Trade Imbalances

Published on 2nd October 2019

All the countries of the world wish to prosper, to grow their economies. During their colonial days their wealth had been exploited to enrich their colonial masters. They cannot expect much from their former colonial masters. But they do expect to be allowed to develop their own countries themselves. But they are hampered from doing so.

There is much talk about free trade. But all the time new regulations are being introduced which are detrimental to the development of poor countries. This is because proposals on rules and regulations are made by the rich, often secretly. The poor are practically forced to accept them. One example is the Trans Pacific partnership. It was cooked up in Washington with inputs from their big businesses. In the agreement Governments of small countries could be forced to compensate the big foreign companies with huge sums of money, should their decision affect the profitability of the big companies, including future profit.

Fortunately, now the powerful country which prepared these agreements has rejected it. With the exclusion of this country, the Agreement has become more palatable. But the agreements still laid down conditions for trade – which negates free trade. We are told that we must remove duties on imports, or reduce it so that foreign products can knock out our infant industries. We are reduced to exporting only raw material. How do we industrialise and create jobs for our people?

A classic case of the denial of free trade is the ban on the import of palm oil proposed by the European countries. Unable to sustain the competitiveness of their own edible oils, a campaign is mounted to ban palm oil. It is said that palm oil is poisonous to health, destroys the habitat of longnosed monkeys, reduce carbon dioxide absorption etc. Products of Europe are labelled palm oil free. Biofuel using palm oil are banned.

Malaysia produces palm oil. Many poor countries produce palm oil. Malaysia will not clear more forests for palm plantations. We are as concerned about our environment as the Europeans. At the Rio Earth Summit in 1992, Malaysia pledged to maintain at least 50 percent of our land mass under forest cover. We have made good our pledge and better. Our forest cover is currently at 55.3 percent exceeding our Rio pledge.

Palm oil is still a big contributor to our economy. There is no evidence that it is poisonous. We appeal to the good sense of the rich not to impoverish us, not to deprive hundreds of thousands of our workers from earning a living. You will be doing a good deed by consuming palm oil.

Malaysia is a middle-income country. It depends on trade to grow. Naturally our markets are the rich countries.

Now the rich want us to balance the trade, to buy more of their goods, to correct the imbalance. To do this we will have to spend the money we earn from trade to import the goods of the rich. Our growth will be stunted so that the already rich will become richer.

Trade enriches everyone. It has been shown through the ages. Malaysia is a trading nation. Our population is too small to provide a good market. We need the world market. With the new communication technologies, we can increase our trade with the world. So, don’t impoverish us by forcing us to buy what we don’t need or to reduce our exports.

Trade wars are wasteful. Now that the whole world has become a market for everyone, trade wars will stultify the potential for everyone to become rich.

We are also seeing sanctions being applied to countries. We do not know under what laws sanctions are applied. It appears to be the privilege of the rich and the powerful. If we want to have sanctions, let us have a law to govern them. The fact is that when sanction is applied to a country, other countries get sanctioned as well. Malaysia and many others lost a big market when sanction is applied on Iran.

By Tun Dr. Mahathir Mohamad,

Prime Minister of Malaysia.

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