Each dollar of increased import protection leads to a drop of US$.66 in gross domestic product (GDP), according to research published last month by the Organisation for Economic Co-operation and Development (OECD). Therefore, despite pressure by producers, governments should resist calls for protectionism and instead pursue further trade liberalisation as direct trade restricting measures have the most negative effects on economic growth and employment. “In the face of concerns over unemployment and recession, governments are coming under increasing pressure to implement protectionist policies and measures – including tariffs, quotas and various forms of subsidies – as a way of ‘saving’ domestic jobs and enterprises,” explained Ken Ash, trade director at the OECD. Yet, he said, import barriers raised domestic prices through higher costs for intermediate inputs thus making export products more expensive and less competitive. Ash said an increase of US$1 in tariff revenues could potentially result in a US$2.16 fall in world exports and a US$0.73 drop in world income. On the other hand, he pointed out, full liberalisation of trade in goods and services would help increase average real incomes in developing countries by 1.3%, and by 0.76% in high-income countries. Newly emerging economies – including Egypt, Thailand and Nigeria – could gain 3-6% of gross domestic product (GDP). Trade protectionism can also lead to retaliation by trading partners, according to former Minister of Trade and Industry and director of Ubu Holdings, Alec Erwin. He pointed out recently that shooting too high for tariff protection could potentially harm trade relations with key export markets. “South Africa has to be able to trade as freely as possible with all global and regional export markets. After all, the products need to find global markets,” he said. Chairman of the Manufacturing Circle, Andre de Ruyter, agreed, commenting that the protection of industry was far broader than imposing high import tariff protection. “Preferential procurement programmes, more focused tax incentives and addressing the non-tariff barriers are some other ways in which trade policies can be adapted,” he said. Minister of Trade and Industry, Dr Rob Davies, believes there is a fine line between fighting global trade protectionism and safeguarding local industrial development without being “overly protectionist” and alienating key export markets. “As a small, open economy (accounting for only 0.5% of world trade), becoming overly protectionist could result in South Africa being denied access to other markets on which productive sectors depend.” He expressed concern that sanitary and phytosanitary (SPS) measures and standards were increasingly used as excuses for trade protectionism, which especially impacted on all small, micro and mediumsized enterprises (SMMEs). “If we break trade rules, there will be consequences and we risk retaliation. But within those constraints, the emerging new circumstances call on us to be more resolute, and indeed smart, in advancing and defending our own national interests. This will include defending our right to take tariff decisions based on our own needs and to deploy appropriate trade remedies,” he said.
