On the liberalization of retail trade | BusinessMirror


Looking back to academic studies and literature from the 1990s, there is a growing push towards trade protectionism around the world. Perhaps in part as a result of the Asian financial crisis of 1997, countries have become more concerned about losing their economic growth and strength to other exporting nations. In fact, it was a situation of being between the hammer and a hard point.

Most nations had the same refrain: “You should buy our exports, but we don’t have to buy your exports.” There was also the question of what kind of foreign investment should be allowed. Foreign capital investment was good for the factories since the workers would be local. The United States was happy to see Japanese automakers move in and hire American workers. But two things happened.

The first was that the profits flowed back to Japan. Then American automakers were losing business to Japanese cars that could be made more cheaply in the United States than imported from Japan.

The annual US trade deficit in 1990 was about $78 billion and $375 billion in 2000. The US trade deficit widened to about $680 billion in 2020. This is not a coincidence that China joined the World Trade Organization on December 11, 2001.

Much of the growth in the US deficit from 1990 to 2000 was due to more countries orienting their economies to tap into the US consumer market. In addition, Americans wanted cheaper foreign products. But the bigger numbers are: China’s global trade surplus was $29 billion in 2000 and hit $358 billion in 2015. When President Trump imposed trade sanctions, that amount plummeted. by 60%.

After China joined the WTO, foreign direct investment in China increased by 350% between 2001 and 2020. The movement towards more protectionism of developed economies was over.

Western consumers wanted cheaper Chinese manufactured goods. Western and Asian companies have moved into China with investments to build factories to make at least some profit from “made in China” products sold in their home countries.

Latest from the Philippines: “The Senate has unanimously passed the bill updating the Retail Liberalization Act of 2000, lowering the paid-up capital requirement for foreign retail businesses. With 20 affirmative votes, zero objections and no abstentions, the Senate approved at second and third reading in a single sitting Bill 1840 to amend the Retail Liberalization Act of 2000.

Senate Bill 1840 reduces the $2.5 million paid-up capital investment required for foreigners to establish retail businesses, such as convenience stores, to $1 million.

Countries like the Philippines have been struggling with this problem of foreigners in the retail sector for quite some time. Perhaps a lesson can be learned from Indonesia. This year, Indonesia revised its 2016 “negative list”. Basically, all department stores and supermarkets can now be 100% foreign owned. However, The New Investment List still opened 100% foreign-owned retail for most self-service stores with floor space over 400 square meters and most non-food and beverage products.

These sectors, which are reserved for Indonesians, are expressly allocated to cooperatives and micro, small and medium enterprises under the new investment list. It’s time our laws protected small retailers, not supermarkets. This could be a first step.


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