Protective duties |
Abu Abdullah RD, BIDS
On the 22nd December, the government announced the imposition of protective duties on salt, card board for packaging, and poultry chicks. The only reason given was, to give protection to domestic industry for a limited period .
Now as an explanation this won't suffice. For in that case why go through a process of tariff reduction in the first place? Why do these particular goods deserve protection as opposed to others which are being rapidly unprotected?
Are these the worthy exceptions which merit protection even in the midst of a general shift away from import substitution? I cannot go into a thorough analysis here, but I suspect that the answer will be no for all of them. Salt is in any case a small item in anyone's budget, so it may be a convenient way to collect small amounts of revenue from many people (virtually everyone), but by eliminating or severely reducing external competition, it is likely to encourage monopolistic behaviour by domestic traders. Material for packaging of the right quality is an important component of the cost of exports specially fruits and vegetables, jams and jellies etc. And finally chicks are an important source of employment and income for the rural poor under various macro-credit and self-employment programmes. Hatching and rearing the chick is a technologically more demanding activity, and subject to scale economies, which make them more suitable for urban or peri-urban entrepreneurs. Nor do distribution or livelihood concerns seem particularly relevant.
True, this was done with the WTOs concurrence. It would be fun to find out what arguments the Bangladesh side advanced to sell their case.