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Finance and Economic Development Minister Patrick Chinamasa

Bernard Bwoni
Minister Chinamasa’s Mid-Term Fiscal Review was on point and in line with infant industry protection.
Now that is a responsive government! The Finance Minister is in line with the premises of Zim-Asset and the cluster of value addition.

He addresses domestic production by curbing inessential imports into the country.

The idea is to stimulate local production through a period of initial infancy industry protection.

There is no way around this, any country at this stage of development is going to require this initial period of protection.

The decision to suspend importation of all agricultural produce and cancelling all import permits is a socially responsible and economically efficient strategy if domestic producer’s prices remain as competitive as the imports given up to make way for local produce. Competition is good for the economy as it increases efficiency, better service for consumers and lower prices. Protectionism in the initial stages of economic transformation is equally good for the economy as it offers the domestic producer that cushion to establish themselves and be able to learn to compete in the global market. Domestic producers in Zimbabwe have in the past been insincere and less than honest when Government had intervened to offer that initial period of protection and promotion.

Some domestic producers have deliberately induced a sense of severe shortages to allow them to inflate prices on basic commodities.

Thus the call by local farmers for Government to establish local production deficits first instead of directly exposing domestic producers to cheap competition is welcome.

The Government should be looking at importing only those products that local producers are failing to meet.

In return local producers need to offer a quality product at prices that do not impact negatively on the welfare of the local consumer and remains competitive for export.

As economic theory dictates, removal of trade barriers is beneficial to the global economy.

The argument is that by increasing trade barriers through tariffs, domestic consumer costs increase, foreign exporters’ sales decline and efficiency gains through comparative advantage are hampered.

The developed economies often tell the developing countries of the benefits of free markets with illusory promises of wealth and progress if they opened up their markets.

Many developing countries took such advice on board only to find the markets from the very same developed countries tightly closed for them in return.

Protectionist policies for the developing countries are essential and needed to create a balance between social responsibility and economic savviness.

Inasmuch as developed countries need to be sincere about free trade, local producers in developing countries also need to be sincere and honest in their conduct when barriers are put in place to support them.

Protectionism must never be used as a way of creating artificial shortages to inflate prices and maximise profits.

The priority must be the creation of a nation that is socially responsible and economically efficient.

When it comes to trade liberalisation, developed countries’ policies have their flaws but developing countries have a responsibility to their own citizens to provide products that remain affordable to fill the gap left by the imports foregone.

There is nothing unusual about domestic producers and farmers in Zimbabwe clamouring for protection against dumping from foreign producers.

The European Union’s Common Agricultural Policy (CAP) protects EU farmers from foreign competition by deterring imports from outside the European Union by levying import tariffs.

The EU also protects producers against price drops by buying up and storing surplus crops or exporting them to developing countries at below market prices, which exert unequal competition as has been happening to Zimbabwean farmers.

The EU’s free trade agreements force developing countries to open up their markets for European surplus production. Zimbabwean farmers cannot compete with subsidised EU goods, cheap imports from China and South Africa and in effect face risk of being displaced by unfair competition.

A strong agricultural sector is vital for the highly competitive food industry to remain an important part of the Zimbabwean economy and trade.

The marginalisation of local farmers is precisely the risk associated with the ongoing dumping of cheap foreign food imports.

For Zimbabwe, just like other developing countries, to be competitive, there is an urgent need to significantly reduce the unsustainable import dependency that characterises the market presently.

Zimbabwe has to immediately switch from being a net importer to a net exporter and the Government needs to pursue a policy trajectory that fosters domestic agricultural production and limits import dependency.

Facts are stubborn and the fact is there is no country in this world that has transformed its economy to an advanced economy through import dependency.

It is stating the obvious that you have to sell more and buy less to make a profit. There is need for a policy shift that allows Zimbabwe to protect itself from lowly priced imports.

In the short-term, society benefits from cheap imports, however, the long-term effects on the national economy are devastating.

However, every government has to remain socially responsive to the plight of its citizens when addressing this issue and looking at policy shift.

It is a delicate situation developing countries find themselves in, how to balance economic efficiency and social benefit. It is a sad situation that Zimbabwean farmers are being forced out of their own local market because of the cheap foreign dumping that the country is faced with.

The cheap subsidised imports mean that local farmers cannot compete on a level playing field in their own land. Developed countries such as China, EU and the USA dump cheap foodstuffs in poor developing countries with the help of export subsidies which only further undermine the farmers in developing countries.

Zimbabwe finds itself in a very difficult position with the IMF and World Bank putting pressure on the country to scrap tariffs and subsidies as part of the free trade rules. In contrast, EU farmers are guaranteed a price for their produce at prices almost three times higher than world prices and there are stringent restrictions on foreign imports into the EU, backed up by very high tariffs on imports.

Export subsidies allow surplus EU produce to be dumped at bargain prices in developing countries. The EU Common Agricultural Policy uses quotas and very high tariffs to effectively block the importation of foreign foodstuffs. It is interesting to note that the EU tariffs vary and rise in proportion to how processed the product is. Partially processed products face an average of 20 percent higher tariffs than raw resources and finished products face almost 50 percent higher tariffs (FAO, 2013).

To put it simply, developing countries can export the sugarcane but not the sugar made from the sugarcane.