Morality's link to trade

is the subject of my Trade Tripper column in this weekend issue of BusinessWorld:

The past few weeks saw this column tackle trade disputes with Thailand, the continued increasing of FTAs (including the RCEP and the TPP) that the Philippines need to engage in, and the expiration of the US GSP. Even then, what your Trade Tripper is more concerned about presently is the fundamentals that lie behind trade. An example is the article we wrote on Psychology and International Trade (July 25, 2013).

The point here is that most trade discussions have to do with each country’s relationship at the border level. What goes beyond a country’s border, assuming the same doesn’t violate the principles of national treatment, is normally no longer the concern of trade officials. For how can it? I remember being amused when one Filipino businessman complained to a visiting WTO Director-General about smuggling in the Philippines. The WTO DG’s response was simple and to the point: but what has the WTO got to do with that?

A country’s ability to trade is only as good as its people’s ability to produce. A country’s capacity to enjoy the benefits of trade lies also substantially in that country’s internal structure. If a country’s workforce is less than productive, not competitive, not properly educated, then no opening up of markets will be able to help that country. In the same way that no amount of increased trade will help alleviate a country’s poor if the societal make-up of that country actually perpetuates income inequalities.

As Philippa Dee (Time to Rethink the Global Rules, East Asia Forum, August 19, 2013) writes: “The bigger trade problems are not at the border but behind it. Conceivably, there is no Doha Round settlement because it offers too little of commercial value -- it is still focused at the border. FTAs don’t do much better. They are preferential, which means they also tend to focus on tariffs and other measures, such as rules on entry of foreign investment, that operate at the border. Yet some of the biggest economic problems in Asia are caused by the poor performance of incumbent services suppliers in transport and logistics, education and health, which are often state owned. Their dominance and lack of competitiveness is a drag on economic growth and a source of structural imbalances. Their performance can be a barrier to entry into regional production networks. Their crowding out of other domestic activity, including small and medium enterprises, is a key source of growing inequality.”

But there is something even more fundamental of significance. This can be seen, albeit quite indirectly, from a reading the EU’s submission in the Seal Products case regarding the use of public morals as a defense in a trade case: “Previous panels have noted that the content of the concept of public morals ‘can vary in time and space, depending upon a range of factors, including prevailing social, cultural, ethical and religious values’ and that, for this reason, Members should be given some scope to define and apply for themselves the concepts of ‘public morals’ in their respective territories, according to their own systems and scales of values.”

The foregoing is interesting for your Trade Tripper as he considers it ironic that while local politicians and even members of our judiciary are intent in excluding public morals as a part of discussions in the public square or in a court of law, an international dispute settlement tribunal seems to have no qualms of including it in determining a case.

So the issue of morality works in both directions: international trade is indeed a force for good. As Jagdish Bhagwati, with marvelous common sense, pointed out: “slowly growing or stagnant economies cannot rescue the poor from their poverty.” More profoundly, Dylan Pahman (Localism, Globalization, and Moral Progress, Ethika Politika, July 9, 2013) puts it: “... globalization holds great moral potential that must rather be cautiously viewed as moral progress.” A sentiment shared by the Social Doctrine of the Catholic Church.

But it must also be remembered that a morally neutral country, of which the Philippines apparently seeks to become, will inevitably find itself on the losing end of the competition that international trade brings. This Charles Murray (Coming Apart, Crown Forum, 2013) and Mary Eberstadt (How the West Really Lost God, Templeton Press, 2013) amply demonstrated.

Both convincingly show that the breakdown in people’s religiosity, the traditional form of marriage, and of the family all lead to “enormous social, economic, civic, and other costs” (see Eberstadt). 2012 research does indicate that the high US divorce rates “perpetually inhibits growth of the US economy.” This is backed up by Nick Schulze (Home Economics, Aei Press, 2013), he declaring the link between “divorces and out-of-wedlock births in America” and economic well-being as indeed substantial.

As this column has long been pointing out, contrary to our politicians, policy makers, and the academes over-infatuation with their Rawlsian ideas on plurality and push for secular liberalism: religion and morality do matter.