Import duties are on the rise – and likely to continue their upward trajectory as a protectionist defence in the global economic gloom. According to an article written by Matthew Stern of DNA Economics, import duties are once again emerging as a preferred policy option. On the local scene, he noted, the first industry that began to enjoy rising tariffs was the clothing sector. This industry, Brian Brink, executive director of the Textile Federation told FTW, recently had its protective import duties raised from 40% to 45%. Designed, he added, to protect a local industry battered by massively cutprice imports from the likes of China. And, added Stern, this trend in rising import duties has since spread across a much wider range of manufactured items (from windscreens to taps to chickens, according to him). Questions, he said, have also been asked about the agricultural concessions made by SA in the free trade agreement with the European Union (EU), “and whether these can somehow be clawed back”. Brink, although not a card-carrying member of the total protectionism party, certainly sees a place for import duties. “Their removal,” he said, “would cause havoc with SA’s worker employment – one of the country’s vital needs.” There is therefore a need to regulate trade to prevent a lot of hard-pressed local industries from going into full free-fall, he added. And he’s not saying that because his own industry is sitting behind a protectionist barrier. Import duties on fabrics, he told FTW, have been at 22% since 2002. But that’s the gross total. There are rebate facilities so that importers can actually get specific types of fabrics in completely duty-free. “Also, take into account all these rebates, and the effective (net) tariff is only 9.3%.” Brink also highlighted just what ridiculous prices some of these competitive imported fabrics were coming in at. Cut-price just doesn’t begin to describe it, with these fabrics so much below cost that it beggars belief. “In May,” he told FTW, “it was R2 per kilogram on average for fabric. Now can you believe that? You can’t buy cotton for less that R16/kg – and that’s just for cotton lint (fibres – the raw material). “They are running rings round the state, and defrauding it of billions of rand.” But Stern – an avid antiprotectionist – is anything but convinced by such arguments. “Whereas the benefits to specific firms from increased tariff protection are clear,” he said, “the wider economic impact of tariff decisions are often misunderstood and easily neglected.” Before leaping to the protection of an individual applicant, he defined (and explained in full-depth) ten truths that should be borne in mind by trade policy makers. “Tariffs are, in the end, just another tax, and, as far as taxes go, tariffs are horribly regressive. “The actual amount of protection given by a tariff is much higher than it seems; they subsidise smuggling and corruption, and are biased against exports. “Tariffs do not help firms to become internationally competitive, are the wrong instrument to improve national competitiveness, and result in a net deadweight loss.” His concluding two truths also had a positive ring to them. “Just because other countries use them,” he said, “does not make it right; and most of the economy is not protected by tariffs and does just fine.” There are the two sides to the argument, the pros and cons of trade tariffs as a policy of choice. Which are you – a protectionist through-and-through, or an ardent supporter of free trade? INSERT & CAPTION Cut-price just doesn’t begin to describe it, with these fabrics so much below cost that it beggars belief. – Brian Brink
