Best Weapon Vs. China: Not Boycott but Economic Freedom

The short video clip above, which shows a Filipina-American entrepreneur attacking China for trying to ‘steal’ a Philippine territory, has become viral.

Loida Nicolas-Lewis,  chairwoman and CEO of TLC Beatrice and the New York-based national chair of the US Pinoys for Good Governance, said she’s honored to have been called ‘China’s public enemy number 1′.

“Hooray for that. Let them know that this group fights back,” Nicolas-Lewis said.

The wealthy businesswoman also supports and spearheads boycott of Chinese products in the United States. Here she said: “The ‘Boycott China Products Initiative’ will not be limited to Filipinos. This campaign will be carried out worldwide.”

From this source:

China’s newest Public Enemy No. 1 is no longer exiled human rights activist Chen Guancheng but Loida Nicolas-Lewis, the New York-based national chair of the US Pinoys for Good Governance (USP4GG).

After Lewis held a press conference in Manila on July 14 to announce the worldwide campaign to “Boycott Made in China Products,” China’s government-controlled media fired back with a newscast calling on the Chinese people to boycott a chain of convenience stores in China believed to be owned by Lewis.

According to the English language translation of the nationwide newscast, “Chinese are not happy with one particular Filipino. The mastermind behind calling on Filipinos throughout the world to carry out large-scale anti-China demonstrations was revealed to be Filipino-American Loida Nicolas-Lewis, Chairman and CEO of TLC Beatrice (China), Limited, a Cayman company that operates retail convenience stores in four Chinese cities: Xiamen, Chengdu, Suzhou and Guangzhou. Chinese netizens were shocked by this news and urged a boycott on her businesses in China.”

In regard to boycott of Chinese products, I don’t think it will work. I believe the real solution is to adopt free market policies. China is becoming an economic superpower because it had been adopting free market reforms since the rule of Deng Xiaoping in 1979. In fact, China is more economically free than the Philippines.

Photo credit:
Photo credit:

From a previous blog article:

A number of Filipino politicians and groups have been calling for mass boycott of Chinese products being shipped to the Philippines. We all know that cheap Chinese products dominate the Philippine retail markets. In protest of China’s growing economic war on the Philippines, several leaders in the House of Representatives have been considering the issue of whether or not China-made products should be taxed heavily or banned altogether. Calls to boycott, ban, or tax Chinese products can have negative implications for the Philippine markets and economy.

Taxing Chinese products will certainly hurt the Filipino poor who buy cheap goods. This move might increase government revenue (although this is debatable because of empirical studies that show tax increase does not always lead to high tax revenue), but it will certainly punish millions of wage-earning Filipinos. Government-imposed ban on Chinese goods is also not a practical option, as thousands of workers could be severely affected. It is important to understand that there is no officially declared war between the Philippines and China. I believe our government is justified to officially ban all kinds of Chinese products only if there exists an ongoing military conflict against China. However, our government may restrict certain Chinese products foractual, existing security and health reasons. It may also issue a travel advisory for Filipino nationals planning to visit China for existential security reasons.

However, private boycott is certainly the only proper, logical option left. Private boycott, as opposed to government-imposed boycott, is always a proper action or option because it involves personal choices, decisions, assessments, biases, or even idelogical dogma. This can be done through personal/individual boycott and group or collective boycott. Private boycott, in this case, can be influenced or motivated by various factors or reasons, such as ideology, patriotism, emotionalism, or personal choices or biases.

But the question is: Is it possible to boycott all Chinese products when nearly all kinds of consumer goods, whether personal or electronics, are being manufactured in China? For instance, China is the biggest producer of electronic parts and equipment (computers, cellular phones, camera, gadgets, etc.). Apple and other giant computer and electronics companies have manufacturing and production units in China. Also, this most populous empire maintains a monopoly on rare earth metals that are essential in the production and manufacturing of a wide variety of electronic technologies including lithium car batteries, solar panels, wind turbines, flat-screen television, compact fluorescent light bulbs, petroleum-to-gasoline catalytic cracking, and military defense components such as missile guidance systems.

This is why I find the proposal to tax or ban Chinese products by some of our lawmakers utterly outrageous and irrational. We can can boycott certain Chinese products for personal reasons. This is what many people do. I know a lot of people who boycott McDonalds and other Western goods for ideological reasons. Unsurprisingly all of them are either hardcore leftists or closet leftists. Yet they smoke Marlboro and some of them go to Starbucks to take a sip of deliciously made capitalistic frappuccino or ice-blended coffee. For me, my main motivation is purely intellectual and ideological. I cannot buy and support counterfeit or fake products manufactured in China because these are in breach of intellectual property rights.

We have to understand that our ongoing dispute with China is not purely territorial; it is also economic. However, if not handled properly it could ignite a ‘cold war’ or an arms race.

In regard to military and economic capability, the indisputable facts are as follows:

  • The Philippines is militarily inferior to China;
  • The Philippines is also economically inferior to China;
  • The main economic weapon– or the source of military fuel– of China is its attractive labor market that pumps up its centrally planned market economy;

These facts show that we cannot possibly win an arms race against China. However, this does not mean that we should bow down to China and simply surrender our territorial claims. There are possible options and solutions.

First, the Philippine government needs to prolong its discussions with China while focusing on its most crucial solution: economy. China is not the problem. Our economy is the main problem. There can be no strong defense or military without a stable, strong economy. The second (strong economy) is the cause, while the first (strong military) is the effect. We cannot reverse, or twist, the law of causality. Yes, this law certainly applies to politics, economics, or even military issues. It is universal; it applies anywhere, anytime.

The most important question that will guide our leaders in their quest for economic prosperity and stability (if ever they considered

China's share in the global FDI
China’s share in the global FDI

this solution) is: What is the primary source of wealth?Practical economics tells us that the real source of wealth is not the government, but the private sector, and that wealth-creation is only possible under a system in which private individuals are free to produce, to trade, to employ, and to contract. The freer the economy, the more people will participate in wealth-creation. Free economy means both local and foreign participants are free to do business, to trade, and to practice their professions. This is how all developed countries built their economies. This is the history of the United States of America, the economic and military superpower built by immigrants. This is the history of Germany, Japan, Canada, Great Britain, South Korea, Hong Kong, Singapore, and even China.

China, for instance, did not become economically prosperous by keeping its Maoist past. In 2001, China quickly transformed its closed economy into a market-socialist model by joining the World Trade Organization. As a new TWO member, China was compelled to open its economy to foreign investors and to protect property rights and intellectual property rights. In just ten years since its WTO membership, China became the fastest growing economy. China’s fast-rising economy is the very reason why it was able to expand its military. In fact, China is even more economically free than the Philippines in terms of foreign participation. Foreigners are allowed to own 100% equity in land and business in China. By contrast, the Philippines limits foreign investors’ participation, and totally bars foreign professionals from practicing their respective professions in the country.

Second, the Philippines needs economic freedom. It needs to institute radical free market reforms. However, this cannot be done without revising the 1987 Constitution, which mandates protectionism and economic interventionism. The primary goals of this economic solution are as follows: 1) to  grow the economy by attracting local and foreign participation; 2) to attract the brilliant minds to become part of our team; 3) to ensure long-term economic growth. This solution was deftly implemented by Singapore under the leadership of Lee Kuan Yew.

This economic solution offers a huge advantage to the Philippines because it is freer compared with China in terms of political freedom. Both statistics and reports show that China is about to lose its millionaires, professionals and intellectuals in the next few years. A survey publishedlast year found that 60% of about 960,000 wealthy Chinese citizens with assets over 10 million yuan ($1.6 million) were either contemplating on leaving the country or taking steps to do so. The top destinations are the U.S., Canada, Singapore and Europe. Many great leaders understand the importance of having a great number of professionals, inventors, scientists, and intellectuals in economic development and in building a socially and economically stable nation.

However, this solution would remain futile without concrete actions, which include:

  • Eliminate certain taxes or lower tax rates. Taxes that can be eliminated are income tax, estate tax, capital gains tax, property tax, community tax, and corporate income tax. The government may focus on consumption tax as its source of revenue. However, the elimination of taxes should be done in a gradual, cautious manner.
  •  Lower government spending
  • Privatization. It is time to privatize all government-owned and controlled corporations.
  • Legalize gambling and lottery. Allow both foreign and local entrepreneurs to run gambling and lottery businesses. Let them compete with each other.
  • Allow 100% foreign ownership of land and business.
  • Allow foreign professionals to practice their professions here.
  • Allow foreigners to put up schools, media, public utilities, etc.
  • Allow foreign investors to put up power companies and compete with Filipino-owned power utilities.
  • Decontrol or deregulate by repealing economic regulations and restrictions.
  • Allow private insurers and social security companies to compete with SSS and GSIS.
  • Abolish certain government departments and agencies like DepEd, CHED, DSWD, DOH, national housing authority, NFA, DPWH, DoE etc. But this should be done gradually.
  • Abolish certain welfare programs like PhilHealth, government loan programs, subsidies, etc.
  • More focus on our judiciary or court system, police, and military.

The main purpose of these concrete actions is to make the people independent. Welfare programs and services only make the people

Comparison among countries: 2012 FDI
Comparison among countries: 2012 FDI

dependent on the government. With strong and healthy economy, the people will have more employment and business opportunities and they no longer need to rely on government freebies and services. The only proper role of government is to protect individual rights.

Third, the Philippine government may then focus on vital issues, such as the country’s legal system, the police force, and the military or national defense. With stable economy and independent citizenry, the government could then pay more attention to its primary functions: 1) court system to settle legal disputes, 2) police force to deal with criminals, and 3) and military to handle internal and external threats like civil war or invasion.

China may be a giant bully, but nothing is impossible under a free market system. The best real-world model is Israel, which unfortunately is not a complete representative of free market system. The best thing about Israel is that it is more economically free compared with the Philippines, it embraces foreign professionals and investors, and it can afford to focus more on national defense because of its stable, strong economy. According to CIA World Factbook, Israel recorded an unemployment rate of 5.6%, with $235.1 billion GDP, making it the 52nd wealthiest country in the world. Despite its relatively small population, Israel’s military is considered one of the strongest in the world.



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