[Letter] Revisit trade policy

Peter Bruce’s most recent column (“Here’s hoping government sees the light over industrial policy”, July 4) refers.

Tariffs (and other forms of protectionist trade and industrial policy) run the risk of entering “tit-for-tat” territory. If well timed, limited and supportive of industries or products that provide a real global competitive advantage and create skills and jobs, a case can be made for some measure of tariffs.

Crucially though, if tariffs are imposed underlying structural drivers of high costs (such as load-shedding, logistics bottlenecks, rigid labour markets and other administered prices) are not addressed, the government runs the risk of simply propping up uncompetitive players, and less-than-ideally priced goods.

A new 10% import duty — instituted on solar PV panels, cells and modules brought into the country, gazetted and signed by finance minister Enoch Godongwana on June 28 — forms part of a (then) mineral resources & energy department plan for the renewable energy industry. The plan aims to create 25,000 jobs by 2030 and foster R15bn in new investment.

The ultimate worth of a policy — in this case tariffs — should be measured not by its intentions (however noble) but by its effects. If higher costs and (a handful, if that many) uncompetitive players result, the tariffs and other areas of trade policy should be investigated and possibly jettisoned.

Should a tariff not bring imported panels to parity with locally manufactured products it will ultimately just be a pernicious device. Capital costs, infrastructural impediments, crime, business-friendliness; all these factors, and those mentioned earlier, affect local businesses’ ability to grow, innovate and provide competitive services and products.

If the new government does not make progress in at least some of these areas aggressive industrial policy is only of ultimate benefit to large players that can influence policy choices in their favour.

© Centre for Risk Analysis
Terms & Conditions | Privacy Policy
CMS Website by Juizi