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Trade Is Good

By: Cielito F. Habito, PhD
Many fear that Donald Trump, soon to assume office as president of the United States, will bring his country and its economy to ruin because, among other things, of his promise to return to trade protectionism. His premise has been that too many American jobs were lost due to the freer entry of foreign goods into the US market, especially from Mexico and Canada under the North American Free Trade Agreement, and from China. The problem is that if he indeed brings down the US economy, he would bring down with it other economies around the world, including ours.
The same reasoning is espoused by those who call for return to more protectionist trade policies elsewhere, including in our own country. Will trade protectionism, or restricting trade across countries, indeed do us good? What motivated us, and all countries worldwide, to foster more active trade in the last three decades in the first place?
The guiding motivation behind a more open trade policy is that a country’s producers must be internationally competitive if they are to be able to sell their products and services beyond their own limited domestic markets. Being able to sell overseas is critical because depending entirely on one’s domestic market limits the potential growth that a producing firm, and an entire economy, can achieve. Even China, with the largest domestic market in the world in terms of number of consumers, saw the need to join the World Trade Organization to have better access to world markets. For a relatively small country like the Philippines, being able to sell our products to the rest of the world is crucial. Our similarly small neighbors, with Vietnam now a notable example, have demonstrated how international competitiveness has allowed them to dynamically grow their economies, create millions of new jobs, and bring down poverty dramatically over the last 25 years.
Read the full article at http://opinion.inquirer.net/100798/trade-is-good