Fatman muttered under his breath, "If you think about it, the Mercantilist had got it right."

"Well then stop thinking." Greybeard growled, eliciting a guffaw from Fatman.

"A think-tank not thinking!" Smiles across the room - even Greybeard, generally known to be dour and humourless, smiled.

"Fair enough. Continue".

"Well, if there was no free trade there would be no iPhone," Slimy jumped in, grinning from ear to ear. "Innovation and productivity are a direct result of a competitive environment, and access to bigger markets. More profits equal more money for research; more threat from competition equals a greater inclination to innovate."

"Whether or not reductions in tariffs and innovation are correlated cannot be conclusively established, despite numerous studies and research; however, I am not arguing that at all," claimed Fatman, "In fact, opening up markets make perfect sense for developed nations - but does it for developing nations?"

"Well, there are numerous examples which can be cited where opening up trade by a developing country increased exports of products where they had a comparative advantage," offered Sith Lord, "Albeit, admittedly, the comparative advantage from what I could gather was generally limited to raw produce, with a few exceptions."

"Again, that was not the debate I wished to get into. Perhaps another day. Let me at the very outset concede, and keep constant, the understanding that free trade is good for innovation and productivity, and that competition and multiple choices are in the consumers' best interest. However, at the same time, we must also agree that only exports can, in substance, pay for imports."

"Well, unless the creditors waive off the obligations, or a country gets aid, or sells its assets, agreed. And in the interest of saving time, yes, workers' remittances are the export of human resources."

Fatman grinned, "Thank you, you guessed that one. So, would it be right to deduce that at some point in time, according to economic theory, not getting into how the currency will appreciate or depreciate to make domestic produce competitive for international markets, cumulative imports must equal cumulative exports for a nation -irrespective of whether the country has a trade surplus or a deficit."

"Hang on for a second!" Slimy interjected, "A country can always default." This aroused a round of laughter.

"This always breaks me up," Sith Lord cackled, "But let us stick to serious stuff. So, will you take this, or should I?" He asked this looking fixedly at Greybeard.

"Well, in theory, all else being held constant, trade at some stage balances - but in practice that may never happen. And I see where you are going with this."

"Well, in practice, a lot does not happen; that is the best thing about Economics. But let's not sell it short; we must maintain appearances. After all, thinking about how the economy works is the think-tank's bread and butter."

"My conclusion is simple and straightforward," began Fatman, "while at the same time horrific for a developing nation in modern times. At no point in the foreseeable future will the exports rise sufficiently to create a surplus equivalent to adjust the past deficits. External debt acquired to pay for earlier deficit will ensure that - even if it was to be assumed that they innovate sufficiently to be able to compete with the Multinational Corporations who have a stranglehold on the Global markets."

"I, for one, do agree with you; it is unlikely that a corporation from a developing country, barring exceptions to the rule, that too mostly because of sheer brilliance or sheer luck, will ever be allowed by the big boys to survive in the world markets." Sith Lord nodded in agreement.

"And despite all the talk about monopolies being bad," Slimy began, "it is a fact that all business and industries globally are dominated by the Big 3 or 4, which situation is really not conducive for the consumer - except perfect competition seems to be helpless to come up with an answer to this anomaly."

"That is another debate we get into at some stage, seemingly, as in this particular case; the end result of perfect competition is a monopoly - at best an oligopoly." Greybeard sounded a bit agitated, "So the consumer loses anyway."

"Did you really think that it costs a thousand bucks to make an iPhone, or that it is because of competition that Apple is selling it cheap?" Fatman shook with laughter, his jelly belly shaking uncontrollably. Greybeard acknowledged him with a smile.

"So what you are proposing," Sith Lord surmised, "is that free trade and a mercantilist approach only differ on timing: in the case of the latter you balance upfront, while in the case of the former it balances at a later stage. But if external debt is allowed to grow unchecked, the balance will remain elusive. So it would make sense for a developing country to selectively allow imports, control its critical sectors and maintain significant influence over other key sectors, build a surplus, bring external debts to ability to pay levels, strengthen domestic productivity, and only thereafter open its market."

"Are you kidding?!" Fatman yelped. "Seriously, sometimes you frighten me. Why would I even think of proposing a strategy which jeopardises the interests of those who bankroll the Tank?"

"Then, what was this all about?" Sith Lord growled, visibly agitated.

"Well, lunch was delayed, and an empty stomach does get devilish thoughts. In any case, even if I were to propose that, there are enough numbskulls out there brainwashed into believing that free trade is definitely the end of history."

(The writer is a chartered accountant based in Islamabad. Email: syed.bakhtiyarkazmi@gmail.com. The views expressed in this article are personal.

The views are not necessarily those of the newspaper).

Copyright Business Recorder, 2020