Locally made or grown may not be good

THE EDITOR: What if Government decided to “incentivise” locally produced cars in order to save hundreds of millions in foreign exchange? What could be the collateral consequences?

First, such vehicles would be more expensive than Japanese or American ones. This is because skilled workers required for such a factory would have to be paid higher wages than their Japanese and American counterparts because their skills would be scarcer here.

Nearly all car parts would also have to be manufactured locally or else expenditure on foreign exchange would not be significantly reduced.

This would increase the cost of production and hence the price of locally manufactured cars.

Moreover, since these vehicles would almost surely be of inferior quality, maintenance alone would add to the expense even assuming only locally made parts are used.

Car buyers would thus be worse off economically, as well as everyone who uses public transport, since fares would also go up.

This is not theory, since this exact situation obtained up to the 1980s when the government effectively banned imported vehicles through high tariffs so local car assembly plants could make protectionist profits and jobs.

Few people would therefore disagree that a local car-making sector would be a bad idea. This scenario applies equally to local food production.

Nonetheless, many people, from UWI economists to newspaper commentators, seem to believe more agricultural products are somehow equivalent to lower food prices and a chimera labelled “food security.”

To add to their incoherence, the same people who argue that government is inefficient in all other spheres assert that “government ought to be leading the charge in prioritising food production."

However, both history and present-day economic statistics show that food security is best achieved through trade, not protectionism or autarky (self-sufficiency).

ELTON SINGH

Couva