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Free trading at the global
hypermarket
By Gary LaMoshi
HONG KONG - A medicinal mouthwash once ran an
advertising campaign that showed people making sour
faces while they sloshed the brew around their mouths.
"He hates it, but he uses it," the slogan went. That old
slogan fits Thailand and its hypermarket invasion.
In case you've been able to avoid the phenomenon
that not only afflicts Bangkok, but Phuket, Bali,
Jakarta, Kuala Lumpur, Guangzhou, Europe and the US,
hypermarkets are those huge retailers which carry
groceries and just about every other household need
under a single roof, large enough to conceal a couple of
747s. The second most famous Arkansan in history, Sam
Walton, invented the concept with Wal-Mart, but most of
the chains in Asia have European roots.
(Hypermarkets are sometimes incorrectly
identified as "category killers". A category killer is a
similar scale store that specializes in a particular
product line. Toys "R" Us is category killer.)
Small retailers everywhere fear and loathe
hypermarkets. Yet it's not uncommon to see couples
loading their flatbed carts with crates of candy and
snack foods that, unless they have a football team-sized
family waiting in the SUV outside, are likely destined
for the shelves of the neighborhood sari-sari
store. (Thai wholesalers complain that hypermarkets have
cut their business, too.) Urban officials decry
hypermarkets' devastating impact on Main Street shops.
Consumers complain about the traffic congestion they
generate and the vast scale of the stores. But everybody
shops there.
Thai Rak Tesco
Thai
Prime Minister Thaksin Shinawatra's Thai Rak Thai (Thais
Love Thais) party made curbing hypermarkets a plank in
its election campaign platform that featured heavy doses
of economic nationalism alongside pledges to encourage
foreign investment. Over the next 18 months, small
retailers and their advocacy groups grew impatient,
claiming hypermarkets had driven 300,000 mom and pop
stores out of business. The jumbo operators continued
their successful expansion across Thailand amid
occasional noisy protests from impacted communities and
increasingly fiery denunciations of both hypermarkets
and Thaksin's inaction.
Finally, in May, the
government introduced a package to aid shopkeepers. Its
centerpiece is the Allied Retail Trade Company (ART), a
395 million baht (US$9.1 million) buying cooperative
that aims to win concessions for small retailers similar
to those the big players enjoy. The government owns ART
but plans to privatize the firm after five years.
Thaksin's government also announced plans for a
retail bill to tame the hypermarkets, and launched a
panel to investigate hypermarket pricing practices, due
to report this week. A draft of the retail bill made
public in September proposed restrictions on hypermarket
trading hours, capital access, and new outlet locations.
It also aimed to regulate prices, advertising and "shelf
fees", payoffs big retailers everywhere demand from
manufacturers to stock and display their goods. Both
small retailers and the giants were unhappy with the
bill, indicating the government had done a credible job
of balancing their competing interests.
Last
Saturday, Thaksin suddenly announced his government
would withdraw the retail bill, citing the "bad signal"
it would send to foreign investors and its implications
for Thailand's international trade. Instead, he pledged
to use existing zoning and commerce laws to combat
hypermarkets. Predictably, small retailers are enraged.
Do the right thing
Whatever his
reasoning, Thaksin made the right move for his country,
though perhaps not his party. The battle against
hypermarkets had developed an increasingly
anti-farang (foreigner) subtext that was indeed a
"bad signal" for international investors in Thailand.
Promised new regulations, due in March, will probably
offer some more mild restrictions and fail to resolve
fuzzy enforcement, which helps hypermarkets skirt
current laws as needed.
In a speech Tuesday,
Thaksin told angry small retailers "I'm placing your
heart by mine", and promised that state-controlled Krung
Thai Bank would extend generous credit to besieged
shopkeepers. The real problem, of course, is that people
want to shop in hypermarkets. It will be tough for any
law to change that fact.
Hours eariler in
Singapore, lead negotiator Tommy Koh sent out for
hamburgers and pizza, comfort food for US trade
negotiators, as the two sides worked into the wee hours
of Tuesday morning on final details of a free trade
agreement. After two years of talks, the continental
giant boasting the world's biggest economy and the tiny
island nation announced a deal.
The Bush
administration hopes that this pact will become a
template for negotiating similar free trade agreements
with other nations. US Trade Representative Robert
Zoellick stopped in Manila on his way home to offer a
pep talk to other ASEAN nations to follow Singapore's
lead.
What a minute. A free trade agreement with
Singapore? Isn't Singapore already a free port, which
has virtually no tariffs or other restrictions on
imports? Isn't Singapore not only a signatory to every
regional and world trade pact around, but also a leading
advocate of free trade?
The answers to all are,
"Yes. But …"
Freeish trade
Sure,
Singapore is a free port, but hardly a free market. (See
Singapore's
capitalism myth, Nov 7, 2002, for more on the
world's most successful socialist republic.) The main
aim for the US side was to break into the restricted
service sector. Singapore's Monetary Authority will
gradually allow US banks to offer the same services as
local banks. US law firms will find it easier to open
offices, but they still won't be able to practice
Singapore law. Singapore will gain duty-free access to
US markets, giving it an advantage, particularly over
electronics export rivals Malaysia and Taiwan, at least
until those governments sign their own free trade
agreements with Uncle Sam.
The Singapore-US
agreement resolved one sticky issue, chewing gum,
famously banned in Singapore a decade ago, presumably
after a wad discarded under a table appeared on the knee
of Senior Minister Lee Kwan Yew's fancy trousers. The
new pact will allow the import and sale of sugarless gum
- for therapeutic purposes as prescribed by a doctor or
dentist. Imagine how many of Singapore's
government-licensed medical practitioners will write
such prescriptions.
One remaining sticking
point, reportedly a potential deal breaker, is
Singapore's reluctance to waive its right to impose
capital controls in emergency situations. That Singapore
would ever restrict the flow of capital, and thus
scuttle its reputation as an international finance
center, is unthinkable. But the government wants to
reserve that right, in the event of the unthinkable.
What's equally unthinkable is that, if such a grave
situation arose, a piece of paper would stop the
government of Singapore, or any nation, from taking any
step it felt was necessary for its survival.
That's the bottom line with trade treaties of
all stripes. Countries use and follow them as it suits
their purposes. Those gung-ho American free traders slap
tariffs on foreign steel to combat an "emergency" -
domestic steel producers may go out of business, taking
jobs and political campaign contributions with them -
and spend billions a year to subsidize homegrown corn,
then try to shove it down the rest of world's throat
along with the chickens that ate it.
Thailand
tosses a 395 million baht grant to small retailers,
pledges generous loans from the state bank, and promises
more tough action to fight foreign hypermarkets. But it
won't pass legislation against hypermarkets, because it
doesn't want to send a negative message about its
commitment to free trade.
An Indonesian
businesswoman asked me about the impact of the ASEAN and
ASEAN-China free trade pacts on the already reeling
local garment industry. I suggested that perhaps
imported clothing would need testing for fire safety to
protect the health and welfare of the Indonesian people.
"But we don't even have labs to do that here," she said.
"It could take years." Then she smiled. Now she
understands the rules of the free trade game.
(©2002 Asia Times Online Co, Ltd. All rights
reserved. Please contact content@atimes.com
for information on our sales and syndication policies.)
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