In the last general elections, we saw Santiago Abascal, leader of Vox, during the debate of the four candidates outlined a protectionist discourse, contrary to free trade. It is probably the most anti-liberal feature that this party is showing in the speech, which leads to greater similarities with the European extreme right parties.
Recently he has supported the agricultural demonstration in Almería by supporting “fair prices” and contrary to “unfair competition from non-EU products.”
The argument is simple to understand; the State must defend the national products of foreigners to preserve the companies and the employment they generate. A speech that closely resembles the United We can when defending the taxi sector against the disruption of Uber and Cabify.
It is, therefore, about preserving national industries … which translates into an attempt against free trade that allows the free movement of goods and services between different countries. In the following lines, we will detail the great benefits of free trade and why protectionist problems are a manifest error.
The most curious thing is that this message is not included in its electoral program, with which it was presented last November 10 before the Spaniards. In the foreign sector section, we talk about “attracting capital” from the need for “low taxes, a stable institutional and legal framework.” But in no case does it not indicate that this opening of the foreign sector is harmful to national companies or may pose a threat.
Free trade eliminates poverty
In recent decades there has been a process of globalization that today is in question for the trade war between the United States and China. This whole process has resulted in the economic opening of large countries such as China or India, which, in turn, has allowed billions of people to get out of poverty.
On a global scale, the most significant data we have today is that the population in extreme poverty already has less than 10 %, while at the beginning of the eighties, we saw that it amounted to 44% of the population.
On this point, we must specifically point to China. In spite of its vertiginous advance in the Chinese population, from the ’80s until today, we have gone from 972 million Chinese people in extreme poverty, while in 2010, it had been reduced to 362 million. Or in relative terms, it had gone from a poverty rate of 80% in 1980 to 10% in 2010.
This has been possible thanks to a workforce that had a competitive advantage with low wages that allowed lower labor costs and allowed many manufacturing companies to be transferred to these countries. This relocation for developed countries represented a substantial improvement in income levels.
Free trade universalizes consumption
Earlier, we commented that relocation was carried out because labor costs were more attractive. If unit costs are lower, this has a final impact on lower and lower prices for global consumers.
If a product is becoming cheaper because of the improvement in costs in the production process, it allows the universalization of its consumption for the middle and low income of society. At the same time, there is a liberalization of income since the product consumed proportionally represents a percentage lower than the total income.
When tariffs are imposed to avoid the cost-efficiency of any production process, the whole society is being prevented from benefiting from improvements in the production process, income liberalization, and opening new markets. Tariffs prevent any society from advancing.
If there is someone who has an advantage in producing something, why should we prevent or hinder its production?
Free trade allows the opening of new markets
Consequently, thanks to this liberalization of the aforementioned income, new markets are opened and, therefore, new job opportunities are generated, which bring value and better well-being to society, even if it is through disruptive adjustments or under the concept of creative destruction time popularized by Joseph Schumpeter.
This is probably the most difficult point to see since bankruptcies are generally considered negative, and many believe that it is best to try to avoid them at any price. It is even paying a price premium to protect, even if it means squandering taxpayer resources.
Just as it would have been a mistake to protect Kodak from the appearance of digital photography, every protectionist movement that tries to nullify a competitive advantage generates a potential setback in society at the level of opportunities that can develop.
Instead of criticizing those countries or companies that simply do better, it is reasonable to grant those incentives and comfortable legislative frameworks that are necessary for free enterprise to seek the most efficient way to produce.