Sunday, January 28, 2007

Free Trade

I was reading this article...
26/01: Trade barriers are immoral
Category: General
Posted by: Raja Petra
By Wan Saiful Wan JanMalaysia Think Tank London
Trade and business are not alien to Malaysia. Our farmers and rubber tappers all sell the products of their efforts to consumers. Many run retail shops, foodstalls, or restaurants. Some ventured into bigger ventures like supermarkets or multinational businesses.Trade is also customary among Muslims. Prophet Muhammad and his wife, Khadijah, were both successful entrepreneurs. The Prophet famously said "trade is nine tenth of sustenance (income)".
When nations like Malaysia trade with other countries, Malaysian as a whole benefit. Cheap electrical equipments from China allow improvement in our quality of life. If our economy are opened up, everyone, rich and poor, would benefit.Our government's trade negotiations with various countries are a good step forward, as long as they are done in transparent manner. The ongoing free trade negotiations with America must be welcomed by all.
In fact, trade liberalisation is generally good - be it multilateral, bilateral or even unilateral.Socialists and some other parties with vested interests would obviously campaign against what our Ministry of International Trade is doing. Typically, their scare-mongering tactics would include telling the people that FTAs bring destruction to our economy.Socialists and vested interests want our nation's economy to be controlled by certain quarters only. They abhor competition for they fear being weeded out. They reject the open market as they fear losing control.By opposing competition, they seek to guarantee only their own sustenance, and deny the public like you and me the benefits of free markets. They campaign for the protection of certain ineficient sectors despite the fact that these sectors maybe producing expensive yet inferior goods.If the government succumbs to their campaign, the victims would be farmers, rubber-tappers, villagers, and those with low household income. Simply put, the vast majority of Malaysians would be victims of continued protectionism. We would have to continue paying higher prices for inferior products and services. This is socialistic oppression!
The reality is, opening up our economy would drive up competition, improve productivity and lower prices. Foreign investment would increase and so will job opportunities. All these are good.In a report "Penghapusan Sekatan Perdagangan: satu tuntutan moral" published by Malaysia Think Tank London in January 2007, the author professor Julian Morris explains that removing trade barriers brings significant potential for economic development. The poor would particularly benefit from economic liberalisation as the prices of household items would be reduced and their purchasing power would increase. Our economy and national productivity would grow tremendously and we will have more new jobs and new industries. The outcome of liberalisation is for all of Malaysians to enjoy.
Towering figures like Ibn Khaldun and Friedrich Hayek has argued that the market should be left free from unnecessary interference. Economic control brings the possibility of monopoly by certain groups, which ultimately victimises the people at large.In controlled economies, people cannot exercise choice. They are forced to accept whatever high price charged by the monopolies. This is clearly unacceptable.If we truly want to help improve our national economy, then we should support multilateral, bilateral, or unilateral efforts to liberalise our economy so long as it is done tranparently. This is a moral imperative for everyone, regardless of race and religion.As Professor Morris said in the report published by Malaysia Think Tank London, "Free trade frees people. It enables all to improve their lives and has the potential to eliminate poverty." An electronic copy of the report is attached.
Please feel free to circulate / upload on your own site.
Malaysia Think Tank London
Suite 112, 456 – 458 StrandLondon WC2R 0DZ
United Kingdom

So I write this:

Title: Before we join the Free Trade bandwagon….

The front cover of current national Geographic magazine has a picture of a lonely tree, in a sea of soybean in what was a formerly Brazil rainforest. Another picture inside depict a family of native Indians walking through charred remain of their rainforest homeland.

Such picture paints sad story of wholesale globalization. Multinational corporations, attracted by cheap lands in Third World countries invest millions of dollars in host countries, creating billions of dollars for their shareholders (normally residing in First World countries), raping and denuding the land, the environment and the native inhabitants. They paid paltry taxes to the cash strapped host countries, bribing those in power to circumvent the local laws. Our Malaysian multinational are no different, look at the accusations leveled against them by environmentalists and Indonesian govenment about their operation in Kalimantan and Sumatera.

Europe, USA and Japan only preach free trade when it suited them. How much has Japan opened its rice and beef market? Does astronomical prices of beef and Koshihikari rice reflects free market? Have banana wars between USA and Europe over yet? Why has China dragging her feet about revaluing their yuan?

Yes, in general, globalization and free trade is good. BUT only if the rules are fair and the terms of trade are equal to all sides. At the moment this is not so.

A few things have to be rectified first before we jump into free trade bandwagon.
1. Currency of reference has to be stable, and does not unfairly benefit any particular country e.g. USA.
So what is wrong with US dollar as world currency? Well, to sum it up, at the moment USA can print money to the tune of USD60-70billions, use that to obtain goods and services without actually doing or producing anything.

2. Malaysia (and other countries in the same league) must improve its law enforcement, environmental law provisions and human right law provisions on par with Western countries. So that the rogue elements of this world won’t be able to rape and plunder resources of our country with impunity, and those country’s officials who are in cahoots with them, being bribed, they should be taken to court and penalized as well.

Penalty should not just stop at the company and management level, shareholders too should bear some of the penalty. This will ensure responsible investing.

3. Minimum wage and safety net – this is a necessity if we want to implement free trade. Having a safety net means that MNC can choose the best employees, and not feeling guilty if they have to fire anyone. It also lessens the risk of social unrest during economic downturn. We would give the image to the world that we take care of the less fortunate in out society, and income is (more or less) evenly distributed.

4. There must be free movement of labour force and goods across national boundaries. Just like Europeans has done within European Community.

These are only some of the criteria that we should think of before opening our economy fully to free trade. Feel free to add more.

Free trade would means that some jobs would move to other countries, as we become less competitive in some areas. Our padi farmers, rubber tappers and fishermen might find it difficult to make a living, and have to sell their lands to make way for housing and factories. In general, the poor would become worse off and have to change their lifestyle, hence the need for minimum wage and safety net.

Take example of the native Iban from Batang Ai, they have were uprooted from their lands and villages to make way for a dam that supply electricity for Sarawak – and “fairly” compensated with a wooden house and a small piece of land. Soon our padi farmers and rubber tappers would be in the same predicament, thanks to free trade and globalization.

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