[276 Editorial]

FTA: Lessons from History


   It takes time to learn anything, and it takes much longer for society to learn it. Hazardous driving, for example, has been shown to decrease only after two decades of mass ownership of automobiles. Numerous warnings seem to be useless. After many car accidents, people realize cautious defensive driving is necessary.
   So it is with free trade. Society has paid huge tolls in order to learn the advantage of free trade and the danger of protectionism. At the turn of the twentieth century, every country purported to be an empire. was renamed The Great Han Empire by Gojong, the last king of Joseon Dynasty.
   An empire was defined as a country with a large population, a vast territory, an invincible army, and all the natural resources needed at the time of the Industrial Revolution such as iron, coal, petroleum, rubber, and so on. Commodities moved freely within the empire while was strictly protected. The way to survive was to establish colonies. For example, invaded to secure rubber during World War II.
   But no empire is self-sufficient, or can ever be. World wars were results of imperialism and protectionism. Major countries and colonies mobilized and casualties were felt in them. After paying heavy prices, major countries realized free trade is the key. Free trade is beneficial to participating countries and much better than having colonies and waging wars.
   Major countries established the United Nations, decolonised, and some signed the General Agreement on Tariffs and Trade (GATT) in order to secure free trade. Wars disappeared. In the last sixty years, there has been no major world-wide war. Instead, a new age of mutual prosperity has emerged that includes not only developed countries but underdeveloped countries. So-called Third World countries began to slowly develop from the 1960s on. Among others, took advantage of this development. Most favored, in particular nation status.
   Protectionism is economically motivated for some groups, strata, or occupations. Sometimes protectionism springs from political motives, ideological reasons, or racial and cultural 'root-seeking' behavior. Humans are instinctively defensive of what they used to. Whatever the reason, some countries are inclined towards protectionism.
   Socialist countries such as and sought to create 'self-sufficient economies.' Latin American countries during the 50s and 60s implemented 'import substitution' policies, a variant of self-sufficiency, which aimed to domestically produce commodities and substitute these for imported products. Zero importation was the goal. They thought importation meant dependency; their prosperity resting on others whose aim was naturally their own prosperity and profit.
   Mountains of books defending these kinds of policies were published during the 70s and 80s. But they were simply wrong; defeated not by other books but by reality. Hong Kong, , and rose from the ashes of civil war and entered the international stage splendidly, as opposed to Latin American countries where the economy is not yet out of the swamp of stagnation and politics are unstable. This is a remarkable fact given that these countries flourished during the first half of twentieth century and were not engaged in the two world wars, indeed prospered during them.
   As underdeveloped countries industrialized and international trade became more complex, GATT, an agreement between advanced countries, was expanded to the WTO, comprising almost all countries. The WTO is a broad and low-level agreement as it comprises countries very different in terms of industry, capital, technology, markets, national income, and so on.
   FTA’s are another expansion of the WTO, guaranteeing the free flow of capital, technology, products, and human labor in the long run, between the respective countries concerned. The principle of relative advantage of free trade also applies to an FTA. But numerous reasons to object to free trade and regress to protectionism also exist. We see such turbulent phenomena world-wide today. The FTA may not be 'politically correct' in certain situations, but keeping in mind the tolls humans paid in the twentieth century, it is economically correct, which in the long term will affect international stabilization as well as peace.

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