By Sebastián Cárdenas
It is interesting to know what Bhagwati was already telling us about free trade and that is that in the last two centuries they have tried to prove that free trade is not the best option but from a theoretical point of view there is no better policy than free trade because when there are market failures that cause protectionism to increase efficiency, it is always more beneficial in terms of welfare to solve the market failure first to liberalize trade later.
This situation is still being discussed worldwide and our country is no exception. In the last 40 years since the return to democracy, we have lived through a back-and-forth of situations inherent to our trade policy, which I believe has not had a clear direction that has allowed us to outline a process of development in trade matters.
The beginning of the new government proposes “more Ecuador in the world and more world in Ecuador” could be a slogan that will lead us to better days from a perspective of more growth and development?.
Anything is possible, but some facts must be made clear. Since 2007, our trade policy has taken a protectionist course, where we went back to living an import substitution with another name, that of the change of the productive matrix, sounds good, but what were the triggers for its impracticality?.
We wanted to turn Ecuador into a producer of capital goods to the extreme, in addition to stopping the efficient import of raw materials and consumer goods, at a very high cost and that is to limit the consumer to few options when it is the one that through its demand energizes the economy. The famous theory of the infant industry was applied, losing competitiveness in our companies at the expense of gaining ground in the change of matrix trying to cover the gaps of products that could not enter due to the protection applied, and it is not that it is wrong to give national companies opportunities to grow and improve their production, but with an environment of no competition, asymmetries in consumer behavior were generated.
When Ecuador had the opportunity to enter the process of a trade agreement with the European Union in 2009, it was rejected because the flow of income did not allow to see the globalization situation that Ecuador needed, and it was not until 2014 that this possibility was raised when the national finances returned to their reality.
Perhaps saying that free trade is a panacea may be utopian, but knowing that we can have a population with greater consumption options, that we can have freedom of choice and that companies can enter into a process of greater efficiency by having to compete, makes us a better society. It is also clear to emphasize that this turn of rudder proposed by the new government to insert us into the world entails other adjustments for the economy to accompany this new trade policy ranging from tax to tariffs, since Ecuador, faced with this new opportunity cost of having greater freedom, makes us responsible for generating the conditions that do not allow us to have the differences of the past.
For this reason, the free trade commercial policy must be applied with an integral practice of the economy as a whole, looking for more dynamic exchanges, being more efficient, improving the differences in the market and proposing a model of competitiveness totally structured based on our exports to strengthen them and project ourselves in the long term, achieving more foreign currency and a better economy for our country.
Bibliography
Daniels, Radebaugh, & Sullivan.(2013). International Business Environment and Operations. Pearson.
Steinberg, F. (2006). The political economy of protectionism. ECONOMIC ANALYSIS.
