HomeAnalysisProtectionism does not work

Protectionism does not work

LAST Friday government gazetted a Statutory Instrument banning imports of certain products unless they are brought in under a special dispensation.

Zimbabwe Independent Comment

The new import restrictions sparked a furore characterised by protests by importers and traders as they condemned the ban of imports of synthetic hair products, salad creams, building material, other foodstuffs and toiletries, forcing Zimra to suspend the new measures. The high volumes of imports — mostly from South Africa — are symptomatic of Zimbabwe’s massive de-industrialisation and collapse in production which sit at the heart of the country’s deep economic crisis. Due to company closures and a dramatic fall in production, Zimbabwe now relies on South African imports. In the last five months, Zimbabwe imported US$798 million worth of goods from South Africa.

Zimbabwe National Statistics Agency data shows exports to May amounted to US$949m against US$2,1 billion imports.

As a result our trade imbalance and current account deficit remain unsustainably high. Most of the imports are consumptive products such as bottled water, sugar, soap, cooking oil, cellphone handsets, electronics, vehicles spares, clothing and second-hand vehicles, which account for over 70% of the import bill.

Zimbabwe exports mainly minerals and agricultural products.

In response to this situation, Industry and Commerce minister Mike Bimha resorted to banning a series of imports — protectionism.

Government claims it wants to protect local businesses and jobs through its measures. While government’s logic is plausible, sadly, protectionism doesn’t work in this case. Authorities can’t take such action, which is damaging in the long run, to protect industries and jobs which hardly exist. Besides, such a move tends to protect a few individuals and their companies, not the broader public.

In fact, government is in this case simply protecting inefficiency, over-pricing and profiteering by unscrupulous companies which want a captive market. Competition protects consumers from junk products and overpricing.

Also authorities are merely addressing symptoms of the problem, not the root causes. Zimbabwe has now become a warehouse mainly for South African goods due to the collapse of local industry owing to economic mismanagement.

Imports are also flooding the country because local industry is uncompetitive partly because of poor business models, old production systems and antiquated machinery. The use of the overvalued US dollar also makes things worse.

While government’s measures might provide relief to a handful of companies and their owners, in the long run protectionism often ends up hurting the very people it purports to protect. Promoting free trade, attracting foreign direct investment and getting new capital is a much better alternative. What is currently and urgently needed in Zimbabwe are political and policy reforms, a friendly business climate and fresh funding, not trade restrictions. We need to be reducing protectionism by rejecting new trade-restrictive measures and rolling back existing ones. Indeed, what we don’t need is the slamming of the door on trade. Quite the contrary, we need to get trade going.

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