Column by Francisco Pérez Mackenna: “The cart before the oxen” – La Tercera

The project of the Undersecretariat for International Economic Relations to start a citizen consultation process to find out positions, and “legitimize” the country’s foreign trade policy, reminded me of the saying that this column is titled. When the steps to achieve a purpose break their coherence, it is like putting the oxen behind the cart. Chile has spent almost 30 years deepening its exchange with the world through free trade agreements (FTAs). The requirements to approve an agreement of these characteristics, which corresponds to a State policy and not to the current administration, include that it be signed by the government, ratified by the National Congress, and that the Comptroller’s Office is correct.

In a democracy, the authorities elected by popular suffrage represent the citizenry. They are elected by voting with universal suffrage through a transparent system and protected by the electoral service and the current treaties have been signed with our commercial partners, complying with all the protocols of the law. Therefore, what is there to legitimize? On the other hand, what is the legitimacy of a non-binding consultation in which whoever wants to participate and without further information or analysis?

The first free trade agreement signed by Chile was with Canada during the presidency of Eduardo Frei Ruiz-Tagle, in December 1996, and has been expanded several times to include new goods and services. Since then, Chile has built an international network that includes 31 trade agreements, of which 26 are FTAs, being the country with the most agreements of this type in the world, accessing almost 90% of the GDP and more than 60% of the world population. Today, these agreements are not only in force and have other countries as counterparts, but also form an integral part of Chile’s productive fabric, which has incorporated the opportunities that the FTAs ​​provide.

Extemporaneous consultations of this type always generate concern and uncertainty, even though they are not binding and it is usually not possible to conclude anything with statistical significance. In any case, it would be important to know in advance what the content of the questions is and what exactly is intended to be done with the answers.

The press did not take long to attribute the initiative promoted by the undersecretary of International Economic Relations to the postulates of one of his referents, the Korean economist Ha-Joon Chang. He thinks that the agreements have transformed us into a purely extractive economy, preventing our development from being more complete. Chang, resurrecting theses that prevailed unsuccessfully in the 1960s, believes that what is needed is more industrial policy with State intervention, an undertaking that would be difficult with what he describes as a kind of FTA straitjacket between countries dissimilar in their level of development.

Long would be to enter the debate on whether a country like Chile is doing better with treaties like the ones we have or with Chang’s ideas. And although it seemed that the jury had already deliberated that issue by voting in favor of the opening that has been achieved with the FTAs ​​and the clear progress that they have brought to the nations, what could underlie this initiative is the question of whether our commercial opening it is compatible with the welfare state (or social rights) that is intended to be established, both in the government program and in the proposed new Constitution.

Chile belongs to the OECD, but it is not the OECD. We are barely approaching half of its average GDP. This implies that our comparisons are made with those who have more resources and fewer needs. The doubt lies in the great pressure on public spending that social rights will generate and the market’s expectation that this cannot be financed with taxes alone. This would weaken our ability to compete internationally, causing higher inflation and deficits in both the trade balance and the current account.

Jean Tirole, the French economist and Nobel laureate in Economics, on the first page of his book Economics for the Common Good, reminds us that we often believe what we want to believe rather than what the evidence reveals. Regarding this cognitive bias, he concludes that “when these beliefs are aggregated, they determine the economic, social, scientific and geopolitical policies of a country”. Following Tirole, changing our deep-rooted commercial openness requires building the perception in the collective imagination that the current trade agreements with developed countries are not convenient for us. What better than to start with a rhetorical query?

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Column by Francisco Pérez Mackenna: “The cart before the oxen” – La Tercera