How much free can we afford ‘free’ : the question of free trade

trade clipart

Source: dreamstime.com

 

The reason why we don’t see – so far – any major wars as massive as World War II can be attributed to the importance of international trade. If I were in Nobel Peace Prize selection committee – boy, I swear – I would no doubt award this to the whole ‘free trade’ notion, in its entirety. Seven decades after one of the largest military conflicts in human civilization ended, we have overseen an exponential increase of global trade, enabling the creation of the largest middle-class in the world in history (in spite of inequality).

No doubt, we should also be thankful to the United States, the world superpower which, forsaken for its disastrous, naivete-driven mistakes in Vietnam, Iraq, and Afghanistan and numerous failed interventions, has established a long-standing international structure that conditions the whole world to trade. The country’s former adversaries, such as Germany, Japan, and even Russia (after Soviet Union collapsed), have rapidly industrialized themselves due to the stability established by American global leadership. Even China, the world’s second largest economy and possibly a future superpower by itself, will still have to, to some extent, play by the standards established in Bretton Woods, because the country simply gains tremendous benefits from the system. Never before we have seen international trade being conducted at a massive scale (over 23 trillion US$ last year in world export volume), a figure unimaginable if looking back 70 years prior.

And never before, also, we have seen international politics being so intricately complicating when trade itself is not simply an instrument of international politics itself; trade itself, in fact, has turned into politics. For decades, the whole world has attempted – and foundered – in its attempt to install a global free-trade regime, the most obvious failure of which can be illustrated from Doha Rounds (albeit there’s modest progress in Bali Package in 2013). When trade, in principle, serves as a powerful deterrent of war by itself, why is the whole world so frightened with plans for a global free-trade regime?

One answer (from my perspective): the whole world is still not ready. I’ll make this slightly science-fiction, but if we refer to Kardashev’s civilization theory, we are still on a very long path to achieve Type-1 civilization (when humanity can afford to harness energy from the entire planet, something we are still struggling to do so today). At a current scale, we are still on 0.7. To complete the other 0.3, most scientists have estimated that it will take, at most, one more century, or faster, either six or seven decades. The world in Type-1 civilization, just imagine, is the world where political sovereignty does not matter so much anymore, let alone in territorial borders. Just think how much we can afford when the entire planet can run on electricity, full time, utilizing all the existing potential this planet can offer. It is also the time when tsunamis, earthquakes, volcanoes, hurricanes, and ocean waves can generate electricity, most cheaply one cent at a time. While such marvels still prevail in research papers and small pilot projects, we have quite a number of global phenomena that have globalized our world today. Internet, English, and smartphones have conquered the world, but they are just the beginning, and even then, many people have sensed a rupture with its sheer, unprecedented rapidity in the scale. Are we globalizing too fast? Are we altering meanings and symbols into mere simulations? Are we ready for a future where there is no longer a visible border in all aspects? This is one main reason why global free-trade agenda fails.

And, see, even though it’s already 2015 out there, the world remains, at itself, a hybrid between people who want to live in the past and those who aspire to seize the future. Rather than turning it into a big convergence, the current discourse, instead, results in a big polarization. 3 billion people still live in abject poverty, earning less than 2 US$ a day. More than half of the world’s countries are still severely lacking in infrastructure access, another inhibiting factor in the creation of free trade. How will you, given these variables, allow them to compete with those in the developed world? This is also another challenge in readiness. Because we know when free trade promotes competition, competition enhances efficiency, and oftentimes, the notion of ‘efficiency’ itself can be as brutal as the word ‘murder’. For losing industries, a huge number of jobs will be ‘massacred’, while those that maximize innovation and efforts in creativity will emerge as the major victors. How will you allow them to compete with those in the developed world, again?

And this is not simply a battle between developing world and developed world. The latter also feel threatened by the massive, cost-efficient labor forces that the former can offer. China’s miracle may have been over, but India, Southeast Asia, and Africa are the next waves of economic revolution. Population growth remains high in these regions, generally, and they are promising future markets for multinational firms. So what about unskilled workers in industrialized countries? How will you make sure, not that they feel ‘protected’, but rather less harmed, by the savagery of efficiency promoted by the whole idea of free trade? While European countries have a comprehensive social welfare scheme (that may also explain why they are not so competitive), US does exactly the opposite. The country promotes free trade, very actively, but at the same time, there is inadequate spending in upgrading infrastructure, training workers, and even enhancing social protection for the poorest and most vulnerable.

Free trade is great, I must admit, but too much free trade, if unprepared, can result in greater inequality. The key is in stronger social welfare. To ensure the workers are equipped with adequate working skills, they need to be trained. And this is where education, and vocational assistance, play a huge role. To ensure that the workers, and consumers, can live healthily and work productively, there needs a comprehensive healthcare scheme. But, most importantly, is the preparation for adjusting to disruptive technologies in the future. We have had 3D printers, autonomous cars, battery factories, and the Internet-of-things. Once they are launched into the market, millions of jobs will be affected, and significantly, the volumes of trade as well. And this is where free trade will go in maximizing their potential, because, again, in the sake of efficiency, whichever trend does not matter. The most crucial, and urgent, concern is to persuade them how to face up to new realities, and continue to innovate in competing to formulate and create the best products in global market.

I do not see global free trade being possible in the next 10 years, but in 20 years, it is more likely. As global export volume doubles every decade, the rise will continue to be on an exponential path. What I can see now, most likely, is the sprawling of mega-regional and bilateral free trade agreements, most notably right now, Trans-Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (TTIP), or China’s new initiatives such as Regional Comprehensive Economic Partnership (RCEP) or Free Trade Area of the Asia Pacific (FTAAP). If we monitor at the news very closely, even to grant President Obama a fast-track authority proves such impeccable, and painstakingly difficult, struggle. Both TPP and TTIP, which ‘only’ cover 12 countries in Pacific Rim and 28 European Union members, do not represent the entire Asia and Europe, but even multiple deadlines still have not enabled these agreements to be passed into notion.

The age of free trade does not ‘end’ as some advocates voice their concerns; it is just the beginning, but with big hurdles everyone needs to overcome.

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