For many, the Beijing Olympic Games represent a coming-out party for China on the world stage. Though the analogy may be apt, it's worth noting another, more important, competition in Asia has been going on for years now. And market-based capitalism continues to bring home the gold.
But you'd hardly know it from the headlines of late. Venezuela is nationalizing its assets, many fear protectionism and the death of NAFTA in a new US presidential administration, the Doha round trade talks collapsed, Japan (the world's biggest exporter) is predicting bad economic times ahead, and so on. It may seem free trade is in peril.
But if you just take a small step back and see the wider picture, it's very clear free trade is on the rise overall and will continue trending that way. This is an imperative for the global economy to continue growth—which in most regions of the world and to most of the populace—is just beginning. Folks who can't see the world is merely on the cusp—not the tail end—of potential global growth are the same folks who are overly bearish today—they don't see the opportunity. The Chinese Olympics are representation of both the progress that's been made on the global scene and the still latent potential.
Not long ago, it would have been nearly inconceivable for China to host an Olympic Games. But the same could be said for the economic and political reforms in China and throughout Asia over the last two decades. China and other Asian countries have instituted myriad economic reforms, opening their markets to the West and in turn gaining access to foreign markets for goods of their own. The results have been breathtaking. China has grown to be the second-largest trading partner with the US. And last year, trade between the US and the East Pacific reached one trillion dollars. Remarkably, for the first time in centuries, more trade now crosses the Pacific than the Atlantic.
And trade barriers continue to fall. Bilateral free-trade pacts are either completed or in the works between the US and Singapore, Australia, South Korea, Malaysia and Thailand. This is not to say they'll all be made into law right away. The free trade pact with South Korea (the biggest such pact in over a decade for the US—and the biggest ever for South Korea) is currently facing resistance from protectionists in both countries. But the backlash over allowing US meat imports has subsided as South Koreans realized protectionist fears (and health concerns regarding the safety of US meat) were unfounded. In fact, demonstrators in support of President Bush's visit to South Korea this week outnumbered detractors. And with Seoul negotiating similar deals with the EU and Canada, the South Korean mood may be brightening for increased trade with the West.
Of course, the US Congress will have to approve the trade pact, which looks unlikely during Mr. Bush's term. Astonishing, considering it's increasingly obvious freer trade has not benefited some countries at the expense of others, as protectionists fear. Rather than the zero sum game some expected, wealth has spread throughout reform-oriented nations. It's a win-win situation.
In fact, free trade is by definition always a win-win. It works like this: Let's say there are two trading partners, one makes watches and the other makes shirts. The watch-making trader is much more efficient at watch-making than the shirt-maker; likewise, the shirt-maker is much more efficient at making shirts than the watch-maker. So they trade with each other and both parties are automatically better off for it, gaining something of value cheaper than they could have done it themselves.
That's just one example—now think of it in terms of millions of goods on display in a global marketplace…the potential gains to trade are nearly endless!
So it shouldn't be terribly surprising President Bush has timed a weeklong tour of Asia touting free trade, capitalism, and human rights to coincide with the Games. After all, competition creates a spirit of constant and never-ending improvement, which is a big part of what capitalism's all about. So expect the Games to be a showcase not just for a new China, but for the benefits of the free trade that helped to create it. And as for capitalism (in lane 1), expect the gold rush to continue.
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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.