Prosperous Places Trade A Lot
Singapore rated high, trade deals rated low
Mixing nationalism and economic policy often backfires. We trim, blend, and append three 2010 articles from: (1) BBC, Nov 3, on Singapore; (2) Christian Science Monitor, Nov 10, on trade deals by Jonathan Adams; and (3) Cato Institute, Oct 27, citing Henry George by Jim Powell.
by BBC, by Jonathan Adams, and by Jim Powell
Singapore best country in which to run a business
Singapore remains the best country in which to run a business, according to the World Bank. Its Doing Business 2011 study rates 183 countries on the ease in which they allow firms to operate.
Report co-author Dahlia Khalifa said, "Singapore has now been top of our survey for the past five years.”
"It is simply the most efficient place from which to import and export. For example, you only need four documents to export and import goods, which remains global best practice.
"Singapore is also the leader in protecting investors and minority shareholders."
China, now the world's second-largest economy, trailed Singapore in 79th place.
JJS: China also absorbed Hong Kong which when independent often bested Singapore as the best place for free and prosperous enterprise. Both city-states recovered a lot of socially-generated land value, which enabled them to keep taxes on buildings, business, and earnings low. Since trade pumps up site value, especially in the commercials zones of cities, any nation could recover its ground rents and then lose the fear of trade across borders and instead welcome trade with open arms.
Do free trade deals really boost economies?
East Asia ( ASEAN, China, Japan, South Korea, Taiwan, and Hong Kong) will be the world's largest economic bloc by 2015, surpassing the North American Free Trade Area and the European Union.
Yet has NAFTA had that much of an impact on its three member economies -- the US, Canada, and Mexico? Some studies, including one from the Congressional Budget Office, have found only very slight effects on trade, growth, and jobs that can be directly attributed to the pact.
One reason why such trade deals may not matter much is that currencies fluctuate. Case in point: The South Korean won -- which depreciated almost 50% against the dollar from early 2008 to early 2009 -- effectively gave Korean firms' exports a 50% discount.
There are now 90 free trade agreements in effect in Asia, up from 20 in 1997 -- and more than 60 other deals are in the works.
China is signing pacts for primarily strategic, not economic reasons. The deals helped China soothe fears in southeast Asia over its economic and political rise.
In China's deal with Taiwan, the first phase lowers tariffs on 539 Taiwanese exports to China, but only 267 Chinese exports to Taiwan. China repeatedly emphasized it was "giving advantage" to the island in negotiations. The mainland is paving the way for political union by economic means.
Firms that plan to use trade deals were more likely to be huge, foreign-owned multinationals in wealthier countries, like Japanese automakers. Small and medium firms in poorer countries tended not to benefit much from trade agreements.
Philippines exporters said tariffs weren't the main issue for them, but rather a maze of market-specific paperwork and export rules. "Non-tariff barriers is the thing that's affecting us," said Luis Sicat, chairman of a household accessories export group.
"Countries like the US, and in Europe have requirements -- sanitary, lab tests on products, lead content, and all these other things that make it difficult for us to comply." Big firms have an advantage because they are able to "absorb" the costs of compliance, Mr. Sicat said.
Blockading with Trade Restrictions
Battered by the recession, many Americans are beginning to blame some of their woes on foreigners. There’s talk that the federal government ought to take action against Chinese, Japanese, Mexicans, Europeans and others. Hence, recent newspaper headlines like “Americans Sour on Trade” and “Goodbye, Free Trade?”
Making imports more costly enables protected domestic producers to charge higher prices than they could get away with if American consumers were completely free to buy from anyone anywhere.
The late Milton Friedman believed that the rhetorically most effective critique of trade restrictions was Henry George’s book Protection or Free Trade (1879). George realized that if tariffs were really good, then civilization would have begun where people were cut off from the outside world by mountains, oceans, deserts, and other natural barriers. But, he explained, “it is where trade could best be carried on that we find wealth first accumulating and civilization beginning. It is on accessible harbors, navigable rivers and highways that we find cities arising and the arts and sciences developing.”
Monopolies could be maintained only if there were government-enforced restrictions that prevented people from dealing with alternative suppliers. He concluded that the most effective antitrust policy was free trade -- consumers and businesses able to shop the world for the best values.
He explained why trade restrictions mainly harm nations that impose them: “A tariff that raises the price of lumber necessarily discourages the industries which make use of lumber, from those connected with the building of houses and ships to those engaged in the making of matches and wooden toothpicks; a tariff that raises the price of salt discourages the dairyman and the fisherman; a tariff that raises the price of sugar discourages the fruit-preserver, the maker of syrups, and so on.”
George observed that nations try to prevent adversaries from trading, and a blockade is considered an act of war. The US blockaded Cuba and North Vietnam. Israel blockaded the Gaza Strip, aiming to weaken Hamas. “What protection teaches us is to do to ourselves in time of peace what enemies seek to do to us in time of war.”
Editor Jeffery J. Smith runs the Forum on Geonomics.
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