Economist Ha-joon Chang says China has been unfairly pilloried for trying to protect some of its key industries from foreign competition. Nick J B Moore / for China Daily

US has the worst record in trade wars, says South Korean economist

LONDON - Ha-joon Chang, the influential economist and best-selling author, said the United States is guilty of hypocrisy in accusing China of being protectionist.

The South Korean insists the US was one of the most anti-free trade countries in history when it was a developing economy in the late 19th century.

For the three decades up to around 1880, it had an average industrial tariff rate of between 40 and 55 percent, Chang said.

"It is quite amazing that America now lectures everyone on free trade. From about 1830 to the outbreak of World War II, the US was basically the most protected economy in the world," he said.

Chang, who gives out a chuckle when he thinks he has made an effective point, was taking a break for afternoon refreshment in the River Restaurant at the Savoy Hotel in London.

He said China in particular has been unfairly pilloried for trying to protect some of its key industries from foreign competition.

Some of the measures the Chinese government has taken since reform and opening-up began in the late 1970s have been the right ones.

"In the end, this kind of policy is necessary. Unless you make foreign companies transfer some of their technology, they just come in, use your cheap labor and go out again," he said.

Chang, 47, a reader in the political economy of development at the University of Cambridge, has lived in the UK since he did his masters there in the mid-1980s.

But that has not stopped him becoming something of a minor celebrity in his native South Korea.

His second book Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism, published in 2008, went right to the top of the best-seller charts there with staggering sales of 500,000 copies for a book of its kind.

Its success was partly boosted by the country's Ministry of Defense deeming some of its contents sensitive and banning its sale in military barracks.

"It was the best publicity I could have had because you could buy it everywhere apart from the army bookshops," he said.

"It sold 250,000 copies within two months of its publication and went to the top of the national best-seller lists not just for economics but all books. It has become a bit of a phenomenon in South Korea."

His latest book, 23 Things They Don't Tell You About Capitalism, is again written in his trademark light, witty yet penetrating style that his readers have become familiar with.

"I put in a lot of effort to make my writing fun and readable. I rewrite some chapters many times to make them more so. I believe not just me but my fellow academics should make more of an effort to speak to the general public," he said.

"Unfortunately, many of my colleagues have this attitude that they are plebs and don't know anything."

Chang challenged the position taken by the G20 leading nations in the aftermath of the financial crisis in 2008 that to adopt protectionist measures in response would ensure a slump on a par with the Great Depression of the 1930s.

He rejected the established view of many economists that protectionist measures implemented nearly 80 years ago made the downturn deeper and more prolonged.

"We were told after the recent financial crisis that we should refrain from protectionism because these are the policies that prevailed after the Great Depression.

"However, if you actually look at the data only a few countries actually raised their tariffs significantly," he said.

He very much accorded with the work of the economic historian Peter Temin at The Massachusetts Institute of Technology (MIT) in this field.

"He puts forward the view the collapse of world trade after the Great Depression came about because of a slump in demand on the one hand and because trade credit dried up on the other, not because of tariffs," he said.

Chang said China by restricting foreign companies access to certain markets like banking and telecommunications and by using other measures will be in a better position to fully develop its economy.

"I don't have a problem with protectionism so long as it is used for the right purpose. My view is developing countries in the early stages need this space created by protectionism to create their natural productive capabilities," he said.

He argued the example to avoid is that of the Philippines that has one of the lowest standards of living of any country in the world as a result of being exploited by foreign companies.

"If you were to look at the structure of its exports you would think it was a very prosperous high-tech economy. The share of high-tech products as a proportion of its manufactured exports is second only to Singapore," he said.

"But its per capita income is not even $2,000. That is because all the things it makes are made with Japanese, Taiwanese and Korean technology. Unless host countries put more conditions on foreign investors to transfer their technologies to them these companies are not going to do it."

Chang argued in this and his previous book Bad Samaritans that Africa is the basket case when it comes to being a victim of free trade.

The widely held view, according to Chang, is that Africa is underdeveloped because it has too many natural resources and that results in its people being "corrupt" and "lazy".

He said its real problem is that it has adopted a free trade policy - opening up its markets to anyone who wants to exploit them - in exchange for foreign aid.

"You give people aid to open up their markets and they basically lose the chance to generate self-sustained growth. They become permanent recipients of aid," he said.

Chang, the son of a civil servant and who read for his first degree at Seoul National University before leaving to do a masters at Cambridge, grew up in a country that did pursue protectionist policies.

It has since emerged as an Asian tiger economy with world leading brands such as electronic goods giants Samsung and LG and carmaker Hyundai.

"When I was growing up we didn't see much at all of foreign goods. They were either smuggled or in the case of rock 'n' roll records, they were pirated copies. It was a very different world to today," he said.

"The previous generation of miracle economies such as South Korea and Japan were a lot more closed off to foreign investment. Compared to the situation then, foreign companies are having a much easier time in China," he said.

Chang believed protectionism is a much more multi-dimensional issue than many suggest but the arguments between nations over it tend to remain the same.

"Americans are now telling everyone free trade is the way to go. When they were practicing protectionism in the late 19th century, it was the British who were telling them they shouldn't do it. The British, however, developed their own industries in the 18th century by protectionism. This history just keeps going on," he said.

China Daily