Trade is getting a bad rap these days. From the Brexit vote in Britain to Mr Donald Trump's election victory in the US, a common analysis is that there is a popular revolt against globalisation. Free trade, so the critics say, has robbed countries in the developed West of jobs. These have moved to cheaper locations in China, India and wherever multinational companies prefer to relocate. As a result, there has been a hollowing out of the advanced economies, increasing unemployment and declining wage levels. The income gap has widened with those at the top earning ever larger salaries because globalisation made their skills mobile and allowed them to move to the highest bidder. All this cannot be denied and is supported by economic data. What's still foggy is why it has happened and what should be done.
The disruption that is taking place wasn't because of free trade but a result of the technological revolution that has swept the world, said Foreign Minister Vivian Balakrishnan at a recent forum organised by this newspaper. It has overturned businesses, displaced traditional skills and caused other changes. Much of it is driven by advances in digital technology, led by the likes of companies such as Google, Facebook, Uber and Alibaba. These companies and the changes they wrought will not go away whatever governments do to protect their citizens from their ill-effects, perceived and real.
Hence the remedy touted by populist politicians, namely, introducing protectionist policies and rolling back trade agreements, will not help. In fact, they will make their economies even weaker when they try to shield them from international competition. It is better to train their citizenry to operate and do well in the new economy, re-skilling workers and helping companies make the transition to the new world.
Globalisation isn't beneficial to everyone, of course, and there will be winners and losers. Governments will have to do a better job helping workers who have been displaced because their jobs have disappeared. They need both interim support and skill retraining to prepare them for the new jobs that will be created. A new social compact might see workers actively adjust to the new reality and prepare for it, while the Government extends a helping hand to all who are striving to make the transition. Both sides have to live up to their share of the bargain to make it work.
On their part, workers have to accept that economies will never remain static and thus lifelong learning and training are necessary. Employers must be supportive as well to help keep society intact. If affected workers are neglected, there could be a political backlash with profound consequences for the economy, as in the case of Brexit. Then the lesson that free trade isn't the problem might be learnt the hard way by all.