The elections are over, thank God! Now let’s pay attention to international trade

my Trade Tripper column in this 13-14 May issue of BusinessWorld:

Well, back to regular programming.

You may not have heard of it but May is World Trade Month, with LA Area Chamber’s 90-year-old initiative World Trade Week happening this 21-26 May. The annual Trade Winds Forum, meanwhile, is from 14-22 May, where US companies will be able to network on investment opportunities in Singapore, Malaysia, Indonesia, Thailand, and Vietnam.

Unavoidably, politics has a way of tarnishing the optimism that people would like to attribute to international trade.

Talk of walls, of bringing jobs back, and stronger enforcement of trade remedies signal a return to protectionism. Ironically, while serving as sop for the populist brigade, experience has shown it has always made life harder for the poor rather than bettered it.

A lot of the criticism against trade runs on false logic.

“International trade is often blamed for the economic disparities and dislocations”, according to Dan Ikenson (“Crucifying Trade For The Sins Of Domestic Policy”; May 2016), that the US (and a lot of other countries, including the Philippines) are experiencing. “One reason for the connection is that trade is falsely portrayed, and easily perceived, as a contest between nations.”

For leftists, the “narrative” (a word that should really be banned) is that the domestic team (i.e., Team Philippines) “must outscore the foreign team.” Exports (or sales) are points for us, while imports (purchases) are points for the other team.

Only, the real world doesn’t work that way. Not everything boils down to a “we win-you lose situation.”

Look: when you bought this newspaper, you engaged in a trade: money for newspaper. Who lost? Neither. Both BusinessWorld and you won because each got what it wanted.

If international trade were indeed a zero-sum game of “one up thus the other goes down”, then there wouldn’t be much trade going on sustainably to begin with.

Which leads to a point by Jonah Goldberg (“Arguments against Free Trade are Deeply Flawed”; April 2016): “protectionists are also wrong philosophically. Countries don’t trade with others countries; businesses and consumers transact with other businesses and consumers. Protectionism is corporate welfare by other means.”

In other words, international trade is the great leveler: it bypasses the power of State planners and oligarchs by allowing even the smallest of businesses to transact with one another directly.

Make no mistake, there is competition between countries as to who can sell to who. But that’s going to a different category of discussion. And the response to that is better expressed by Ikenson:

“Trade enables each of us to focus our productive efforts on what we do best. Instead of allocating small portions of each day to producing everything we want to consume, we specialize in an occupation and exchange the output we produce most efficiently (monetized in the form of wages and salaries) for the goods and services we produce less efficiently.”

“Under that arrangement, we are able to produce and consume more than we could without specialization and trade. We are freed from performing tasks that we are less well-suited to perform, yet we can consume the fruits of those foregone tasks through exchange. That specialization changes the composition of the types of value-added activities performed in the country, as well as the types of jobs.”

One popular argument against trade liberalization is that it poses risks for the environment, that increased manufacturing and commercialization pollutes at far higher levels.

The same goes for product standards and for labor.

But in order to protect the environment and labor, and uphold product safety, a State needs more money. And international trade has proven to be the most successful in generating income for developing countries:

“There is considerable evidence that more outward-oriented countries tend consistently to grow faster than ones that are inward-looking. Countries that have opened their economies in recent years, including India, Vietnam, and Uganda, have experienced faster growth and more poverty reduction. On average, those developing countries that lowered tariffs sharply in the 1980s grew more quickly in the 1990s than those that did not.” (Global Trade Liberalization and the Developing Countries; IMF Staff, 2001).

Not to mention closer partnerships amongst countries to monitor and uphold such standards, as well as exchange of best practices.

Unfortunately, the WTO projects that “growth in the volume of world trade is expected to remain sluggish in 2016 at 2.8%.” This amidst a several months slump for the Philippines in terms of exports.

And people still have to detach analysis from income inequality with international trade. This confuses a lot of people, particularly when brought up by way of political rhetoric. But they have to be discussed separately: the former involves domestic structures, the latter on international relations, with competitiveness as the main link.

A lot of work clearly needs to be done.

Perhaps one good thing about the recent national elections is that it’s finally over and we can focus now on matters that are really more important.