They say, you know, everything happens for a reason. But what is that reason? Who defines logic?
Economically speaking, the most popular theory – capitalism – could not have prevented economic crises, which now seem to be occurring quite periodically. Whenever a crisis hit, the world’s best economists were usually caught off guard and unprepared.
Politically speaking, the champion – liberal democracy – has not produced any long-lasting peace either. Why such a mess? A tentative reason may be that the world is simply too complex for any single logic to be capable of anticipating events or keeping them in checks. Or, the world perhaps just does not require any particular roadmap to begin with because it keeps changing anyway.
I’m not saying that you should stop thinking. On the contrary, some common-sense learning has become more mandatory than ever before.
Common sense? Yes, indeed. Not too long ago, import tariffs, quotas and subsidies were the magic formulas to make a country rich. Britain is arguably the best-known case in the practice of protectionism early on. The Brits did it so well and became so rich. They only began to discredit protectionist methods after they had become a dominant economy in Europe.
The same is true for France, Germany and other economic powers. Actually, every country has had experience with protectionism to a certain extent. Was it wrong to protect your local products? Not at all, especially when you only tried to protect them for a while until they got ready to compete. Since the mid-20th century, however, strong protectionism started to gradually lose its charm and became a laughing stock on the international arena because it is said that developed countries would not want developing countries to know the secret on how to become rich.
Originated with the General Agreement on Tariffs and Trade (GATT) in 1947, then broadened in scope by World Trade Organisation (WTO) rules since 1995, the most fashionable economic model suddenly adopted a new name: trade liberalisation.
But before free trade became such a global norm, Latin American countries, in particular, applied protectionist measures designed to help groom their local industries which were producing substitutes for import. But this import substitution industrialisation was not destined to last long and soon had to give in to demands for free trade partially at the insistence of the International Monetary Fund (IMF) and the World Bank as the ultimate lenders.
By the 1990s, many more poor countries, in need of development assistance and foreign investments, had to be rushed into signing free trade agreements (FTAs) often on poorly understood terms which favoured richer trade partners. Of course, why would one expect otherwise? Some economists living next door surely like to make economics look so hard a subject with weird-looking mathematical signs and formulas while in fact it is mostly common sense.
Also, by the 1990s, as if poor states had their destiny written somewhere, a growing number of environmentalists, backed by scientific research, had already started blaming human activities for the disastrous impact of global warming. Reports of the Intergovernmental Panel on Climate Change (IPCC) to this effect are abundant.
This revelation has been very inconvenient and very hard to swallow, putting a severe strain on the efforts of developing countries who simply wish to reap the benefits of industrialisation too. The ensuing fight between industrialised developed countries and the newcomers has become common place at every UN climate change conference since 1992. I’m not interested in arguing who is right or wrong, but fairness and justice are eternal values worth defending.
Who knows how to navigate? Some thinkers may still want to spend their lifetime theorising, but local crop growers just need buyers. And they probably have learned that there are no quick fixes. Governments must be able to ensure a reliable access to markets in a guaranteed and fair manner.
Negotiating for one is no easy task, however.
So-called development economists have carefully studied records and try to tell stories as they see them by using real-life vocabulary. Bad Samaritans and 23 Things They Don’t Tell You About Capitalism by Ha-joon Chang are among the best-selling books. Although this kind of development economics is not free from bias, it does provide developing country trade negotiators with some historical perspective to aid their bargaining power. History is very powerful. No doubt about it. Just ask your spouse if s/he ever forgets any of your past mistakes.
But then again, behaving as an anti-capitalist doesn’t take us anywhere. This brings us to the second tool of navigation: pragmatism. Yes, always. This is because not only the world keeps changing without our prior approval but a country also practically exists on multiple levels: internally, regionally, and beyond.
Internally, you must satisfy local stakeholders to win votes. Then, you have to sign up for difficult provisions of regional FTAs so as to not be left alone. When regional mechanisms prove too complicated or too costly to implement, you’d look for bilateral FTAs that may have simpler and ready-to-go checklists. Legalists get busy pointing to overlaps among various trade agreements but businesspeople just want to choose the most profitable channel. The complication in making such a choice is further intensified if the products need to go through long supply and value chains that exist way beyond national borders.
Using his unique knowledge as an insider, Bernard Hoekman tried to rescue the WTO and published in 2014 a good report entitled A Road Map for the WTO. But this global institution has been seeing its relevance diminished. With a growing number of multilateral trade agreements, regionalism shows no sign of fatigue. And that’s where our pragmatism shall play out.
You and I love the world but a strictly globalist view often sounds confusing and has many pitfalls. Besides, many good concepts can get lost in the rapid technological advances. Who ever thought that Twitter and Facebook could have made a person become the president of the US? Who knows what comes next? What I do know is that economics can never be properly understood without some knowledge of history and references to power politics.
Sometimes, a superpower might join a trade agreement mainly to cripple the influence of its immediate adversary. Leaving politics aside, in a world that is getting more and more closely connected, there is no logical turning back from digital trade in services, which could soon overtake physical trade. Although trade barriers in the digital technology remain very high, who knows when the owners of the internet decide to drastically lift them? Just like protectionism which became a taboo when it was no longer very useful, there is no reason for developing countries not to anticipate a more liberated flow of data soon.
So, don’t shoot a bird just because one of its kind has recently pooped on your head. Make it one of your New Year resolutions to go out and take lots of pictures of them. Artworks entirely made as non-fungible tokens may sell for a huge amount of money to say the least. Who knows?
Virak Prum, LLB, LLM, PhD teaches Cambodian Business Law at CamEd Business School. The opinions expressed are solely his own.
Source:Phnompenh Post, Cambodia
