* This is my article in BusinessWorld last June 7, 2018.
In a free trade, an effectual combination cannot be
established but by the unanimous consent of every single trader, and it cannot
last longer than every single trader continues of the same mind.
— Adam Smith
The Wealth Of Nations (1776), Book IV Chapter VIII.
Free trade should mean that people are free to trade and
do not need to secure permits to trade from governments. The expansion of
governments — local, national, and multilaterals — has also resulted in the
expansion of preconditions and negotiations before meaningful trade can be
allowed.
This is what Adam Smith referred to in the quote above.
It is the collective action of traders and not the coercive regulation of
governments that free trade and real competition is established.
In recent months, “trade war” has become a common term
used in international media and blame is put on the US President for stoking
protectionism and implying that US trade partners that enjoy and experience
huge trade surpluses for many years are not practicing protectionism.
Trade numbers will greatly help us to clarify things.
I got monthly data of merchandise trade, exports and
imports, from the World Trade Organization (WTO). After getting the sum of
trade balance, January to June then July to December of 2016 and 2017 and the
first three months of 2018, I got the monthly average and daily average. I
chose countries with relatively large value of trade surplus or deficit (in
parenthesis) plus selected ASEAN countries like the Philippines. The numbers
show some interesting patterns (see table).
Here are the notable facts from these numbers.
One, the US continues to experience more than $2 billion
a day in trade deficit, since many years ago until today. The second half of
2017 showed a big deficit, posting an average of $2.5 billion a day. US
President Trump’s threats of imposing higher tariffs on certain imports became
louder in early 2018, hoping to reduce the trade deficit.
Two, China has been enjoying a trade surplus of up to
$1.5 billion a day in the second half of 2016, then Trump’s higher tariff in
early 2018 for some of its exports has significantly reduced the imbalance but
China still enjoys a trade surplus overall.
Three, Germany has the second biggest trade surplus after
China with about $0.8 billion a day. The recent higher US tariffs for steel and
aluminum were mainly directed at Germany and other European exporters.
It would seem that the US is not exactly “becoming
protectionist” as most media reports and opinions claim. People got used to
seeing the US as having perennial big trade deficit for many years and when
Trump tries to correct this, those people get angry.
Ultimately we should assert free trade and people’s
freedom to trade, not governments and bureaucrats’ freedom to restrict trade.
There are net gains in trade (gains are larger than pains) while there is net
diswelfare in protectionism.
Bienvenido S. Oplas, Jr. is President of Minimal
Government Thinkers, a member-institute of Economic Freedom Network (EFN) Asia.
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See also:
BWorld 217, Dutertenomics, TRAIN and high inflation, June 02, 2018
BWorld 218, Tobacco taxation, smuggling and plain packaging, June 07, 2018
BWorld 219, The US-North Korea summit and the global economy, June 20, 2018
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