 |
 |
| ON THE OTHER HAND |
| Protectionism Wins over Free Trade By Antonio C. Abaya March 6, 2002 It was more eloquent than a thousand anti-globalization demonstrators shouting themselves hoarse in Seattle or Davos or Prague. By proposing a 30% tariff on imports of steel into the US, President George W. Bush has unwittingly endorsed the concern of anti-globalists that the post-modern religion of Free Trade has been wreaking havoc on the livelihood, and thus the future, of millions of people around the world, most especially in but not limited to, the poorer countries. The argument is thus joined: if one of the richest countries in the world � the US is not THE richest � can be adversely affected by Free Trade, what more the struggling countries of the Third World, burdened as they already are by galloping population growth rates, weak exports, semi-primitive agriculture and nascent (and therefore vulnerable) manufacturing sectors? President Bush was forced to choose Protectionism over Free Trade because hundreds of thousands of workers in the American steel and ancillary industries have lost their jobs as a direct result of the influx of cheaper steel imports from such countries as Russia, Brazil, South Korea, Japan and the European Union. By proposing to impose a 30% tariff on steel imports, Bush is belatedly trying to save American jobs even if the net result is said to make steel at least 10% more costly and thus make steel products more expensive for American consumers. In the presidential electoral campaign of 2000, he had promised workers in such key political (and steelmaking) states as Indiana, Ohio, Pennsylvania and West Virginia that, if elected, he would come to the rescue of the beleaguered steel industry and save their jobs from the competition of cheap imports. It is now payback time and he has to deliver on his promise. Otherwise his Republican Party, the ideological champions of Free Trade, could lose in the mid-term elections next November and possibly even in Bush� bid for a second presidential term in 2004. ***** Actually this is not the first time in the modern era that the US has chosen Protectionism over Free Trade. In the 1980s, in order to save the American motorcycle industry from extinction, the US raised tariffs on Japanese imports. The move saved the Harley Davidson, but not the American Indian, company. There was a time, too, when tariffs were raised on imported footwear in order to save the American shoe industry. And to this day, imports of sugar into the US are strictly restricted by numerical quotas in order to save the jobs of sugar producers in the southern states. So also are imports of garments, in order to save jobs in the American garments industry. And students of economic history know that during the first century of its existence, the US of A deliberately chose a policy of protecting its industries against competition from the more developed European countries, especially England, in order to create and save American jobs, since they knew that their prosperity depended on a high level of employment. This was Protectionism, not Free Trade. And the US is not the only mature economy to choose to protect its industries. To this day, France and Italy do not allow Japanese carmakers to capture more than two percent of their domestic markets. This was a deliberate policy to protect domestic products and jobs against foreign competition. That�s not Free Trade, that�s Protectionism. For a long time, Japan and South Korea resisted American pressure to open their domestic markets to agricultural products, including the national staple, rice, from the US, because they knew that their farmers would be adversely affected by cheaper imports. It is a measure of their sense of common destiny that even after cheaper US rice was finally allowed in, most Japanese consumers continued to buy the more expensive domestic products. The moral of the story is that even the most mature industrial countries in the world, the most indefatigable advocates of Free Trade, choose to protect their industries whenever it is in their national interest to do so. The tragedy of the Filipinos, especially our political leaders, is that they are such na�ve suckers: they readily mouth the Free Trade slogans handed down from Washington and they actually believe them and put them into play, even to the detriment of our own domestic industries. The pragmatic and sensible approach should have been: mouth the slogans, but protect your own, as the Americans, the French, the Italians, the Japanese, the South Koreans and others do. We are such simple-minded patsies. In the global village, we are the village idiot whom everyone takes advantage of and laughs at. Bernie Villegas and Jess Estanislao, the ideological gurus of President Ramos who first embraced Free Trade for us, even want to accelerate Free Trade faster than the Asean Free Trade Area calls for. We are more Popish than the Pope. ***** Somehow our political system seems incapable of producing leaders of the calibre of Nehru of India or Mahathir of Malaysia. It was Nehru who modernized impoverished India into one of the most industrialized countries in the world, able to fabricate domestically millions of products from paper clips to nuclear submarines. This sophisticated industrial base, protected from foreign competition, is credited for the growth of the Indian middle class, at 250 million strong, one of the biggest consumer bases in the world, even if other hundreds of millions are still mired in poverty. It was Mahathir who laid the foundation for Malaysia�s entry into the ranks of newly industrializing countries or NICs. The automotive industry is a case in point. The Philippines� automotive industry had its beginnings in the late 1950s, when the first Asian assembly plants of the global automotive giants were established in this country, ahead of South Korea, Malaysia or Thailand. And yet, even half a century later, our pioneering automotive industry has remained a puny assembly operation , totally dependent on imported components, confined to the miniscule domestic market, and almost always on the verge of being overwhelmed by smuggled and legally imported competing products. On the other hand, the automotive industries of South Korea, Malaysia and Thailand, established 20 to 30 years AFTER our own, have become world-class manufacturing enterprises that fabricate vehicles from locally produced sheet metal plates and aluminum blocks, enjoying tariff and other protection against foreign competition from their governments. South Korea now turns out more than two million vehicles a year. Thailand produces almost all the pick-up trucks now being sold in the US market. Malaysia�s Proton national car, one of Mahathir�s pet projects, first rolled off the assembly plant in the mid-1980s, almost 30 years after the start of the Philippines� own automotive industry. From the start, it enjoyed not only tariff protection against imports but also a tax exemption that made it at least 35% cheaper than similar cars being assembled in Malaysia (by Toyota, Chrysler, etc). This special status allowed Proton to capture 70% of the Malaysian domestic market, amid the protests of foreign assemblers. But, typically, PM Mahathir was unfazed by the protests of foreigners. For him, it was a matter of national pride that Malaysia become a player in the global automotive market, despite its small population of 20 million. Next to Sweden (pop. 9 million), Malaysia is the smallest country in the world with an authentic, indigenous automotive industry. By end of 2000, almost two million Protons have been built and sold, not only in Malaysia but in other countries as well. And although in 1986 more than 70% of the Proton�s components were imported (from Mitsubishi, its corporate partner), now, only 16 years later, it is almost 100% domestically produced. This year a plant will be inaugurated where the engines will be machined from steel and aluminum blocks. Proton is now available in several models, including a van, a sporty version, and a modest Morris Minor-type for low-income families. Using the same formula, Malaysia has also developed its own national motorcycle. If Malaysia had followed the Philippine example of no ambition for a national car, no protection or tax breaks against imports, no chutzpah to crash the global market, and no vision or timetable for 100% domestic manufacture, there would have been no Proton, and Malaysia would be assembling only 4,000 units a month from imported components, which is what we Filipinos are still doing half a century after we began. And we wonder how we got left behind? Henry Ford would have died a poor man here. ***** This article appeared in the March 25, 2002 issue of the Philippine Weekly Graphic magazine. |