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FREE TRADE ZONE TREND (part I)
February 1, 2002
Let us play a guessing game. Which business is more "blessed by God"? The right answer should be SHIPPING, or in a broader sense, transport business. Why? Because God has created natural resources at different locations of the world. Therefore, shipping was the earliest transport, across oceans, sending raw materials to their respective markets.
With shipping comes protection and the age-old debate of whether one's own markets should be protected or not. However, Adam Smith (1723 - 1790), British economist made clear that "DIVISION OF LABOUR" among countries leads to specialization, greater efficiency, and high aggregate production. As a result, world governments have more reasons to open their markets to make the trade cake bigger. Therefore, Adam Smith is considered the originator of the Free-Trade idea.
However, we may find an identical idea, as early as 2000 years ago, in Chinese history. During the time of WARRING STATES (403-206 B.C.), one of the renowned legalist, Lee Si ( ? - 206 B.C. ) made his famous petition to Emperor of Chin dynasty (255 - 206 B.C.) "not to expel visiting scholars", (who were thought to be treacherous lobbyists and not loyal to Chin). He argued "if your majesty only prefers everything to NATIONAL, you should not have beauties from other states in your harem, no jade from Xingjiang, no alien music, no good swords, or horses for fighting)......". He even enumerated how the emperor's ancestors tried their best to recruit talented individuals from other nations, who became great prime ministers of the Dynasty. Since Li's arguments were very convincing, the Emperor withdrew the expulsion ruling. The letter did not have the terminologies of division of labor or free trade but in fact it was one of the strongest supportive document for free trade or division of labour.
The way to generate free trade was initially with free ports, then free-trade zones. We know of many such zones: Hongkong, Singapore, Colon of Panama, Copenhagen, Stockhol, Gdansk of Poland, LA, NY....etc. If a country or region does not have such zones, there are alternatives devices, such as bonded warehouses or associated systems used by London and Amsterdam.
There were 133 such zones in 1970, growing to 614 in 1990. USA's first free-trade zone came into being in 1934; by mid 1990, there were about 200+ such zones with about 250 subzones.
In addition to zones of individual countries, regional cooperative groups, including some kinds of multinational free-trade zones, have been created.
(to be continued)
Nowadays, technology or information/knowledge industries have also branched out worldwide. However, one could say that God is fair, as the competition for THE NUMBER ONE SPOT AMONG THE TOP TEN keeps changing.
E-mail: VJCHANG@hotmail.com
Tel/Fax USA : (301) 438-7439
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