Better Together? Free Trade in the Protectionist Era

Source: FNF

Perspectives from Pakistan, Europe, South Africa, and Lebanon

On Thursday, August 3, 2017, the Friedrich Naumann Foundation for Freedom’s Expert Hub on the World Economic Order hosted a luncheon and panel discussion with study tour participants on the Forum’s inaugural program, entitled “Better Together? Free Trade in the Protectionist Era”. Panelists from Lebanon, Belgium, South Africa, and Pakistan discussed the situation of trade in their regions and responded to questions from the Foundation’s network of political professionals, academics, and trade experts in Washington, DC. The Forum on the World Economic Order brought experts nominated by the Foundation’s regional project offices from around the world for a week-long study tour on the subject of free trade and protectionism.

Raya Haffar El Hassan, Chairperson of the Tripoli Special Economic Zone in Lebanon, discussed the status of free trade in her region. Lebanon currently has a large trade deficit in comparison to the current GDP. After Greece and Japan, Lebanon has the largest debt-to-GDP ratio in the world. Lebanon is currently dealing with a lack of competitiveness and economic productivity. While Lebanon has not traditionally operated under protectionist economic policies, protectionist rhetoric has been coming from the government more recently. Politically, the government has had to operate in coalition with Hezbollah in order to be able to accomplish its objectives. Yet, this coalition has not always been conducive to reforming economic policies. The war in Syria on the border and the increasing number of Syrian refugees in Lebanon has had a negative impact on Lebanon’s tourism industry, as well. However, many economists in Lebanon are trying to counteract the protectionist narrative coming from the government because looking inward will not in itself create more economic growth and competitiveness.

Ghaleb Cachalia, Deputy Shadow Minister for Trade and Industry with the Democratic Alliance in South Africa, discussed the challenges South Africa is facing in dealing with the African National Congress-led government. This government has not been as functional as it was under Nelson Mandela and is dealing with the problem of corruption and disregard for the constitution. The country is “on the fence” regarding free trade, with tendencies towards protectionism. South Africa needs to strengthen its competitiveness and reclaim the domestic market. Fortunately, elections will be held in 2019 and the African National Congress is polling under 50%. The Democratic Alliance will be pursuing more policies to open up trade.

Source: FNFDr. Manzoor Ahmad, Chief Executive for the World Trading Advisors in Pakistan, spoke on the situation in Pakistan as compared with the region more generally. Given the strategic location of Pakistan in central Asia, the country should be exporting more goods than they have been. Although the GDP has been reduced, the high tariffs mean that Pakistan is not doing as well economically as the other countries in the region are. For the past year, Pakistan has been dealing with an energy crisis due to increased demand and a failing power infrastructure, which led to widespread power outages and interruptions to its industries. By the end of 2017, Pakistan hopes to have its energy industries running at full speed again and establish more connections to trade with China’s western provinces. The number one export market for Pakistan and the countries in this region is currently the USA. However, because of Pakistan’s high tariffs, it has become more difficult to remain competitive in the region.

Finally, Dr. Matthias Bauer, Senior Economist with the European Centre for International Political Economy (ECIPE) in Brussels discussed the situation regarding trade policy in the European Union and in Germany. Originally from East Germany, Dr. Bauer noted how trade liberalization has benefitted the states in former East Germany, though the economy in these states today remains less diversified than in the west. Politically, both the EU and Chancellor Merkel in Germany stand in favor of the liberal economic order and multilateral trade. Germany also supports bilateral trade agreements in the EU. The groups in the EU that are more skeptical and conservative towards free trade are those dealing with consumer protection and environmental sustainability. The left-wing and Green parties have campaigned against fracking and the use of GMOs, which are their main points of contention with the Transatlantic Trade and Investment Partnership agreement. This skepticism towards the benefits of trade agreements has become more prevalent in European civil society in the past four years. For example, in a survey in 2016 by the Bertelsmann Foundation, popular support for the Transatlantic Trade and Investment Partnership in Germany decreased from 55% to 17%, in part because of these concerns. However, both the leading political voices, as well as businesses in Europe remain pro-free trade.

Anne-Marie Simon, Program Assistant, Transatlantic Dialogue Program, Friedrich Naumann Foundation for Freedom