BWorld 27, The rich getting richer, the poor getting middle class

* This is my article in BusinessWorld last November 19, 2015.

There are plenty of papers circulating and arguing that the increased integration of the Philippines into the regional and global economy will result in the rich getting richer and the poor getting poorer. How true is this statement?

Has the Philippines’ membership in the Asia-Pacific Economic Cooperation (APEC) improved the lives of its ordinary citizens?

Without going through the long and technical procedures in typical academic papers, this paper will check certain data and parameters to see if the above statement is true or not.

Four sets of data in two tables will be used: (a) infant and toddler mortality rate, (b) life expectancy, (c) unemployment rate, and (d) mobile phones and Web connectivity.

Here is the simple process: If people are getting poorer, or the degree of poverty today remains the same as a decade ago, then (a) there will be more or the same rates of infant and toddler deaths, (b) life expectancy remains the same as people in different age brackets die at the same rate as a decade ago, and so on. (See Table 1) 

From these numbers, the verdict is that the health and safety of Filipinos is improving, not worsening, over the past one and a half decades. There are fewer deaths among newly-born infants and toddlers; and Filipinos are living longer, meaning there are fewer deaths per age bracket on average. Those are the good news.

The bad news is that Philippine records are lower than those of its neighbors in East Asia except in Cambodia, Laos, and Myanmar. And this is where most of the pessimistic and critical comments are coming from: they emphasize the higher ratio of infant and toddler deaths in the Philippines compared to its neighbors and are silent or deliberately hiding the fact the good news mentioned above.

We now verify the same question with another set of data. (See Table 2)

If it’s true that unemployment and poverty rates in the Philippines are so high -- people quoting data from IBON Foundation and the Social Weather Stations surveys indicating a 25% joblessness rate -- then people would be so poor as to stop buying mobile phones and forego access to the Web. Is this happening?

Again, to the disappointment of the pessimists, the answer is No, on two counts. (1) No, the unemployment rate in the Philippines based on International Labor Organization and internationally-recognized official definitions is not 25% or 20% or 15%, but less than 7%. And (2) No, poverty is not worsening because millions of Filipinos can now afford to buy mobile phones and pay for Internet subscription, things that are far from the usual “basic needs” of humanity which are food, clothing, and shelter.

Overall, data for the Philippines and other Southeast Asian and East Asian economies that are members or non-members of APEC point to the fact that the rich are getting richer, and the poor are not getting poorer, but moving into the middle class.

Freeing markets on health care, entrepreneurship, telecommunications and many other sectors will allow the poor to have better access to information, from better ways to do rice, chicken and fish farming, to building stronger houses, shops and buildings.

Bienvenido S. Oplas, Jr. is the President of Minimal Government Thinkers, Inc. and a Fellow of the South East Asia Network for Development (SEANET).

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See also:
BWorld 23, ASEAN trade bureaucracies and Doing Business 2016 Report, November 07, 2015 
BWorld 24, Traffic and Newton's 3 laws of motion, November 12, 2015 
BWorld 25, Feed in tariff means expensive electricity, November 14, 2015 
BWorld 26, IPRI 2015 in APEC economies, November 19, 2015

Inequality 26, Pew survey result on support for free market, July 27, 2015 

Inequality 27, ADR Institute forum on poverty and growth, August 18, 2015 

Inequality 28, IBON and sensational analysis, November 19, 2012

BWorld 26, IPRI 2015 in APEC economies

* This is my column in BusinessWorld last Monday, November 16, 2015.

KUALA LUMPUR -- The protection of property rights and promulgation of the rule of law are the cornerstones of peace and order in society. When such property rights are removed and unprotected, society can quickly degenerate into chaos and disorder. For instance, your house or car is also somebody else’s house and car, and he/she can take and occupy it anytime, anywhere.

Measuring property rights protection across many countries has been done by the Property Rights Alliance (PRA), a network of 74 independent, nongovernment, and market-oriented think tanks from 57 countries around the world and is based in Washington, D.C.

PRA produces the International Property Rights Index (IPRI) annual reports, which is a measurement of how governments in the countries covered promulgate the rule of law and protect property rights, public and private, physical and non-physical or intellectual.

The IPRI 2015 Report is launched today here at Park Royal Hotel in the capital city of Malaysia. The event is jointly sponsored by the PRA and the South East Asia Network for Development, which is a regional project of the Institute for Democracy and Economic Affairs in Malaysia.

The event’s theme is “Protection of Property Rights, Economic Growth, and the TPP.” The Trans-Pacific Partnership (TPP) is included in the theme because of its recent approval by the original 12 member-countries including Malaysia. TPP of course will not be implemented unless each member-country ratifies the agreement.

IPRI is derived by getting the score (one to 10, 10 being the highest) of each country covered in three major areas:

1 Legal and Political Environment (LP), which includes judicial independence, rule of law, control of corruption and political stability;

2 Physical Property Rights (PPR), which includes registration and protection of physical properties, and access to loans; and

3 Intellectual Property Rights (IPR), which includes protection of IPRs, in particular patents and copyrights.

As a result, countries with high scores in two or all three of these areas will have a high IPRI score and global rank.

In the 2015 Report, the top 10 from 1st to 10th places are: Finland, Norway, New Zealand, Luxembourg, Singapore, Switzerland, Sweden, Japan, Canada, and Netherlands.

For this piece, the focus will be on Asia-Pacific Economic Cooperation (APEC) member-countries that are covered in the IPRI annual reports. Only 19 countries are in this table because Brunei was not included in the IPRI 2014 and 2015 Reports while Papua New Guinea was never included in all IPRI reports, past and present. (See Table)

APEC countries that were not included in the 2014 Report because of some incomplete data were given this observation in that report:

1 Philippines: Between 2010 and 2014, the Philippines IPRI score increased by +2.9%. In 2014 IPRI increased by +0.2 due to slight increases in all components. LP increased by +0.2 points due to all four of its items increasing in 2014. In particular, item Political Stability improved by +22.7% between 2013 and 2014.

2 South Korea: Over the 2010-2014 period of analysis, the South Korea IPRI score fluctuated around the value of 6.3. PPR data is missing from the analysis completely and IPR is missing for 2010 and 2011... In general, the overall IPRI value for South Korea is good and stable.

The Philippines’ jump in global rank from 77th in 2013 to 65th in 2015 is somehow impressive despite the flat score of 5.1 and 5.0, respectively. The reason for the big jump is because many countries have suffered significant decline in their scores from 2014 to 2015.

Within the Association of Southeast Asian Nations-6 that are also APEC members and covered in this annual report, there is a mixture of results over the years. The bad news is that (a) the gap in overall score between high-ranked Singapore and low-ranked Vietnam was very wide, with the average score of the former almost twice that of the latter; (b) Thailand and Vietnam suffered significant declines in scores and global rank, both falling by at least 19 notches in ranking from 2014 to 2015; and (c) Indonesia global rank also fell significantly from 59th in 2014 to 70th in 2015.

The good news is that Singapore and Malaysia have managed to retain their high scores and global ranking.

The results of this annual study should prod the governments of the Philippines and other East Asian economies to remember the main function, the raison d’être or reason for existence, of governments: to enforce the rule of law, the protection of the citizens’ right to life (against aggressors), right to private property (against thieves and destroyers of properties), and right to liberty (against bullies and despots).

There is a positive relationship between economic development and economic freedom, and the strength of property rights protection. Civil society leaders should keep reminding governments of this reality, and dissuade the latter from enacting and implementing various programs that directly or indirectly erode the respect of private property. 

Bienvenido S. Oplas, Jr. is the President of Minimal Government Thinkers, Inc., which is one of the 74 think tank-members of PRA. He is also a SEANET Fellow.

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See also:
BWorld 22, WESM, PEMC and search for competitive electricity prices, November 05, 2015 
BWorld 23, ASEAN trade bureaucracies and Doing Business 2016 Report, November 07, 2015 
BWorld 24, Traffic and Newton's 3 laws of motion, November 12, 2015 
BWorld 25, Feed in tariff means expensive electricity, November 14, 2015

Inequality 26, Pew survey result on support for free market, July 27, 2015 
Inequality 27, ADR Institute forum on poverty and growth, August 18, 2015

Free Trade 56, Trade, investments and taxes in APEC countries

The Albert Del Rosario Institute (ADRi) has published my new paper, in time for the Asia Pacific Economic Cooperation (APEC) Summit this coming November 18-19 here in Manila. My special thanks to ADRi President, Prof. Dindo Manhit.

I put a number of tables in that paper, data sources from the World Bank, UN Conference on Trade and Development (UNCTAD), World Trade Organization (WTO), Alas Oplas & Co. CPAs (AOC), Bangko Sentral ng Pilipinas (BSP) and the Philippine Statistics Authority (PSA).

Foreign direct investments (FDI) inward stock is a good indicator of how much FDIs have accumulated in a country net of outflows through time.

FDI net inflows is a better indicator than plain inflows because a country may get huge amount of FDI inflows but also suffering from huge outflows so that the net inflow is actually negative. Like the US, Russia, Hong Kong, Taiwan, Japan, S. Korea and Malaysia, at least for the the years 2012-2014.

 APEC countries are marked red here.

Trade bureaucracies as a form of non-tariff barrier (NTB).

My Concluding notes

1. To have more trade and investments, governments should learn to step back from too many regulations and taxation. 

2. Corporate income and other taxes in the Philippines in particular should decline in the face of rising tax competition among ASEAN countries. 

3. Non-tariff barriers (NTBs) like import licensing and SPS measures should be relaxed and reduced. 

4. Global capitalism is about integration and competition, complementation and substitution, happening simultaneously. 

5. Markets in a competitive environment always result in innovation and business creativity. 

6. Governments should focus on their core and basic function – lay down fair rules for all players, be an impartial judge or referee in cases of disputes, protect private property ownership, enforce the rule of law, contracts between and among people.

The 12-pages paper is also posted in slideshare.

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See also:

Free Trade 52, More on the Gravity model, September 08, 2015

Free Trade 53, TPP "final push" this September + paper by Dr. Clarete, September 19, 2015 

Free Trade 54, Eco-protectionism at APEC 2015 meeting, September 28, 2015 

Free Trade 55, TPP Agreement, finally, October 06, 2015
Business 360 8: TPP, RCEP, SAARC and Free Trade, June 17, 2013 

BWorld 12, Investments, APEC and economic liberalization, July 25, 2015

Free Trade 54, Eco-protectionism at APEC 2015 meeting

Eco-protectionism is wrong. The idea that countries and economies should erect new trade barriers on top of existing ones, tariff or non-tariff, to cut carbon emission is wrong. Trade precedes growth and development, inclusive or otherwise.

Here is an example of eco-protectionism, from a PH planet saviour climate official during the APEC meeting in Iloilo City last week. He said,

“If you (APEC economies) are not prepared to address (disaster risk issues), then there is no trade to speak of,” 

1. PH climate change official tells APEC: No trade without addressing disaster risk...

INTERAKSYON.COM

http://www.interaksyon.com/.../ph-climate-change-official...

Other stories:

2. Eco protectionism a threat to African products | SA News

SANEWS.GOV.ZA

http://sanews.gov.za/.../eco-protectionism-threat-african...

(S. Africa) Trade and Industry Minister Rob Davies... said "eco protectionism" was emerging under the guise of addressing climate change concerns, particularly from advanced countries.

"For instance, some countries are considering the imposition of border adjustment taxes on imports produced with greater carbon emissions than similar products produced domestically, and subject to carbon emission limits," said Davies. 

3. The eco-protectionism threat

LIVEMINT.COM

http://www.livemint.com/.../The-ecoprotectionism-threat.html

"At the same time, however, another form of protectionism is threatening to assert itself: imposition of trade measures, ostensibly for reducing emissions of harmful greenhouse gases (GHGs). The two dominant economic powers, the US and the European Union (EU), have signalled the introduction of domestic legislation for reducing emissions of carbon dioxide, one of the principal GHGs, by establishing standards for their domestic industries. But, perhaps more importantly, they have also indicated that these standards will be imposed on imported products. A new form of “green protectionism” is, therefore, on the anvil, one that has been aptly described by Prof. Scott Barratt of Columbia University as “eco-imperialism”. 

Even someone from the German Green political foundation, HBS, signaled caution against eco-protectionism.

4. Risks and Side Effects of Eco-protectionism

https://www.boell.de/.../ecology-society-buetikofer...

"In earlier pieces, Krugman has answered this in the affirmative and added that climate-based tariffs against carbon leakage, i.e. the shifting of emissions abroad, had to be brought into compliance with WTO rules. I do not want to categorically nay-say this but point out a number of serious political risks:

Firstly, European industry has already been granted a number of exemptions from emissions trading and thus achieved considerable cost advantages. Additional climate tariffs would not be legitimate protection but protectionism.

Secondly, important industries such as car manufacturing have unfortunately already won pyrrhic victories against modernisation. Protective tariffs would only further encourage such obstructive behaviour." 

5. Protectionism harms consumers and the environment

http://www.libinst.ch/?i=protectionism-harms-consumers-and-the-environment--en

"Environmental ideologues continue to make dour prognostications about our planet's future, claiming that we all must consume less, have fewer children and trade less with each other to address climate change. Based on their scaremongering and frankly embarrassing record of false predictions in recent decades, these claims should not be heeded seriously. Such demands may suit the protectionist agenda but they have little merit in terms of their practical ability to enable humanity to use scarce natural and human resources in an ever-more sustainable manner.

The competitive market process, underpinned by free trade between and within nations, is inherently more sustainable than the regulated economy advocated by eco-doom mongers. Protectionism, naked or cloaked in green, harms the vast majority of people as well as the environment - and is best avoided.“

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See also:Warming Hysteria: From GW to CC, Green Protectionism, November 25, 2009

Free Trade 7: Class War, Eco-protectionism and Climate, April 02, 2008

Free Trade 50, the proposed Trans Pacific Partnership (TPP) agreement, August 09, 2015

Free Trade 51, SEANET paper on unilateral trade liberalization in the ASEAN, August 23, 2015

Free Trade 52, More on the Gravity model, September 08, 2015

Free Trade 53, TPP "final push" this September + paper by Dr. Clarete, September 19, 2015

BWorld 18, Non-tariff barriers in the ASEAN, September 12, 2015

BWorld 12, Investments, APEC and economic liberalization

* This is my article yesterday in BWorld Weekender.

MANILA WILL HOST the annual Asia-Pacific Economic Cooperation (APEC) Summit this coming November 18-19, 2015, or less than four months from now. Presidents and Prime Ministers of the 21 member-countries including the three largest economies in the world, US, China and Japan, will be coming to Manila for two days to discuss and sign certain agreements related to trade, investments and related concerns.

The Philippines’ trade and investments in the face of ASEAN integration just five months from now was also discussed last July 15 at the Tower Club in Makati City, sponsored by the Albert Del Rosario (ADR) Institute.

The convenor and main speaker was Dr. Epictetus Patalinghug (UP College of Business Administration, and a Trustee of ADR Institute). Discussants were Dr. Gilbert Llanto (President of the Philippine Institute for Development Studies/PIDS), Dr. Ramon Clarete (UP School of Economics/UPSE Prof. and former Dean), Mr. Donald Dee (Honorary Chairman, Philippine Chamber of Commerce and Industry/PCCI), and Atty. Wilfredo Villanueva (Head of Tax and General Counsel, SGV & Co.).

In his presentation, “The Role of Exports and Foreign Direct Investments in Industrial Development,” Dr. Patalinghug said that the five striking resemblance among highly successful economies were: (a) Openness to the global economy, (b) Macroeconomic stability, (c) High saving and investment, (d) Market allocation, and (e) Leadership and governance.

He also showed this summary of Philippine economic history. (See Table 1)

That is an objective and correct assessment. And it is not unique to the Philippines or its neighbors in the ASEAN, but rather the general trend for the rest of the world. If we check the economic integration and liberalization of the four newcomers to the ASEAN, namely Cambodia, Myanmar, Laos and Vietnam (CMLV), their pace of liberalization in trade and investments on average was much faster than the Philippines.

Let us focus on investments; in particular, foreign direct investments (FDIs). The UN Conference on Trade and Development (UNCTAD) released the World Investment Report (WIR) 2015 last month and that paper shows many interesting data. (See Table 2)

There was significant expansion in FDI inward stock (ie, net of FDI outflows) in many APEC member-economies. In particular, the expansion from 1994 to 2014 (two decades) were as follows:

* Americas: Peru 18x, Mexico and Chile 10x, US 7x, Canada 6x.

* North Asia: China 15x, S. Korea 12x, Japan 9x, HK 7x, Taiwan 5x.

* Southeast Asia: Vietnam 23x, Singapore 17x, Indonesia 16x, Thailand 13x, Philippines 11x, Malaysia 6x.

Australia, New Zealand and PNG did not experience significant FDI expansion.

Russia and Brunei are the “outliers” with 114x and 103x expansion, respectively, mainly because they have very low base in 1994. Russia has emerged from partial disintegration where a number of central Asian economies (Georgia, Kazakhstan, Tajikistan,…) separated from the former USSR. APEC was formed in 1989 but Russia, along with Vietnam and Peru, joined it only in 1998.

In terms of FDI stock/GDP ratio, three economies that have undertaken unilateral trade liberalization (meaning no or little trade negotiations) stand out: Hong Kong, Singapore and Chile, with ratio of 535%, 296% and 80%, respectively.

Some important lessons from the above numbers and discussion:

One, openness to trade almost always results in high attractiveness to foreign investments and all the opportunities they bring -- technological, financial, managerial, and market access. Clear examples are HK, Singapore and Chile. Also the socialist economies China and Vietnam that allowed certain degrees of economic freedom and the market system.

Two, global capitalism is about integration and competition, complementation and substitution, happening simultaneously. Business risks will always be there. Companies and people need to keep their radar for adaptation and familiarization of those risks, while keeping the pace of innovation at regular or higher levels.

Three, for the Philippines, its FDI stock/GDP ratio of 20% is the lowest among its neighbors in SE Asia, but this is not something to look down or commiserate. Some richer economies have rates lower than 20% like Taiwan, Japan, S. Korea and China. Nonetheless, this should be one reminder that the country needs to amend its Constitution to remove protectionist provisions that restrict or prohibit foreign investments in many sectors of the Philippine economy.

Four, more than low taxes and/or high profit, foreign businessmen are concerned more with the security of their investments, that threats of confiscation and political harassment are zero or kept to the minimum. Respect of private property, rule of law, and economic freedom by the people, producers and consumers alike, domestic and foreign entrepreneurs alike, are important factors to attract, retain and expand investments in the economy.

Bienvenido S. Oplas, Jr. heads the free market think tank, Minimal Government Thinkers, Inc., and also a fellow of the South East Asia Network for Development (SEANET), a regional center that advocates trade and investments liberalization.

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See also: 

BWorld 8, Manila's Traffic and Transport Woes, June 27, 215 

BWorld 9, Poitical populism vs. tax realism, July 05, 2015 

BWorld 10, Greece crisis, pension and rule of law, July 11, 2015 

BWorld 11, China's stockmarket and central planning, July 18, 2015

Business 360 8: TPP, RCEP, SAARC and Free Trade

* This is my article for the June 2013 issue of the business magazine in Kathmandu, Nepal. The person in the cover is a friend, Robin Sitoula, President of a free market think tank in Kathmandu, Samriddhi Prosperity Foundation.
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TPP, RCEP, SAARC and Free Trade

If people are left alone to buy or sell something, they would wish that they are given full freedom to choose their buyers and sellers. They would not wish some external bodies to tell and prohibit them from trading with certain groups of people or economies.

In the Asia-Pacific area, the Asia Pacific Economic Cooperation (APEC) was created in 1989 whose   “primary goal is to support sustainable economic growth and prosperity in the Asia-Pacific region….by championing free and open trade and investment, promoting and accelerating regional economic integration, encouraging economic and technical cooperation… ” (APEC Mission Statement)

This is the biggest economic alliance in the entire planet because it includes huge  economies like the US, Japan and China. Then there are certain  political agenda by some member-governments that are not fulfilled, and new groupings were created.

One is the Trans-Pacific Partnership (TPP) formed in 2010, which is an expansion of the four member-countries Trans-Pacific Strategic Economic Partnership Agreement (TPSEP or P4) formed in 2005.

The other is the Comprehensive Economic Partnership for East Asia (CEPEA), formalized in 2009, and more recently is called the Regional Comprehensive Economic Partnership (RCEP).

APEC member-countries (21) that are
TPP members, actual or candidate (12)	Not TPP members (9)
Japan, , Australia, New Zealand, Brunei, Malaysia, Sing., Vietnam * US, Canada, Chile, Mexico, Peru.	China, Hong Kong, Taiwan,  S. Korea; Indonesia, Philippines, Thailand, Papua New Guinea, Russia.

* These seven countries are RCEP members also.

The RCEP is composed of 10 member-countries of the Association of South East Asian Nations (ASEAN) + 6 countries.  PNG, HK, Taiwan and Russia are the only APEC member countries that do not belong to either TPP or RCEP. 

In South Asia, there is the South Asian Association for Regional Cooperation (SAARC).

CEPEA/RCEP (16)	SAARC (8)
ASEAN (10) + 6: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam + China, India, Japan, S. Korea,  Australia, New Zealand	Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka + Potential members: China, Myanmar + Other observers: Iran, Japan, Mauritius, S. Korea, Australia, EU, US

SAARC was formed to promote peace, stability, progress and economic cooperation in the region. Among the mechanisms to attain this goal is the establishment of the South Asia Free Trade Area (SAFTA) where traded goods among member-countries will have zero customs duties by 2016. Another mechanism is the SAARC Visa Exemption Scheme for certain groups of people like high government officials, businessmen, media and athletes. These moves are laudable and will definitely have a positive impact in confidence-building and further economic integration among the people of the neighboring countries.

While RCEP was Japan-initiated, there is growing perception that China is rising in leadership. And while TPSEP was New Zealand-initiated, the expanded TPP is now seen as being led by the US.

By creating and expanding the TPP, the US may have weakened APEC as Asia-Pacific countries are now divided between TPP or RCEP members, except for a few that are members of both economic blocs.

For a country like Vietnam, it can use the TPP to counter what is seen as China's weight on its border, and use RCEP for economic trade and diplomacy with China. So Vietnam will be able to walk a balance between the US and China.

People in the ASEAN are looking up at the Asean Free Trade Area (AFTA) of zero duties among member-countries by 2015. This is a common market of around 700 million people or slightly higher than the combined population of the US + EU. RCEP is looking at a semi-FTA among the 16 countries by 2015.

It sounds ironic that state-run economies like China and Vietnam can integrate themselves in a free trade and free market landscape. But they are playing with global capitalism, of a highly globalized trade, tourism and investments by people. So those socialist governments must abide by having zero import tax for certain goods from certain countries.

Some national laws and taxes like a domestic sales tax or value added tax (VAT) can distort a free trade policy. For instance in the Philippines, while most imported goods are levied with zero to three percent import duties, they are slapped with 12 percent VAT and that immediately raises the price of previously cheap imports. Lots of oil smuggling in the country for instance, is done not so much to avoid the one or three percent import duties for oil products, but to avoid the 12 percent VAT.

People from different countries should  consider the policy of unilateral trade liberalization over the long-term. Trade with no political preconditions, no prolonged trade negotiations and disputes. People on average just want value for their money when they buy something. They do not require various conditions and regulations to be put in place before they trade. Only governments do.

A unilateral trade liberalization policy like that in Hong Kong is the best option to sanitize trade from politics and politicians. All goods and services are allowed at zero tariff, except for a few regulated items like guns, bombs, poisonous substances, fake medicines, and disease-tainted meat and crops like during bird flu and related outbreak.

We are far from that ideal though. So we have to live with the reality of continued intervention by governments in trade. And those trade alliances – AFTA and RCEP in East Asia, SAFTA in South Asia, and TPP for US-invited economies in the Pacific – are better than economic nationalism and protectionism. 

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See also:
Business Bureaucracy 7: Penalizing Small Businesses, February 01, 2013 
Business 360 5: Reducing Construction and Electricity Bureaucracies, March 14, 2013 
Business 360 6: Peace and Prosperity in Asia, April 13, 2013 
Business 360 7: Jeju Forum for Peace, May 10, 2013

Free Trade 4: FTA in APEC

The coming Asia-Pacific Economic Cooperation (APEC) summit in Sydney, Australia this coming September, is looking to produce one good result: a possible free trade area (FTA) among the 21 member-countries. Of course, like most if not all FTA visions around the world, an FTA will become a reality in 10 or 20 years from date of signing, if not longer. Nonetheless, it's better than not putting that vision at all.

This is expected to be the "fallback" position after the failed talks on reviving the Doha talks between the big and representative countries of the poor world and the rich world, and should other efforts to revive it will fail again.

Usually, agreements and communique like this among member-countries of any alliance or grouping of countries, will be full of "provided that" and other conditions, before any real free trade area can become a reality.

If countries, or better yet, trade negotiators and politicians of those countries, are serious in having free trade, no agreement with other countries is necessary. They can always declare a unilateral trade liberalization, and that's it. Hong Kong has done it; Dubai, Chile, Singapore, other smaller economies are doing it.

This means that trade "activists" who are leaning towards free market should not play along with those groups and individuals who declare, "free trade yes, on condition that...." We better address ourselves to the general public the "net gains" and benefit from free trade.

Last year, I wrote this:

Pan-Asia free trade area

September 05, 2006

A news from http://euobserver.com/9/22250/?rk=1 has this story,

Japan set to kick-start pan-Asian free trade area" by Lisbeth Kirk
21.08.2006 - 09:57

Japan minister of economy Toshihiro Nikai is set to unveil plans for a pan-Asian free trade area of 3.1 billion people, half the world'spopulation, Malaysian news agency Bernama has reported ahead of the 38thASEAN Economic Ministers meeting starting today in Kuala Lumpur.

The free trade area would include ASEAN-countries Australia, China, SouthKorea, India, Japan and New Zealand and would be promoted by a Japanese fundof 100 million US dollars....

The 39-year-old ASEAN bloc agreed already in October 2003 to set up a singlemarket by 2020, modelled on the EU. But ministers meeting this week hope to speed up the plans and get it ready by 2015. "We need to muster political will to create the AEC [Asean EconomicCommunity] by 2015, instead of 2020," ASEAN secretary-general Ong Keng Yongsaid, according to AP.

China and ASEAN have already agreed to create no-tariff zone by 2010 intheir combined market of 2 billion people.... ASEAN is the America's fourth largest trading partner. ASEAN was established on 8 August 1967 in Bangkok by Indonesia, Malaysia,Philippines, Singapore and Thailand. Brunei, Vietnam, Laos, Burma andCambodia have joined later....

This is a good development. Better than no regional or continental free trade area at all. Of course, there will be free trade among countries as early astomorrow if governments will not hinder trade.

Almost all people around the world want bargains, they want more choices. And only free trade, of big supply of various goods and commoditiesfrom everywhere, can do that. The job of trade protectionism, sometimes called "fair trade", is to restrict trade, to limit supply of various goods and services available to consumers, to limit choices.

What the governments of Japan and other countries do in the above plan is phasing out trade protectionism little by little, and any form of trade liberalization should be done with their consent first. Hence, if theywant full free trade to be realized in 20 years, or 30 years, or 50years, that's what will happen. If governments are out of the picture of regulating trade, then free trade can happen anytime. Government's main job should be to regulate and control criminals and robbers, terrorists and killers. Regulating trade that makes life easier for people, especially the poor and jobless, by giving them access to cheaper food, cheaper clothes, cheaper farm inputs, and so on, is bad and wrong "role" of government.

About the Doha round, me thinks US' Trade Rep. Susan Schwab should better talk to Prof. Jagdish Bhagwati, a famous academic economist (Indian-American, i think) in the US, than moving around talking to the trade reps of China and other countries. Dr. Bhagwati argued in some recentpapers for a unilateral trade liberalization for the US and estimated the benefits for the US economy in terms of economic growth and job creation. Hence, Mr. Bhagwati has no problem with EU's high export subsidies, high agri subsidies, and so on. But Ms. Susan Schwab has lots of angsts on such export subsidies, the same with her counterparts in the EU and Australia and Japan and many other countries.

On another note, When globalization hits home...

Globalization will definitely hit homes, wherever they may be. A city can experience job losses when a big company packs up and puts up its office or manufacturing plant in another country, the same way that the same city created new jobs when that firm that left came a few years ago, or a new firm comes in.

Many governments in developing countries are allergic to the idea of de-bureaucratizing business regulations, so many of their people are working abroad if not migrating outright to pursue their ambition and entrepreneurial spirit.

And many governments of rich countries are also allergic to the idea of reducing business taxes and of leaving wage-setting to the employers and the market. So many of their companies are leaving and putting up manufacturing plants and offices in developing countries.

These plus many other aspects of capital and labor mobility are all part of globalization. There are losers, definitely, but there are also gainers. Overall, there is net gain, or the number of gainers are plentier than the losers. But if the initial losers will learn to adjust and be flexible, they become gainers later.

One reader asked, “how much longer should the losers wait?”

It depends. A chicken farmer who has been raising chicken all his adult life and suddenly shifts to producing other livestock or crops that experience price hikes while chicken prices are going down can benefit from globalization and make money quick.

While those losers who just wait for new or additional subsidies from the state, and continue producing goods and services that experience price declines due to competition from other producers abroad, can remain losers for the rest of their lives.
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See also:
Free Trade 1: Estonia's Free Market, Globalization, May 09, 2006
Free Trade 2: Unilateral Trade Liberalization, May 17, 2006
Free Trade 3: Protectionism Perpetuate Poverty, September 05, 2006

ASEAN 1: Asian regional bureaucracies

As mobility of people, goods and services, around the world hastens, so have government bureaucracies expand. Not contented with “national planning”, governments extend to “regional planning” and “global planning”.

In Asia, as many Asian economies grow fast – ie, relative to other countries and regions or continent in the world – Asian governments also create new regional bureaucracies fast. Consider the following bodies in Asia:

1. ASEAN – Association of South East Asian Nations, 10 countries (Indonesia, Singapore, Malaysia, Brunei, Philippines, Thailand, Laos, Cambodia, Vietnam, Myanmar). Presidents and/or Prime Ministers of these countries meet annually.

2. ASEAN Plus Three (APT) – composed of Asean10 + China, S. Korea, Japan. Since the late 90s, there has been no strict or exclusive “Asean summit” because they have always been APT. And more recently, it has become “Asean Plus Six”, composed of APT + India, Australia and New Zealand.

3. APEC – Asia-Pacific Economic Cooperation. This is an expanded Asean + 6, to also include the US, Canada, Russia, Mexico, Chile, Peru, other Pacific countries. They hold summit meeting every 2 years.

4. ASEM – Asia-Europe Meeting; composed of APT + EU 25. They also hold summit meeting every 2 years.

5. CSCAP – Council for Security Cooperation in the Asia Pacific

6. NPCSD – North Pacific Cooperative Security Dialogue

7. NEACD – North East Asia Cooperation Dialogue

Proposed new bodies:

1. AMF – Asian Monetary Fund; this is different from the existing Asian Development Bank (ADB).

2. CNEA – Concert of North East Asia

3. NEASD – North East Asia Security Dialogue

Not included above are the various regional free trade agreements (FTAs) like AFTA (Asean FTA), SAFTA (South Asia FTA), NEAFTA (North East Asia FTA, and so on. Also not included are dozens of bilateral FTAs (existing and proposed), or EPAs (economic partnership agreement) by Japan with selected Asean countries.

Annual or biennial summit meetings of those heads of states and their ministers are never cheap. Taxpayers of host governments spend a lot for those meetings, including preparations and post-meeting monitoring.

The main goal of those various bureaucracies and trade agreements is “more economic and security cooperation” among governments of member-countries. This sounds lofty and holy, except that they are agreements AMONG GOVERNMENTS, and not exactly among the citizens of those countries. People to people voluntary arrangement is still restricted by their own governments. For instance, despite the Japan-Philippines EPA (JPEPA), an average old and aging Japanese household who cannot find younger private Japanese caretakers and nurses, cannot hire a Filipino caretaker or health professional anytime they want because the Japanese government has restricted to only X number the entry of Filipino (and other foreign) health professionals every year.

It has been noted that the single important rule of a bureaucracy, is that once created, it does not die on its own; rather, it seeks to expand and perpetuate itself. After all, the cost of maintaining and expanding it does not come from its own bureaucrats, but from the taxpayers in the private sector.