The left-wing protesters said they feared the bolstered regional anti-terror cooperation, which was finalized by the leaders of the 10-member Association of Southeast Asian Nations (ASEAN), will lead to an increase in human rights violations.
They also objected to trade liberalization advocated by the bloc, saying it will damage local industries, mainly fisheries.
The demonstrators braved heavy rains and snarled traffic as they wound through busy intersections carrying colorful banners, flags and a five-meter-tall effigy of Japanese Prime Minister Shinzo Abe, US President George W. Bush and President Arroyo.
They later burned the effigy, which featured Arroyo wrapped in a mock US flag and sitting on the right arm of Bush like a ventriloquist’s puppet.
Mrs. Arroyo and Abe have been staunch supporters of the US-led war on terror.
"It’s a symbol of what American and Japanese are doing and their influence in our country," said student Alex Ylan, 20, as he wheeled the effigy down the street. "They should not be interfering."
Others lay on the ground, pumping their fists in the air and shouting "Down with US"
They faced off with about 150 riot police equipped with shields, tear gas and wooden truncheons for about two hours, but there was no violence and no one was arrested.
"A majority of leaders of ASEAN are human rights violators," alleged Imelda Tabiando, 39, a local activist.
She said the proposed counterterrorism measures could be used to clamp down on government critics.
According to a draft of the accord, seen by The Associated Press, it calls on the nations to improve cross-border cooperation to prevent attacks, share intelligence and training, curb terror financing and rehabilitate convicted terrorists to prevent repeat attacks.
One of the protest organizers, Jaime Paglinawan, said the protest, which gathered about 300 people, aims to expose "the issues and demands of the Filipino people."
"We are now opposing the US war on terror because the US is attacking the national liberation movements in different countries," he said. "We want the ASEAN leaders to uphold our national sovereignty and our national patrimony."