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Free Trade Brings Prosperity

This Press Briefing has been arranged in connection with the launching of Global Freedom to Trade Campaign. As we know that WTO's 5th ministerial conference is going to be held in Cancun, Mexico, from September 10 to 14, this is to remind that the driving force behind the WTO was 'free trade' but the politics of big powers and its vested interests have divided this platform into warring forces. We at Alternate Solutions Institute want to stress the importance of trying to achieve global free trade through WTO, and taking advantage of this Campaign wants to highlight the fact that free trade is the way of prosperity for the people of the world.



by Khalil Ahmad

The text of the Press Briefing given at a meeting with journalists in connection with the launching of the Global Freedom to Trade Campaign arranged by the Alternate Solutions Institute, Lahore, Pakistan.

Welcome. I, Khalil Ahmad, on behalf of Alternate Solutions Institute, welcome you to this Press Briefing. Alternate Solutions Institute is a registered, non-political, non-profit educational think tank. Its mission includes promotion of the concept of a limited government under the rule of law protecting life, property and individual liberty of its citizens. Its motto is: Welfare of the People by the People.

This Press Briefing has been arranged in connection with the launching of Global Freedom to Trade Campaign. As we know that WTO's 5th ministerial conference is going to be held in Cancun, Mexico, from September 10 to 14, this is to remind that the driving force behind the WTO was 'free trade' but the politics of big powers and its vested interests have divided this platform into warring forces. We at Alternate Solutions Institute want to stress the importance of trying to achieve global free trade through WTO, and taking advantage of this Campaign wants to highlight the fact that free trade is the way of prosperity for the people of the world.

From the platform of Freedom to Trade Campaign we call on world leaders to permit the people of the world the real freedom to trade. That means removing all barriers to trade imposed by governments, including quotas, tariffs, subsidies and protectionist regulations.

We demand that all nations:

Eliminate import tariffs and quotas.
Eliminate production and export subsidies.
Eliminate protectionist, trade-linked environment regulations.
Remove other bureaucratic restrictions on trade.
Allow entrepreneurs, traders and innovators the freedom to protect
and exchange their property.

Free trade frees people: it is
fundamental to eliminating poverty, promoting development and
achieving political and economic freedom.

Now a few words about free trade:

In Pakistan, it has become intellectually fashionable to outrightly dismiss free market, free trade, globalization, capitalism, privatization, etc. Most of the mainstream politics and NGO activities thrive on the slogan of fighting for the poor. But, nobody ever gives a thought to the fact that these economic phenomena actually benefit the poor.

Let's have a look at free trade: is it good for the poor or not? The opponents of free trade believe and propagandize that it is bad for the poor. How? They won't explain it in detail.

Here are some real samples:

A news item reads as: Call to stop Chinese chicken import
Pakistan Veterinary Medical Association has demanded of the government to stop imports of frozen chicken from China besides imposing duty on such imports. The President of PVMA said the imported frozen chicken meat was much cheaper than the locally produced chicken.

Another news item reads as: Heavy duty on chicken meat import sought
Karachi: Pakistan Poultry Association (PPA) has demanded of the government to impose heavy duty on the import of chicken in order to protect the local chicken industry from plunging into crisis. The office bearers of PPA said that two consignments of 25 tonnes of chicken had already been imported from China which would have drastic consequences for the local industry and the country will suffer a loss of Rs.14 million in GDP and thousands of people attached with the industry would be rendered jobless. The Convener Press and Public Relations of PPA said that imported chicken is much cheaper in comparison to local chicken but the public gets no relief from it as its full consignment goes to hotels and catering houses.

Whose interests the stopping of cheaper chicken import from China or duty imposed on it will serve? No doubt, not the interest of consumers.

Yet another news item reads as: PTC urges govt to check duty evasion, smuggling
The Managing Director Pakistan Tobacco Company (PTC) urged the government to check duty evasion and smuggling which is seriously hurting the tobacco industry. The Managing Director further stated that the loss to the government annually is around Rs.6 billion at the current rate in which evasion amounts to Rs.4.2 billion and smuggling Rs.1.8 billion.

Isn't it another case of avoiding open competition to fleece the consumers? Of course, the smugglers provide cheaper and better things; that is why people buy them, and, in turn, the smugglers earn profit from this 'illegal' trade. And, why the producers and importers try to evade the duty? Because this duty raises the cost of a product and makes it less competitive in the market, so the people had to evade such duties to be successful in their businesses. Why don't these Poverty Politicos ask the government to eliminate or reduce such duties, instead?

And yet another news item reads as: Duty on used monitors fails to boost TV sales
The imposition of 25 per cent import duty on used computer monitors in the budget FY 2003-2004 has failed to hold back the declining sales of both the imported as well as the locally manufactured television sets. The price of used monitors is so low that even with the addition of 25 % import duty, the monitors are still considered cheaper by the lower and middle income group buyers who are the biggest seekers of this item. Used monitors are not only used with unbranded or second hand computers but used as television sets too by adding a device known as 'TV Card' which has a remote facility to view at least 256 channels; and this type of a modified television plus computer monitor with better picture quality (is far cheaper) than any new brand television set.

Whose interests this 25 % import duty on used monitors did serve? Hasn't the advancement in technology (made by some 'greedy' capitalist to earn profit) brought things in the reach of low income groups? And, even the import duty purported to serve the interest of the TV set importers failed to stop this benefit to the poor.

You know about the present shortage of cars. In a world where innumerable cars exist, can you imagine a country where people have been forced to buy cars from black market? Reason is that if you do not create a free market, a black market will emerge.

On the whole, what do these news items amount to? Clearly, they amount to Protectionism. The poultry association, the tobacco manufacturers, all of them and many others in the same situation clamor for Protectionism because it serves their interest, and it is understandable. But, why do the people fighting for the cause of poor favor import duties, restrictions on free trade, and advocate protectionism? It is quite unintelligible.

They plead, as has been argued in the above news items, that local industry will be destroyed. Do they mean that the local industry should flourish at the cost of poor consumers? I hope they won't concede to this anti-poor measure. Then, they try to frighten us that so many people working with this industry will be rendered jobless. Again, do they mean that so many people should have job and live at the cost of other people? I hope they would like to give a serious thought to this exploitative situation. Their final argument is like this: free trade results in a loss to the government. This loss may be in the form of foreign exchange (as the volume of imports increases in the case of an under-developed economy), revenue (as the uncompetitive businesses vanish), and reduction in GDP (as the Pakistan Poultry Association argued 'the drastic consequences for the local industry will incur a loss of Rs.14 million in GDP').

Will the opponents of free trade answer these two questions: Is the loss to the government is the loss of people? Or, is the loss to the people is the loss of government? It is these answers that determine who is in favor of the poor and who is not. As a principle, the good of the people should be considered the good of the government since government is instituted for the sake of people and not vice verse. The poor benefit from free trade and a government that seeks the good of people should follow what is in the interest of people. It should not seek protectionist policies that serve only a limited section of society.

Moreover, economic decisions are judged against a background of long term consequences. If an uncompetitive industry or a business closes down, the causes which played this 'havoc' start working toward the birth of other businesses. New vistas open and investors and producers find new ways to do business to fulfill their own and others' needs. This is what economic history tells. This argument against free trade is a contradiction in terms. Had history followed this course, no economic and social progress would have been possible. For instance, if to save the jobs of the typists or say calligraphists or in like cases government had imposed duties on the new products and restrictions on their use were we able to go ahead with computers and information technology? Akbar, the great moghul emperor, was shown by a foreigner the type of an earliest printer. He rejected its use on the same pretext that our calligraphers would be rendered jobless.

Also, economic decisions are judged by their consequences for all the people and not this or that section of society. Surely, the number of people attached with an industry doomed to failure is quite limited and no policy should be formulated to provide them at the cost of other people.

Another blessing of free trade is that it minimizes the possibilities of war which is one of the greatest enemies of people. Free trade brings people of various countries closer not only economically and politically but culturally and intellectually also. In addition, this mitigates or diminishes the aversions, differences, and hostilities between the peoples of those countries or creates tolerance for them; and, as a result may evaporate the causes giving rise to wars between those countries. The French Frederic Bastiat (1801-1850) aptly described this argument in a few words thus: 'If goods do not cross borders, soldiers will.'

Finally, we must admit an economic fact of utmost significance that we are all (except those who live as parasite and consume only) producers and consumers, at the same time, of this or that product or service. Another economic and psychological fact of equal significance is that producers and consumers everywhere behave like the citizens of the same country: they seek maximum value for their money. The producer no matter a billionaire or a 'have-not' tries to find the highest possible price for his/her product or service, i.e. maximum value for his/her money. The consumer no matter a billionaire or a 'have-not' also tries to find cheaper and quality product or service, i.e. maximum value for his/her money. The determination of the point at which demands of both producer and consumer happen to balance rests with a free market and not with any other authority acting in the name of people or something else. Only a free market where voluntary exchanges take place among producers and consumers allows an open competition to exist among various producers-cum-consumers. Protectionism or restrictions on free trade between various districts or provinces or countries ultimately make poor poorer since in that case they are forced to 'purchase' a product or service not worth their money.



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