Legislation needed to restore faith in free trade

The populist backlash against free trade is unfortunate, but ultimately unsurprising ("Why the pushback?"; Dec 11).

Liberal trading regimes have indeed created new wealth and opportunity.

The problem, however, is that these benefits have been disproportionately enjoyed by a fortunate few, that is, major political and corporate players.

When large conglomerates can influence trade negotiations, secure preferential access to markets, or effect anti-competitive mergers, small- and medium-sized enterprises are invariably squeezed out, while hardly any of the gains trickle down to the main workforce.

Ease of relocation and the ability to control overseas operations have resulted in widespread offshoring of production and business functions.

This is a natural outcome of comparative advantage, but governments in the developed world have been slow to compensate for this net loss of jobs.

The fears of the electorate, therefore, cannot be dismissed as irrational rambling or blind belief in political snake oil.

In fact, they stem from very real concerns over livelihoods and survival.

Restoring faith in free trade requires a concerted effort on multiple fronts to manage and mitigate its drawbacks.

First, strong anti-trust legislation and enforcement should be a prerequisite of any free trade agreement (FTA). While it is the right of big businesses to capitalise on free trade, their activities should be subject to appropriate scrutiny and regulation.

Second, provisions must be made in FTAs and legislation to uphold the interests of SMEs so that they can participate more effectively in a globalised market.

Third, it would be in the best interests of both firms and employees if wage scales were adjusted, and profits from free trade more equitably distributed throughout the hierarchy.

Finally, and perhaps most importantly, governments should be more proactive in managing the unemployment that globalisation can bring about.

This could entail training and certification schemes to help re-allocate retrenched workers, or making new investments in related sunrise industries to replace outsourced positions.

Of course, all these are easier said than done, but in the absence of any firm commitment or action, protectionist sentiment will only deepen.

The invisible hand of the free market cannot be set loose on the world without steadying hands to guide and moderate it.

Paul Chan Poh Hoi