[Letter] Avoid tariff-subsidies route

For a country such as SA — consistently and correctly pushing for the implementation of the Africa Continental Free Trade Area (AfCFTA) and dealing with stubborn domestic inflation — the temptation to follow the higher-tariffs, more-subsidies route is great, but should be resisted at most, if not all, turns.

As some countries (among them those that ought to do more to support the World Trade Organisation, multilateralism and freer trade, such as the US) adopt a more protectionist footing, partly to appeal to domestic voter support, trade tensions are more likely to increase.

With more tensions and protectionism comes greater policy uncertainty. Regional and global trade and economic zones and country communities might become more brittle, with governments trying to specialise as much as possible (through tariffs and ever greater subsidies and support for domestic industries) instead of recognising and supporting the value-for-value benefits that accompany more liberalised trade regimes.

Over time, should more friction afflict global trade the upside risk to inflation increases significantly. This will affect developing economies — relatively more reliant on complex, imported components and goods — more than it might other more developed economies.

In turn, costs and prices are kept higher than they otherwise would be, inhibiting economic growth, the organic development of competitive domestic businesses and industries, and having a negative effect on consumers’ choices and economic freedom of choice.