Protectionism: A policy of protecting domestic industries against foreign competition by means of tariffs, subsidies, import quotas, or other restrictions or handicaps placed on the imports of foreign competitors. — Encyclopaedia Brittanica
“For centuries, England has relied on protection, has carried it to extremes, and has obtained satisfactory results from it. There is no doubt that it is to this system that it owes its present strength. After two centuries, England has found it convenient to adopt free trade because it thinks that protection can no longer offer it anything. Very well then, gentlemen, my knowledge of our country leads me to believe that within two hundred years, when America has gotten out of protection all that it can offer, it too will adopt free trade.” — Ulysses S. Grant
The first capitalist power, the United Kingdom, is a striking example of how protectionism — in this case taken to its violent conclusion — leads to success. Through protectionist measures the UK built up its manufacturing industries and became the workshop of the world in the 19th century. This bit of protectionism, first used in the mercantile system, ensured that the UK not only had the capital to expand industries, but critically the market to consume these goods.
But it also dabbled in protectionism earlier. When England was a rising power in the early middle ages, it enacted protectionist measures to build it wool industry which, in the latter middle ages, was one of the largest in Europe and a huge money spinner for the English economy.
When the UK economy got to such a size that the domestic markets could no longer absorb what was produced the British companies sought external markets and then turned away from protectionism to laud free trade.
The case was similar in the United States. Throughout the history of that country it has enacted tariffs and levies on imported goods, initially to provide federal revenue but to also protect domestic industries. A reason for the US war of Independence was to break away from the UKs mercantile system where the colonies were used for raw material production and the UK used for manufacturing, and protectionist measures was a major way to insulate US industries from cheaper, better quality UK wares.
At the turn of the 20th century when the US domestic markets could no longer consume domestic production the US abandoned protectionist measures, like the UK, to laud free trade to ensure ever-increasing profits for their companies.
This has been the stock and trade of all countries which have made something for themselves; they have enacted some measure of protectionism to incubate their domestic industries so they can thrive later. This can be in the hope that they become world-class companies or to ensure a greater degree of independence, but we have seen where protectionist measures have worked.
This has been backed up by a plethora of historians and developmental economists who have pointed out that all industrialised nations, past and present, had or continue to have some measure of protectionist policies. For example, South Korea imposed prohibitive import tariffs on cars and ships despite the fact that it utilises all of those. The tariffs are imposed to protect domestic ship and car manufacturers and have seen South Korea go from a backwater in the 80s to an economic powerhouse backed with a hefty level of State subsidisation.
The work “Kicking Away The Ladder” by Ha-Joon Chang, goes into great detail discussing and describing how industrialised countries used protectionism to build up sectors and industries, blocking out foreign competition in the process, only to then turn around and impose free trade measures on countries which sought to use the same protectionist measures to build up their countries.
The reason for kicking away the ladder is simple; countries with no industry, say cars, will be reliant on importing cars. So, Barbados, for example, a country with no industry to speak of, is reliant on importing products, such as those from agriculture, as opposed to engaging in some form of industrial independence.
History is replete with examples of protectionism working even if it is to build out specific sectors, so to hear a minister state publicly that it won’t work is a head-scratcher. If he means it will be difficult and incur a cost then yes, that is true, but to say it won’t work smacks of hyperbole.
This plays out the same here. Jamaica has no real mass industries save tourism. Bauxite has seen its heyday, sugar stopped being viable some time ago, and farming is at anaemic levels. Manufacturing, when it does take place, is usually the repackaging of foreign imported products. We have some resources, but they are limited, and if they are to be utilised to their maximum potential then in some areas an assisting hand will be needed from the State.
This lack of an organised and efficient industry is acutely felt in agriculture. The sector sees low levels of engagement with the number of farmers at low levels. The consumer bears the burden of this lack of an organised industry with effects felt at the supermarket and markets with prohibitive costs for local and imported produce. The technology, though improving, is still archaic, and financing for the sector continues to be at low levels. A big reason for this is that the farmers must compete against the cheaper imported goods from places like the United States or even the European Union which impose protectionist measures to guard their agriculture sectors.
Without some aid, Jamaica’s agriculture sector will never be able to grow and take off if it is competing against the agriculture industries of countries which are subsidised to the tune of billions of. We cannot reasonably expect the State to fund, to the tune of billions, the industry so that assistance is State intervention in the form of protectionist measures such as tariffs on imported goods.
An idea along these lines was broached by the Opposition, but as they are feckless, spineless opportunists they ran to the hills and abandoned the idea at the first sign of pushback.
As they correctly stated, the funds from this tariff could be put into a fund which is accessible to farmers so they can look to increase farm size and introduce new farming technology and irrigation without accessing banks which almost never lend to farms in major ways. The State could also use its powers to coerce banks into providing loans to farmers at reasonable rates by creating laws classifying them as a special group so there is not just a reliance on tariffs which, if we are honest, will see an impact on consumers.
While the impact will be felt in dollar terms, if done correctly it would be minimal by targeting specific goods such as onions, carrots and other items which we are able to produce in quantities sufficient to meet domestic demands. For too long we have either unquestioningly or cowardly accepted the economic rules to our detriment when in fact to prosper a country often must go counter to what the rules say. When our leaders like the Justice Minister, openly state that protectionism won’t work, they are speaking nonsense. Facts show us it works at its intended purpose of creating industries.
Import subsidies, import quotas, levies and tariffs work; they may not be the magic bullet and they may cause discomfort but they do have a place in any country’s economic arsenal. To deny that is to deny reality and to be wed firmly to the neoliberal doctrine which has shown itself to be flawed if not fatally flawed.
The key to all of this is ensuring that the money earmarked for spending on the farmers is actually used for them and to expand their industry. Jamaica has a long history of having lofty goals and ambitions in funding, such as the gas tax, the consolidated fund, and the education tax and apart from some WiFi hotspots we really have nothing to show from these taxes, tariffs and levies. We have shown that we are capable of learning hard lessons as seen with our 15 years of fiscal discipline so there is hope that if such a measure were taken, those in positions of power would wield it correctly.
Who it won’t work for are those currently empowered, the importing class, the class which produces nothing but extracts wealth like a parasite — see car marts, jewellery stores and the like. We must be honest, especially if we want to see our country grow, and while it is an ugly word now because of the current US incumbent, all countries with industries do it. We must either engage in protectionist measures to create sectors or accept the fact that we will always be a backwater with no independence beyond the paper it is written on.
Do subsidies and tariffs have to be a forever thing, no. They could be a special measure as we seek to carve out a foothold, locally, for our agriculture so that it can compete with the foreign imported produce. This has been done before; industries have been created from total scratch. We are lucky because we at least have the embryo of an industry, land, a history of farming and a name which is attached to agricultural produce. This could be done in conjunction with our Caricom sister nations who face similar issues when it comes to food security and the lack of a sector. Jamaica and Suriname could become the breadbaskets of the region if a simple tariff were imposed on select imported produce and the funds used to incubate and industry.
The need for growth, and growth which does not add further harm to the environment, or as little as possible, means we need to think outside the current box of economic heterodoxy. We must either learn these lessons and adapt of continue slipping down index scales and always playing catch up.
