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Will WTO Meeting Bury Trade Protectionism?

In less than a month, the WTO Ministerial Meeting will be held in Hong Kong. This event happens in different countries every two years, but one single issue keeps cropping up in every meeting: trade protectionism especially in agriculture.

Representatives of countries and groups or blocs of countries accuse other countries or blocs of trade protectionism and the accused fight back. The arguments and facts resented vary, but one thing is common: all of them (with the exception perhaps of 1 or 2 small, unilaterally-liberalizing country/countries) are protectionists. There are a number of reasons why government officials who represent their countries are prone to trade restrictions, to sabotaging the spirit of free trade, whether in large or small scale.

One, protectionist lobbyists, whether local farmers, fisher folks and manufacturers, or plain anti-globalization NGOs and ideologues, are more organized than consumers; and, government officials tend to listen to the more organized, more noisy groups, despite the fact that everyone in this planet is a consumer.

Two, government officials and negotiators are under orders by their country Presidents or Prime Ministers to retain high tariffs in a number of tradable goods for import and export tax purposes, to raise revenues and finance the bloated bureaucracies in almost all countries. Corrupt leaders benefit from high tariffs and other non-tariff barriers: importers and traders will be forced to bribe them in exchange of letting in the restricted commodities, then they become rich and powerful even if they are lazy.

Three, the "net gains in trade" outcome is still not realized and appreciated by majority of government officials and their trade negotiators. Many of them think they serve their citizens a good service by restricting trade, especially in agriculture. When poor households, jobless people, small fisher folks, ordinary employees in the services and industrial sectors, even the non-rice farmers (banana farmers, mango farmers, aquaculture farmers, etc.), can save from buying cheaper imported rice than locally-produced rice, this is not the end of the world for the local rice farmers. Consumers will not burn the money they save from buying cheaper imported rice; they will use the money to increase their consumption of bananas and other fruits, or vegetables and fish, or poultry and livestock products, or have haircut more often. This price signal will alert some rice farmers to shift to other sub-industries like vegetable farming, aquaculture farming, poultry and livestock farming, and so on. The job displacement is temporary but the economic efficiency of labor and resource re-allocation is more long-lasting.

Since government officials have such limitations, then the WTO should not be headed and negotiated by them, but by leaders and representatives of federations of traders (exporters and importers) in each country. Now, this is easier said than done since the WTO was formed by governments, not private traders. Traders and ordinary consumers can launch counter-lobbies to the protectionists and the anti-globalists.

I'm not hopeful that much trade liberalization will happen soon on a global scale. Liberalization will, and does happen more via bilateral and regional cooperation. But a government with open-minded officials and trade negotiators can undertake unilateral trade liberalization. If EU governments give huge subsidies to their farmers so that the latter can sell their farm products abroad at a lower price, so what?

Buy their heavily-subsidized farm products, let the citizens of your country enjoy cheaper imported food and dairy products. As discussed above, your citizens will not burn the money they save from buying cheaper imported products, they will use the money to buy other goods and services, from better construction materials for their houses to having more haircuts or more parties.

funwithgovernment.blogspot.com



By Nonoy Oplas
An Economist based in Philippines


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