Friday, 8 August 2014

The size and effects of some forms of protectionism

From the Economist magazine:
India is hardly the only protectionist when it comes to agriculture. Rich countries are the worst culprits. Japan’s tariffs—778% on rice and 328% on sugar—aim to block trade completely, insulating its small and inefficient producers from competition. The European Union’s common agricultural policy soaks up 40% of its budget. But Mr Modi has run away from reform. India’s food subsidies are massive, costing around 1% of GDP. They lead to huge stockpiles of unwanted, rotting produce, and fan pervasive corruption.
But not only are food subsidies and protection costly, they are not the best way to help the poor.
Giving poor families cash or food stamps would be better at helping the neediest while minimising waste—as Brazil, for example, has demonstrated.
But what are the chances of reform if their are political benefits to the current system? Are agricultural intersts too powerful in many countries?

1 comment:

JC said...

I should think that one implied and powerful argument for strong local support is if the world becomes unstable the locals will still be able to feed the population, ie food importers like WW2 Britain will suffer severely from food shrotages.

Against this argument is the counter that if all nations export and import instability will be contained by self interest.

So the most protectionist countries are more likely to be those that have experienced hunger, eg Europe, those not yet fully trading with the world, eg, India and those inward looking countries that think the world is against them, eg, maybe Japan.

So open food borders suggest optimism, active external trade and trust in a regulated world?