Wednesday, March 18, 2009

Free Trade, Fair Trade... Either Way It Doesn't Matter

The Chinese authorities have just blocked the Coca Cola company's bid to purchase a local beverage maker.

Observers had not expected the Chinese authorities to reject the transaction outright. Instead, many had anticipated that approval would come with some conditions attached, especially since Coca-Cola had developed good links with Chinese policy makers and improved its reputation and visibility through its sponsorship of the Olympic Games in Beijing last year.

Wednesday’s decision underscored how hard it is for non-Chinese companies to make acquisitions in China.

By contrast, there has been a flurry of multi-billion dollar transactions abroad by state-controlled companies in the past few weeks.
You can argue all day about free trade vs. fair trade, but how do you justify a permissive trade policy with a nation that respects neither of the two?

I understand that the theory of free trade maintains that it is the Chinese who are hurt by protectionist practices (law of competitive advantage, blah, blah, blah), but you've got to wonder whether theory truly meets practice in the actual global market.

What it looks like to the layman is that our manufacturing base is being annihilated by cheap foreign labor, while our intellectual product is a victim to lackluster enforcement of anti-piracy law and those areas in which we have proven our competitive mettle (such as soft drinks) we are being blocked by protectionist policies.

We seem to be getting the short end of the stick from both ends.

At least that's how it looks to the layman.

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