HomeAnalysisProtectionism does not work

Protectionism does not work

Industry minister Mike Bimha is finding it increasingly difficult to sell the idea of trade protectionism as the market begins to suffer the backlash of what is clearly a the smoke-and-mirrors affair.

Zimbabwe Independent Comment

When government promulgated Statutory Instrument 64 (SI64) of 2016, we were told that this would boost the economy by limiting imports of goods which can be produced locally. At the time, local manufacturers were struggling to compete with low-priced imports. Bimha now claims many companies have benefitted from SI64. He says the local firms have increased production, created employment and increased market share, as well as improved competitiveness. There is no empirical evidence that the few companies which have remained afloat in this dire environment are direct beneficiaries of SI64.

What Bimha conveniently chooses to ignore, for self-serving purposes, is that protectionism is wreaking havoc in Zimbabwe. It is distorting the market, giving the consumers a raw deal, stoking economic inefficiencies, causing artificial shortages of certain products, imposing poor-quality products on what is now a captive market, and provoking a retaliatory backlash from the country’s trade partners.

For a long time, inflation has been a non-issue. In fact, deflation was the order of the day. It is no coincidence that prices are now on an upward trajectory at a time when the government has imposed a grocery import ban.

Zimbabwe’s year-on-year inflation rate continued to rise in April and stood at 0.48% after gaining 0.27% on the March rate, latest figures from the Zimbabwe National Statistics Agency have shown. The main items which registered high price surges were education, vegetables, major tools and equipment, gas, liquid fuels, accommodation and other personal effects.

It is difficult for any informed Zimbabwean to take the government seriously on the all-important matter of economic policy.

Who can forget that iconic picture taken during President Robert Mugabe’s 93rd birthday party in the Matopos? The president, who ought to be the foremost custodian of economic policy, was captured on camera feasting on imported bottled water and potato crisps, in disregard for his government’s much-touted restriction on such imports. The inevitable conclusion is that there is one law for the wretched poor and another for the fat cats.

In any case, the protectionist import restriction was meant to be a temporary measure. The long-term solution is the ramping up of production in line with far-reaching structural reforms.

While the government’s arguments for import restriction may seem plausible at face value, in reality protectionism does not work. It defies logic that the authorities can seek 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. Already, we have seen the emergence of cartels in the supply of certain grocery items. Consumers can only find certain products at inflated prices and only from a clique of suppliers. Government is simply protecting inefficiency, over-pricing and profiteering by unscrupulous companies which want a captive market. Competition protects consumers from junk products and overpricing. Desperate protectionism is retrogressive.

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