Pledges by leaders of Trans-Pacific Partnership nations to not throw in the towel reflect the pro-trade momentum that enlightened officials have kept going in recent decades. The big problem is that the case for free trade agreements has not been well sold. Consequently, public angst over FTAs could be the deal breaker. That likelihood surfaced with the triumph of a United States presidential candidate who won over Americans fearful of globalisation.
The perception gap has been evident for some time. Two years ago, an Economist-HSBC study found that only one out of four Asean exporters leveraged free trade agreements and nearly half said they did not understand the terms. Yet among the doers, 85 per cent found their exports had grown because of FTAs. The reaction of workers, especially in the West, is often more pronounced, especially when populists make facile links between global trade and the erosion of jobs and incomes. To be sure, globalisation has disruptive effects which some groups feel more adversely. But the world has functioned much better ever since efforts were made, after World War II, to implement a system for multilateral trade relations. Free trade has enabled many, like Singapore, to make striking gains and has given backward nations a chance to improve the lives of their people.
The cause and effect link became blurred after the failure of the World Trade Organisation's Doha round of talks which had dragged on for 14 years as a result of a rich-poor divide and the tug of domestic interests. Consequently, many pursued alternatives which have contributed to complex and poorly understood networks of bilateral, plurilateral, regional and multilateral trade agreements. The terms of the arrangements are similarly complex: covering tariffs, Customs procedures, rules of origin, goods, services, investment, intellectual property, government procurement, and standards relating to labour, safety and the environment. These are exploited by activists to dwell on the effect of cross-border trade on work, the loss of cheaper generic drugs due to stronger patents, and a host of other claims.
The demonstrable benefits of free trade are all too often not emphasised sufficiently. For example, more than half the jobs in Singapore are related to trade in one way or another, as mentioned earlier in a report of the World Trade Organisation and IDE-Jetro. Total trade in goods and services amounts to around four times Singapore's gross domestic product. The gains of free trade are also seen in other countries, but perceptions on the ground might be quite different. These arise when what is more visible is the inequitable distribution of opportunities and wealth. However, inclusive growth is hardly likely when one makes free trade the bogeyman. That will, in effect, shrink the pie for one and all.