Protectionism Can Be Used to Nurture Domestic Economic Development

Cape Times (South Africa), April 23, 2009 | Go to article overview

Protectionism Can Be Used to Nurture Domestic Economic Development


BYLINE: Stephen Greenberg

The South African Department of Trade and Industry's recent announcement that it is considering the reversal of some tariff cuts appears to fly in the face of a global anti-protectionist rhetoric.

At the recent Group of 20 Summit to discuss responses to the crisis engulfing the world's economies, politicians were falling over each other to reject "isolationism" and protectionism.

Everywhere, the bogey of protectionism is being warned against - not only by the same people who put us in this mess in the first place, but also by other, more progressive, voices.

What is protectionism? In essence, it is an economic policy of restricting trade through tariffs and quotas on imported goods, and the use of measures to prevent the take-over of local economies by external companies. Free trade and protectionism both have a long history and have been fashionable in waves, ideologies that ebbed and flowed depending on the interests of the dominant economic and political powers of the day.

In the face of the global economic crisis, the US, France and other countries have included "buy local" clauses in stimulus packages, and have moved to raise tariffs and limit foreign ownership. But this protection is not only employed in times of crisis. It is an inherent part of the architecture of global capitalism.

Take the by now infamous example of agriculture. Despite an ideological argument that there should be free trade and open markets for all agricultural goods, the US and the EU in particular retain massive subsidies for their farm sectors. The WTO Agreement on Agriculture in 1995 reinforced an exceptionally unequal trading relationship between the US, the EU, Canada and Japan, for whom there was one set of rules, and the rest of the world, for whom there was another. The agreement permitted the US and the EU to maintain farm supports denied to other countries.

Between the signing of the agreement and 2006, the US government subsidised its farmers to the tune of $177 billion (R1.6 trillion), with 75 percent of all subsidies going to 10 percent of producers. In the EU, the Common Agricultural Policy (CAP) is a farmer support scheme worth EU55bn (R645bn). Eighty percent of the export subsidies in this programme go to 20 percent of farmers. Large agri-businesses are the major beneficiaries of the subsidies. In the US, the top three recipients were Riceland Foods, the world's largest miller and marketer of rice; Producers Rice Mill and Farmers Rice Co-op. Between them, these three received more than $1bn in subsidies from 1995-2006. Other global agri-businesses on the top 20 list include a division of Cargill and Tyler Farms. The same is true in the EU, with Tate & Lyle and Nestle among the main beneficiaries. Even the Queen and Prince Charles received more than [pounds sterling]1m from UK farm subsidies in 2003/04. …

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Protectionism Can Be Used to Nurture Domestic Economic Development
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