Importation isn't a bad word, Azan

By Damien King, Guest Columnist

Last week, The Gleaner exposed the difference between the interests of the Jamaica Manufacturers' Association (JMA) and the view of economics that I represent.

I pointed out that the extent to which the JMA is successful in lobbying for duty protection (that is, higher import duties on certain manufactured goods) is the extent to which both consumers and other producers would experience a diminished standard of living, since they would have to pay more for the very same goods.

Omar Azan, immediate past president of the JMA, responded that my facts are wrong because the JMA "has never lobbied for an increase in import duties to protect local markets". ('JMA not lobbying for increased duties', Gleaner, June 15, 2013).

Mr Azan then proceeds, in the very same article, to lobby for an increase in import duties to protect local markets. He writes, "Under international trading rules, countries have the right to protect their industries through the use of tariffs." He also notes that free-trade agreements include exclusion lists to protect local industries. Further, he calls attention to the CARICOM treaty safeguard clause which allows for imports to be restricted.

As I said in the interview on which The Gleaner reported last Thursday, when Jamaicans pay more for manufactured goods, it reduces consumption and raises production costs for everyone else. This is bad for the 'productive sector' (a favourite term of the JMA) if you happen to be any kind of producer other than a manufacturer trying to sell your goods for a higher price than the imported variety. The consequence is that employment and the standard of living will fall.

BAD FOR EVERYONE

Parenthetically, Mr Azan wondered, "Why is an economist supporting importation?" Counterintuitive though it may be to business persons, most economists recognise the importance of imports in ensuring an economy's competitiveness.

In a recent survey by the American Economic Association, 83 per cent of economists support the elimination of all tariffs and import barriers. Economists like facilitating imports because we discovered long ago (A.P. Lerner, 'The Symmetry Between Import and Export Taxes', Economica, 1936) that a tax on imports is bad for EXPORTS.

There are many challenges that face the courageous and hard-working business community in Jamaica. But it is counterproductive to add to those challenges by visiting the uncompetitiveness of one sector upon the rest of the economy.

Dr Damien King is head, Department of Economics, UWI. Email feedback to columns@gleanerjm.com and damien.king@uwimona.edu.jm.