Between a rock and a hard place

THERE are two sides to every coin. And that is certainly the case in relation to import protections the Government defended this week.

New quotas have been introduced for the import of cement, prompting one company to launch a legal challenge.

Meanwhile, a Caricom external tariff on pasta was extended and increased, prompting the Opposition to allege Government was favoring big business while taking food from the mouth of the small man.

Both raise the question: who benefits from these protections?

Or, put another way: who stands to lose the most?

Protectionism is risky business. It can result in retaliatory action. And it can have inflationary effects.

The Ministry of Trade and Industry has been adamant that pasta prices will not increase, even with the imposition of a 60 per cent import duty set out in Legal Notice 414 last December. In Parliament, Minister of Trade and Industry Paula Gopee-Scoon said flatly, “There will be no increase in the price of pasta on the shelf in TT come January 1.”

Ms Gopee-Scoon explained that the tariff was being used to address a situation in which the “landed costs” relating to two of the ten main sources of pasta imports were going down due to substantial depreciation of foreign currencies. To protect local business, the State was acting with Caricom’s approval. (The common external tariff is a Caricom mechanism.)

At the same time, Ms Gopee-Scoon tellingly pointed out “a surge in imported pasta” eating up $51 million in local spending per year since 2018. The minister’s reasoning is sound. Local businesses should be supported because they are key sources of employment.

However, while Ms Gopee-Scoon is confident prices will not go up, it cannot be denied that the effect of her measure after January 1 is to deny consumers the chance to access macaroni at cheaper rates. Furthermore, it is not clear whether the currency environment will remain static over the coming year. Additionally, the minister did not provide enough particulars to evaluate why the situation relating to Mexico and Turkey should come to dominate her policy-making.

Similar questions can be raised about cement quotas. Overall, the real foundation of all of these measures seems to be a desire to encourage consumers to buy local.

That is a laudable objective. But in trying to change consumer habits, the State should also be mindful that protectionism has hidden costs when it comes to local productivity and efficiency. And legal fees, too.

Dumping of products is a legitimate concern.

However, though these measures align with Caricom initiatives of the past, we need a more robust and transparent discussion about them. Or else we might end up biting off more than we can chew.