To build on our past economic success and thereby make the grade to a prosperous economy abound with economic opportunities, requires some hard choices. We have to choose between an open, export-oriented free market economy on one hand and restricting trade with the rest of the world on the other. In our case, therefore, we have to choose an open economic model over one which is undergirded by trade restrictions. This path is of course not easy but leads to growth. It is the path that goes through the narrow gate if you like. The other one is a wide path with a broad gate. While it is easy to enter in through this gate because it is wide, it leads to economic stagnation.
The difference between the two paths is also stark because, at the heart of it all, we are being enjoined to choose between an open and export-oriented free market economy on one hand and a path of restricting trade with the rest of the world on the other. The former path embraces trade openness because it is a force for good and not an inconvenience that must be replaced in the long run.
A number of factors compel us to choose the path of free markets and trade with the outside world as opposed to protectionism. First and foremost, we are not only landlocked but have a small population which translates into an equally small domestic market. The small domestic market-to extend the argument further – inevitably limits our scope to grow the economy by local consumption alone. This reality leaves us with no other option but to seek foreign markets for our goods and services. Our duty, therefore, if we are to make the leap to a high-income nation, is to produce goods and services that these markets are willing and able to buy.
I’m not oblivious to the fact that trade restrictions are tempting to both politicians and lobby groups alike. However tempting they may be, they are not, in the long run, viable for `any country that is committed to lifting the majority of its people out of poverty. Politicians pursue this approach not because it is economically sound. They rather pursue it because it is emotionally appealing and therefore helps garner votes.
Lobbyists on the other hand agitate for protectionism under the guise of citizen economic empowerment when their true goal is to shelter themselves from the competition. All this talk about empowerment is a mere cliche because the best form of empowerment for the majority of citizens is a job. If we truly want to empower them, we should not do anything that puts their existing jobs with firms that are not necessarily citizens owned, at risk. Companies should therefore be judged on the number of jobs that they create for citizens rather than the passport of the owners.
The other important consideration in choosing trade over protectionism is consumer warfare. If consumers pay higher prices as a result of restrictions or import bans, that can in no way be called empowerment. The adverse impact on consumers can also not be minimised by simply calling it a small price to pay.
We know for example that both China and India are populous nations. However, one stepped out of its economic morass by opening up its economy and pursuing foreign markets. It did not simply decide that its population alone would be sufficient to lift people out of poverty. Putting aside its dodgy human rights record, it flourished economically.
The other one decided to stick to an inward-looking and highly bureaucratic approach. By not prioritising the selling of goods outside its borders, it lost out on a chance to build its international competitiveness. Instead, it sought to replace imports with locally produced goods and that has not gone well.
