In various quarters, voices of protest are being heard about import controls that were of course necessitated by the pandemic. So, are we being blamed for some measure of protectionism even when our economy is endangered and we are charting a difficult course due to the worldwide economic downturn driven by COVID?
This is in many ways flabbergasting. It’s not even ‘protectionism’ per se, or even protectionism at all. We are trying to survive, and tide over when the times are difficult due to no fault of our own. But even the measure of ‘protectionism’ we have initiated is coming in for flak.
This subject was brought into stark focus in my mind after reading an article in a local daily about the ‘economics of cheap’, by CEO of Dilmah Tea Dilhan. C. Fernando. His opinion piece is extremely penetrative, and restores faith in the idea of an incisive CEO, a bit of an oxymoron in these times otherwise.
Dilhan writes about the pathetic results of the global race to the bottom as it were, in the quest for cheaper and cheaper tea. His language is lucid, he buttresses his arguments with a treasure trove of relevant quotes, but most of all, he is on to something. The quest for cheaper tea has diminished the quality of the brew all around, and that’s not helping the producers – or giving tea a good name. That’s the gist of what Fernando says, as best as I understood it.
Quest
He then goes on to say that it’s the same for coffee and many other products around the world. No doubt consumers want to buy cheap. But do they also want to buy cheap stuff that’s also bad?
 The definition of imports
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But, the quest for cheap has no limits, its spiraling out of control. But my subject is protectionism. It’s a bit different from Fernando’s.
But that shouldn’t stop anybody from seeing the connection. It’s the global quest for the cheapest products that causes the almost evangelical zeal with which anti-protectionist rhetoric is being unleashed on countries such as ours.
While our labour is used to produce the cheapest goods for economies in the affluent countries, we are told that import substitution with local products is a bad idea because it is a free market dynamic that prevails and our consumers must have access to the best quality products from anywhere in the world. That is the other side of the coin of protectionism. Even when we are driven there by hard times, we are told not to rely on our own products.
But our export-led growth meanwhile is impeded in many ways that may not even look like protectionism, but is. There are stringent certification standards that are called for when exporting produce to markets in Europe for instance, but these certifications invariably are for goods that can be produced in those countries, such as biscuits. These fastidious certifications are a form of protectionism, though indirect.
But our best produce such as tea cannot be sold for realistic prices, because of the ‘global quest for cheap’. When we charge ahead with export-led growth the barriers seem insurmountable. But when we switch to an import-substitution growth strategy we are told our guardrails i.e. restricting imports, are a concern.
Imports
Our currency doesn’t help but that’s another story. ‘The quest for cheap’ sounds like a bad joke that doesn’t exist as far as we are concerned because we keep paying more for imports that we can hardly afford.
Cannot help but think this whole game is rigged! The really hard part to stomach is the extreme discouragement towards import substitution even when things are bad such as now when the COVID-hit economy demands that we cut down imports and produce more locally.
Of course, it may be difficult to run an economy in the long term with import substitution across the board. In any event some imports cannot be effectively substituted.
But at the moment we literally cannot afford to pay heed to excessive noise about removing our protectionist barriers. Nobody is talking of economies of scale these days as globally, markets have vanished. Under these circumstances the call by certain countries to resume all our imports in an obscene hurry is in itself, sorry to say, an obscene call.
 The dairy industry is one area where import substitution can work. |
As time goes on, yes of course we’d like to be an ‘Asian Tiger’ too and would pursue an export-led growth strategy to the hilt. At which time it almost goes without saying that our import substitution would largely cease – as we have to seek markets for our exports in exchange for opening our markets to more foreign products.
Seems the problem is not just the quest for cheap, as Dilhan Fernando analyses it, but the relentless quest for free trade too. To succeed in economies of scale we have to produce cheap, but then we have to subsidize certain industries in order to do that – but that’s frowned upon as well by some folk such as our foreign friends.
At some point in the future we may get to grips with all this if we produce enough for healthy export-led growth but things are anything but normal at the moment. The Government’s role is vital. There cannot be business as usual. Certain imports have to be stopped for a while, period.
To call that impeding free trade would be ridiculous. Free trade? What’s with the talk of free trade when there is hardly any trade at all happening these days?
Palitha Kohona, our new ambassador to China was recently saying in a farewell speech to friends here that even when we can sell cheap tea, the packaging has to be expensive. Or words to that effect, at least.
Probably 2021 is the year that all the ingenuity we can muster has to come into play. The world economy is bound to improve from all estimations now that there is so much hype about three or four vaccines to combat COVID. We were out of the gate early by most estimations in preparing for a good year ahead.
Rational
Our exports were not completely stifled and more importantly we have found newer markets for newer products in the interim, such as vegetable produce for certain export markets, for instance. Of course, tourism is down but that is again, a different story. By next year at this time any calls for lifting of import bans may even begin to sound somewhat rational, but until then we are not going to think about it.
Complete laissez-faire doesn’t obtain anyway. At least it does not until we get to a certain stage of our growth and though that should be painfully obvious, why are we being told otherwise, especially by our foreign friends, all the time?
Some import substitutions that will come about in this recovery phase by the way, will be here to stay and that is a good thing. That’s more than a silver lining in this recovery phase.
Things will get better next year, and we are going to ride that wave. Until then, here is to our own produce, to buying Sri Lankan – and our own homegrown economic policies.
