Iniquity of the free market force theory

The buzzwords of international trade today are globalization, trade, liberalization and the all-encompassing theory of the free market forces.

The natural interplay of the free market forces and the economics of pure competition, unimpeded by local restraints and restrictions on the free flow of goods and services across the borders is the supposed consensus of the general community of nations. Under this arrangement, each and every country will be subject to the same rules of competition. No country shall be favoring a domestic product or service over that of another. Every player will be competing, participating and cooperating in the international playing field. This globalization of the world economy and the liberalization of international trade are the fashionable raison d etre of the World Trade Organization (WTO), the General Agreement on Tariffs and Trade (GATT), and closer to home, the Asia Pacific Economic Cooperation (APEC).

The economic order of globalization, trade liberalization and free market competition is really an economic ideal that is attainable and can only be justly achieved if and when all the players in the economic arena, that is, all the countries in the world economy, are of the same stage, level and degree of economic development. In other words, it is not only a matter of leveling the playing field under which each and every participant will now be subject to the same rules of play. More important is the actual level of the competency and capability of the player himself vis-à-vis the other players.

To forge this point further, an obvious distinction must be made between the developed countries, the developing countries and the underdeveloped economies. It is a truism that the players in the economic game, the countries are all varying stages of development or underdevelopment. Obviously, the United States, Japan, Germany, Canada and their like have advanced well far off in their industrial march that they are now rightfully called developed countries. Not all nations, however, belong to the same category. The less developed countries have not yet reached that desired level of industrial growth but are nevertheless on an even keel in their journey to be part of the newly industrialized countries (NIC). These are the developing countries of the world. Further down the economic ladder, are the least developed counties, the backward economies, the underdeveloped nations – which to this day still comprise the majority of the countries in the world.

The Philippines, by the way while not totally underdeveloped, is inching its way into the ranks of the developing nations today.

Now, underdeveloped and developing countries cannot be expected at present to effectively compete with the developed countries because, owing to the latter’s modern state of technology and industrialization, they have better products that they can very well afford to sell at lower prices. With this tremendous comparative advantage of the developed countries over the developing and underdeveloped economies, an unconditional opening up of all the markets of each country, regardless of a nation’s particular state of development or underdevelopment, will lead to the total economic domination by the developed countries over their lesser developed counterparts. Opening up the market of still developing economies, without any protective mantle or umbrella to their local manufacturers and industries, will surely spell the destruction of the competitive position of the local enterprises.

A simple analogy, highly instructive as it is ludicrous, will graphically drive home the point. A boxing bout is being staged between two contenders. The rules that apply to one fighter equally apply to the other. Both can only start throwing punches at the sound of the bell. Both must stop trading blows at the sound again of the bell ending the round. No fighter is allowed to hit below the belt. No head-butting is allowed. You see the rule that applies to one applies to all. We have a level playing field. So far, so good.

Now enter the prizefighters. On the red corner, six foot five inches in height and weighing 260 pounds is heavyweight and highly developed foreign enterprise. On the green corner, five feet four inches tall and weighing 120 pounds is lightweight Philippine enterprise. The referee gives the final instructions, makes both fighters shake hands and extols "may the best man win." The starting bell rings.

I smell a massacre. Don’t you? But ridiculously funny as the analogy is, this is exactly the globalization, the trade liberalization and free forces theory that the WTO, the GATT and the developed economies are foisting upon the world community. And they entice the enterprises of the fledging economies to eagerly enter the ring and carry a competitive bout and position with them. Will you?

The solution, very clearly, is for us to first nurture, support and develop our own local manufacturing sector up to the point that they are competitive with their foreign competitors. Then and only then can we open up our market to foreign competition.

It is high-time, that our economic planners re-think our country’s position in the emerging world economic order. If we are to avert a national disaster of a continuous massive and sustained importation of foreign consumer goods into the country, we must truly enhance our capability in producing our local products.

(You may write your comments/suggestions at 15/F Equitable Bank Tower Paseo de Roxas, Makati City or through e-mail at [email protected])