In a global context of increasing polarisation, it is not surprising that firm ideological lines have been drawn on a number of complex issues. Global trade and investments agreements, which include free trade agreements (FTAs), are among the issues that have been affected by this global narrative of “either you are for us or against us”.
On the one side stands what can be loosely termed as the “global left”, which, rightly or wrongly, attributes many of the problems facing the world such as pollution, the loss of jobs and growing inequality to the forces of globalisation and unfettered capitalism. On the other side stands what can be generalised as the forces behind the so-called Washington Consensus, which is seen as pushing for the international interests of multinational companies and capital owners in the developed world, to the detriment of the interests of developing nations and marginalised communities.
This dichotomy has forced the masses to take the position of either side based on simplified heuristics — which side seems more cool, which side has better media coverage or which side has more appealing spokespersons. In a way, this is understandable. The issues surrounding the global movement of capital, goods and services are very complex and hard to understand even for policymakers. For example, the Trans Pacific Partnership Agreement (TPPA) is documented in 16 volumes of often inaccessible legal language. I very much doubt that my colleagues in parliament had the willpower to go through even the executive summary of the TPPA, much less the actual agreement itself. Hence, the arguments are simplified into a smaller number of issues such as the likelihood of whether governments will be sued by foreign companies, the possible impact on the price of medicines and the opportunities and challenges for state-owned enterprises as well as small and medium enterprises (SMEs).
The reality of FTAs is much more complex. The risk of falling on one side or the other is that we fail to realise that the downsides and upsides of FTAs are two sides of the same coin; all businesses large or small find that opportunities come packaged with risks. No cost-benefit analysis (CBA) can adequately capture the positive spillover effects as a result of being part of larger, integrated global value chains (GVCs) nor the lost opportunities from diverted investments from not being part of an FTA. The long-term benefits of being in an FTA may be significant but spread among a large number of people, thereby diluting its felt effects. At the same time, job losses in specific industries negatively impacted by a more liberalised trading environment will be more greatly felt by a concentrated number of people in the short term.
The heated debate around FTAs probably fails to acknowledge that no single FTA will bring a country on a “road to hell”. It will be hard to point to any country and say that its economy has suffered irreparable damage as a result of it signing an FTA (or a series of FTAs, for that matter). Nor will any FTA, by itself, raise a country from a developing to a developed status. A country’s own internal governance mechanisms and economic policies have much more influence over the well-being of its citizens than being or not being part of an FTA.
The challenge for this government, and especially for my Ministry, is to show to the person in the street how more trade and investment can benefit them directly, not just according to an abstract cost-benefit analysis.
For example, a friend who was driving along an East Coast road observed mountains of watermelons heaped along the roadside. Who would buy these watermelons before they rot? Why were the farmers not linked to a regional supply chain where they would command better prices in a good season? Instead, due to oversupply, they were going at rock-bottom prices. Reducing trade barriers through FTAs would help our agricultural smallholders move their goods out to markets and participate in business at a global level.
A more concrete example is how e-commerce and logistics, with the help of DHL Express, allowed Hanan Asryaf, a collector of vintage clothes imported from the US, to sell Public Enemy and Snoop Dog collector T-shirts online, often to customers in the US, with hefty profit margins.
Finally, I can also point to how a major Chinese textile company was able to provide close to 1,000 jobs to Malaysians in Johor’s hinterland, because it wanted to take advantage of Malaysia’s market access via FTAs to markets in developed countries.
These are just some of the stories that can be told regarding the benefits of increased trade and investments. By “making it real”, making the case for trade and investment can transition from the bland statistics and technical policies to real life examples of changed livelihoods and expanded opportunities.
Dr Ong Kian Ming is deputy minister of International Trade and Industry (MITI). He can be reached at [email protected]