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Home / Protectionism is self-defeating in era of globalisation
Protectionism is self-defeating in era of globalisation
2018-06-20Staff Report 2 The argument for government intervention in trade is to protect the interest of certain groups, usually the producers of certain locally made goods. This is what has been practiced and observed in some industries such as cement - and recently in poultry. However, these trade restrictions usually come at the expense of the other groups, mainly the consumers. In most cases the main argument put forward by affected producers is that allowing free trade results in job losses and destruction of local infant industries. However economists such as Paul Krugman are of the opinion that protectionist measures can lead to trade wars. This implies that when one government imposes trade restrictions on its industry, the other government will retaliate in similar manner, leaving both nations worse off than before. Recently, the world has witnessed the resurgence of populist rhetoric views arguing in support of protectionist policies. These views have triggered countries like the US and China to interchange trade blows by increasing trade tariffs on imported goods such as machinery, agriculture equipment, tech goods etc. The truth is that it is a little too late to reverse the gains of globalisation since digital technologies have had such a profound impact on the way business is conducted in the 21st century. The best approach is for countries to engage each other and establish “rules of the game” that minimise protectionism. It can also be argued that protecting infant industries does not do the country and its citizens any good. This is because in most instances such industries are inefficient in the following sense: Their whole production processes are not efficient enough to reduce their cost of production. Cutting-edge technological know-how compared to those of global competitors is not available and because of these factors, citizens of a country find themselves paying more for the products that are produced locally. This is evidenced from high costs of products made locally. Although these industries have employed a number of people, this cannot be compared to the higher cost of living being experienced by the local consumers. The benefits to free trade, as argued by some economists, is that cost savings can be experienced by consumers as they buy certain goods cheaper than locally produced goods and the savings they make can then be used to purchase other goods in the local market, thereby increasing domestic income. In an honest sense, protectionism is mostly self-defeating for these industries as government protects an inefficient industry with its attempt to compete only locally rather than helping these industries to become global competitors so that they can innovate, expand and generate adequate revenue for the benefit of the company and the country. It is worth noting that before government enact laws on protectionism, tariffs or any form of trade restriction policies, attempts should be made to ask a question if such move would empower the country’s citizens and generate wealth for the nation or not. This fundamental question can only be answered through a commissioned research. Namibia, with a small population of less than 2.4 million people, GDP per capita of US$5705, a trade deficit of more than N$39 billion and severe drought conditions, cannot afford to alienate herself from the global market. As research consultants, the efforts of the Namibian government to encourage free trade on a number of goods and services are applauded. The global strategy for Namibia should now be to research, innovate and develop tech goods for the global market. The Innovation Policy, which is being developed by UNAM for the government of Namibia, could be the starting point for Namibia to be known as a tech hub of innovators. *Mapuku Thikusho is Director: University Central Consultancy Bureau (UCCB) at Unam. These views are his own. 2018-06-20Staff Report 2
