Trends around the world are today favouring open market economic policies as states unite in economic blocs in a bid to ensure that their economies prosper. The European economic integration is a case in point where, over the last 50 years, a market of circa 500 million people was gradually built.
The same economic policy is rather popular in other parts of the globe where several countries seem to be regularly signing new free trade arrangements with neighbouring states, once again in search of economic prosperity.
Malta also opted to open its market further. After certain years of protectionist economic policies, that helped the country invest its resources properly, the Maltese population decided to opt for a more open and free market.
The decision was taken after the people confirmed their willingness to join the European Union and, thus, adopt its economic freedoms. However, there has long been agreement, at least at political party level, that Malta should move in this direction of economic free trade. In fact, the aim was to extend the association agreement with the European Union in order to include elements of the free market, whichever way the last election swayed.
Protectionist policies are now limited for the country.
Protectionism may be seen in three forms, namely tariffs, quotas and administrative trade barriers.
Tariffs would refer to taxes imposed on goods and services that cross a political boundary; quotas would refer to physical limitations on quantities of a product or service imported; while administrative barriers would consist of licensing regulations, subsidies to local products, size and weight requirements, health and safety conditions and other means that are all used in order to protect a local economy.
In most cases protectionist policies are adopted to give domestic producers an advantage, to protect strategic industries, for social or for cultural reasons, or to protect infant industries.
Today, the leading promoters of the free market are definitely the United States of America and the European Union. However, one has to objectively question whether these economic blocs really adopt free market policies or whether they preach open market and lay down trade barriers themselves.
The EU imposes tariffs on external market products. Thus, products coming from Japan and the US face stiff barriers to enter the EU market. The EU is protecting its internal product at the expense of free trade. This is clear under the Common Agricultural Policy, where the EU spends most of its funds on agricultural subsidies. It has thus created an internal market and attempted to cut down imports from external trading blocs.
While the US has advocated free trade and the removal of all trade barriers, the US itself was, some time ago, in the news with regard to the introduction of a tariff on steel imports. The UK workers' unions interpreted the US decision as a trade war act. In fact, the Bush administration's 30 per cent tariff on imported steel had ensured a market for the highly costly US produced steel and destroyed the advantage the British steel industry had when exporting to the US.
Are these protectionist measures? Do they go against the principles of the World Trade Organisation (WTO)? In the end, both the US and the EU can afford to advocate free trade, yet they enact barriers. Their sheer size and big economies allow them enough power to be front-benchers in formulating world economic policies. But does Malta afford to be inconsistent?
We Maltese have agreed to remove several trade barriers and advocate free trade within the European bloc. We have agreed to reduce to a minimum our protectionism policies and adopt the EU's protection safeguards with external trading partners. Without debating whether this is positive or negative for the country, we must at least be consistent and back our line of thought.
If we, as Maltese, were ready to take on the responsibilities of the open market we cannot today ask for protectionist policies. Those individuals and organisations that openly advocated free trade and spoke of how ready they were to face competition after restructuring must at least sustain that line of thought now. After making it so clear that an open market is what is needed for the future of the country, it is not acceptable for them to ask the local authorities to adopt further protectionist policies. Some local organisations have lacked consistency on this matter in recent months.
At the end of the day Malta may still have some elbow room. We may benefit from the small size of our country. I personally believe that certain sectors would stand to gain if a protectionist economic policy is adopted, given our particular situation. The government should seek such possibilities in order to boost the domestic market. Yet, local organisations are expected to be consistent.