Friday, 11 April 2014

Dishonouring Zimbabwe Independence Day is moral repugnance

by Bernard Bwoni
Zimbabwe has a unique and complex his­tory; apartheid and segregation; displacement and theft; a bitter armed liberation struggle; heroism and greatness of the pioneers of the liberation movement and that priceless day on 18 April, 1980. This is a unique country, founded on the principles of freedom and emancipation on the backdrop of a lethal liberation war against a system that deliberately and ruthlessly segregated and mutilated on racial grounds. Independence is that exquisite feeling that has given all Zimbabweans and Zimbabwe options to make her decisions and to define own destiny as a sovereignty country. As Zimbabwe marks 34 years of independence it is regrettable that many are now associating hard won freedom with the economic problems currently bedevilling the country. That the gallant spirit and selfless sacrifices of those sons and daughters of Zimbabwe who went into that unforgiving bush with that bonafide raison d’ĂȘtre to truly liberate the country is lumped together in the same small corner as the indiscretions of some self-serving individuals without an ounce of the patriotic marrow in their bones is disheartening to say the least.
 There are many heroes who just fly beneath the radar, fought gallantly in the bitter liberation struggle and to this day largely go unnoticed as they get on silently with their lives and in some instances encounter ridicule from the very same people they helped liberate from draconian and racist regime. They are not celebrities, they are not on the conference main stage yet they give and have given of themselves for the greater good of Zimbabwe. Their lives inspired and continue to uplift, their spirits transformed political landscape and yet we deliberately forget to acknowledge their totally altruistic forfeiture for the liberation of the majority. The men and women who put their lives on hold to fully commit themselves to liberating the country from the darkest depth of colonialism and racist apartheid system to the revered pedestal of the liberties and freedoms we enjoy and take for granted today. These are the men and women who have been through the mud and mire, enduring unimaginable distress and privation for the love of Zimbabwe. There are many such men and women in Zimbabwe and they all deserve our respect, recognition and reverence, precisely because they did not ask for it, they earned in ways we can only imagine.
Nowadays you often hear statements like ‘smith and Rhodesia was better’ or ‘take us back to when we were under colonial rule’. This is from people who now have that right to vote, that freedom to walk, freedom to exist freedom and be human beings. This is not playing the ‘colonial card’ but hard facts that things were never ever breezy, cheery and rosy under that Ian Smith and his racist henchmen. Rhodesia was a beautiful country for Rhodesians and not the descendents of Changamire Dombo and Lobengula. That is precisely the reason why arms were taken up against that regime. Rhodesia had some of the most repressive and discriminatory laws which reduced the black Zimbabwean to the end of bottom with no impunity. The Rhodesians, some of them still among us because of the reconciliatory hand of President Mugabe, mercilessly maimed and mutilated innocent blacks and today they don the sheep’s clothes as champions of democracy and human rights in independent Zimbabwe! These are the very same people who poisoned wells and sanctioned the indiscriminate massacres at Chimoio, Tembwe, Nyadzonya and many others. Zimbabwe’s Independence Day is sacred as blood flowed continuously through the beautiful landscape for us to enjoy the freedoms we take casually today. Thanks to President Mugabe we have forgiven the Rhodesian atrocities but will never forget, must never forget!
The liberation struggle was initiated by men and women who said enough was enough of the unrepentant regime and they focused on putting emphasis on cascading real power down to the people, advocating for policies that focus on self-sustenance and self-reliance and deconstructing the mind from that neo-colonial structure that continues to render Africans perennially indebted to those who have subdued, subjugated and exploited the Africans continent for centuries.
Hushed heads are an embodiment of real power focusing on action instead of words, and have ability to encourage ownership and develop loyalty in unique ways. The big idea is earning the respect and our heroes earned that. Men and women believed in a cause, fought for that cause displaying conviction minus the complacency. A great many were maimed, massacred by the brazen regime’s callous forces. Many a young men and women got arrested for the cause but never faltered and saw the liberation struggle to its unimaginable bitterness and victorious conclusion. Silence is golden and certainly easier for those that already have the analytical and introverted behaviours already in place. These are the men and women who were brought up on the values of the liberation of this country and confident but not over-confident with that ability to think laterally. As Zimbabweans we should define our heroes and relate to them, imagine what drove them to put their lives on hold to get out there and liberate this country. I am deeply indebted to all the heroes who have the country-defining values as part of their deoxyribonucleic acid and the values still ineradicably etched.
Any nation not build on any values has no foundation and is no nation at all. For you to believe in yourself you have to have some values to subscribe to. A country with no values has no vision and with no vision there basically is no future or growth. Any ideology that focuses on improving the lives of African people inherently threatens the irreversibly colonial and neo-colonial establishment and as such forever ridiculed and suffocated. As we celebrate this unique and sacred independence we must continue to honour the selfless sacrifices of those who helped liberate the country. Discrediting 18th April 1980 and demeaning the liberation struggle is morally defunct. 18th April 1980 has no price-tag and is free for all present and future generations to cherish. The liberation war heroes of Zimbabwe already put the price on their tab for all present and future generations to enjoy without limits.
Bernard Bwoni can be contacted on bernardbwn@aol.com/  bernardbwoni.blogspot.com

Tuesday, 8 April 2014

The EU, Africa and Zimbabwe: disarray leads to industrial stasis


By Bernard Bwoni

Revolutions just as with evolution can happen silently. Analysing the boon and bane of the new landscape and the transformation it ushers is fine art or should I say finite. A new and effective system of checks and balance and politics of maturity and openness evolves. Any ruling party has to constantly be kept on its toes by a brand of inter-party and intra-party political maturity by learning to adapt to this uncomfortable but necessary level of scrutiny. This ascendance towards a mature brand of politics is for those with the moral and mental mettle to deal with the facts minus the associated emotions. Let us focus on facts and figures of the realities on the ground. Zimbabwe signed the trade liberalization EPA with the EU which means Zimbabwe with mere population of less than 15 million people opening 80% of its markets to products from the EU with its 300 million economically-advantaged population by 2022. In the short term it will appear like Zimbabwe is gaining from the trade relationship but in the long term what you will find out is that as volumes increase the balance will shift exactly where the long-term thinking EU are aiming for and that is in their favour. Do your sums and numbers and facts are stubborn.
The Economic Partnership Agreements (EPAs) are ‘meant to safeguard’ African, Pacific and Caribbean countries’ preferential access to EU markets previously granted through the Lome Convention. The recent EU-Africa summit focused on trade liberalization as well as liberalization in investment and services. Many African countries have expressed reservation about signing the EPAs and rightly so. The EU has been exerting pressure on those countries which have not ratified and has set a deadline of October 2014 or it will start levying tariffs on all imports into the EU from those countries that have refused to ratify.
Zimbabwe is already an import-dependent country and signing the EPA and opening its doors further duty-free to more imports was a counter-productive move. The country could have focused on developing the industrial sector to compete globally especially in those areas the country has comparative and competitive advantage. The comprehensive duty-free access for EU finished products significantly impact on revenue to government in the long-term. The government could be forgiven for signing the interim EPA as this was during the time of contentious government of national unity.
The deal which the EU is putting on the table appears fair on paper but in reality and in the long term will not stimulate economic transformation on the continent. Zimbabwe has signed the interim EPA which covers the liberalization of goods (agricultural or manufactured products) but not the full EPA to cover services.
The comprehensive EPA includes goods, services and investment including banking, water services, construction and any other services. From the import figures above it is clear that Zimbabwe mainly exports raw materials to the EU and liberalizing the services sectors which could be important to the country’s own productive capacity as stipulated in ZimAsset’s value addition and beneficiation cluster is detrimental to the country’s economic growth. The EU has not been very clear on infant industry protection within the EPAs being proposed for the continent. What this means is that countries like Zimbabwe which have signed the EPAs will be exposed to direct competition from EU goods and services. Just a quick look on the EU exports to Zimbabwe will illustrate the point clearly. Value addition will be hampered, infant industry protection will be affected and domestic industry will not realize their full productive potential as they would be prematurely exposed to competition from more established firms from the more developed EU.
The recent EU-Africa summit focused on liberalization of investment and services which the EU is pushing for with individual African countries. This is negative for African unity in the sense that by negotiating different terms with already weak African economies this is basically weakening regional integration. The pressure from the EU for African countries has forced some countries to give in and sign the EPAs fearing the threat of exclusion from the EU market.

The EU is Zimbabwe’s third largest trading partner and in fact the balance is in Zimbabwe’s favour on face value. Zimbabwe has more exports to the EU than imports. The value of trade with the EU is in excess of US$800 million with a positive trade balance in favour of Zimbabwe. Zimbabwe exports to the EU mainly raw materials such as raw cane sugar, minerals, tobacco, citrus, cotton, raw hides, tea and leather. In return Zimbabwe imports cars, transport equipment, machinery, chemicals and luxury goods. The Zimbabwe government has signed the interim EPA with the EU which means the country will continue to enjoy preferential duty-free  plus quota-free access of all goods to the EU market and in turn the EU also will have a 80% duty-free quota access to the Zimbabwe market for their manufactured products gradually implemented with full implementation in 2022. The issue of infant industry protection has not been made very clear and there seem to be a lack of long-term planning on Zimbabwe’s part here.
Zimbabwe is likely to lose that revenue base from the removal of all tariffs from trade with the EU and SMEs will be negatively affected by trade liberalization in the long-term. There is no country in the world that has developed without protecting its industry. With very few exceptions, tariff cuts and other measures of trade liberalisation have not brought about the anticipated economic growth and in a lot of cases have in fact brought economic collapse.

Zimbabwe should be looking more at strengthening regional integration and tapping into the huge potential of the regional trade as that will most definitely stimulate economic growth. Zimbabwe’s trade with the DRC and Botswana is positively skewed in favour of Zimbabwe as exports are tenfold more than imports and it is value-added exports. The concerning feature is that our government preaches value addition and beneficiation and at the stroke of a pen turn around and open up its markets duty-free to more advanced economies and in so doing exposing domestic producers to  unequal competition.

Zimbabwe has a significantly negative balance of trade with the world and that is where the argument against EPAs is stemming from. It is quite interesting to note that the EU urgently wants African countries to commit to the EPAs or face tariffs on goods from those countries that have not signed. The EU wants to counter the growing Chinese influence on the continent and it is beginning to look like they are coercing African governments to sign trade agreements which are unfavorable in the long run. The 100% duty-free quota access will give the EU firms the definite edge over competitors in particular the Chinese. The issue with the trade flow between the EU and Zimbabwe is not in the numbers but the detail. Exporting raw materials and importing the finished product will hamper innovation and development for a country like Zimbabwe. The country recently came up with a brilliant ZimAsset blueprint which clearly prioritises value addition and giving 100% duty-free access for EU finished products will just curtail domestic manufacturing industry potential and revival.
The recently concluded EU-Africa summit did touch on this delicate subject and the EU wants a free trade zone for goods with Africa as well as services. What this means precisely is that if a tender is put out for any of the service industries in the country, then companies from all over the EU will freely and equally compete for such tender with local  companies. Now this goes against infant industry protection which is why some African countries are holding out on signing the EPAs. Domestic African companies would find it very difficult to compete against the more established companies from the developed EU with some form of initial infant industry protection.

What we have here is a case of facts and figures, political grandstanding aside. The Zimbabwe government signed the interim EPA with the EU in 2009 and since then trade between the two has increased drastically. The trade is in fact skewed positively in favour of Zimbabwe at present. However looking into the detail of the agreements is crucial because it is the all-important small print that sets out our contractual rights and dilemmas, which tie us down and when you do not read the small print it is a life time braise. The elimination of export taxes will significantly impact the National Trade Policy (NTP) and Industrial Development Policy (IDP) which are meant to promote trade and industrial regeneration respectively. It will also negatively impact ZimAsset which advocates value-addition and beneficiation.
Empirical historical and modern day evidence clearly shows that it is nearly impossible for a developing economy like Zimbabwe to develop without some form of trade protection and subsidies. The signing of the EPA in the short-term and on paper might seem a positive step but in the long term is damaging to Zimbabwe’s developmental efforts. Documents and their small print are always difficult and confusing to read and hence why developed countries have specifically trained individuals to synthesise such and offer politicians and decision-makers an informed inference into their contents. These are not documents you just browse through and sign on the dotted line. They have far-reaching national implications and complications.
Evidence shows that trade liberalisation works only when it happens gradually and selectively as part of a long-term industrial policy. Given that Zimbabwe’s manufacturing sector is emerging from years of decline, it cannot be expected to compete against the mature industries in the more advanced regional and advanced international economies without an initial period of deliberate government protection. It is going to take time and more importantly investment in technological capabilities for manufacturing companies in Zimbabwe to absorb advanced technologies. Without this initial period of protection the sector is going to struggle to survive the international competition. The manufacturing sector in Zimbabwe requires government protection and subsidies at the initial stages so that they can absorb the technologies and learn to complete in the global market. The exportation of EU manufactured goods and services would directly expose domestic industry to this unfair competition.

When Zimbabwe signed the interim EPA in 2009 trade increased drastically between the two. The EU will be granted full duty-free access to the Zimbabwe market by 2022 and what some analysts have pointed out is that that is sufficient enough time for Zimbabwe industry to  build on its competitiveness and face the competition from EU goods and services. What is interesting to note is that all EU countries developed their economies on a backdrop of tariffs and subsidies throughout the 19th century and 20th century and exerting the sort of pressure they are on African countries to commit to these EPAs can only be detrimental to African economic transformation.  Zimbabwe is one country that should have learned from ESAP. Americans owe their high standards of living and international political dominance to the intellectual father of protectionism Alexander Hamilton and not to free market economists like Adam Smith. My argument is that Zimbabwe’s industry is not even in its infancy, it is still to be reborn and exposing it to EU competition by 2022 is just too premature and will impact negatively on the country’s economic progress. It is all high sounding talking about competitiveness but for Zimbabwe to build that level of competitiveness to compete with more advanced economies of this world it requires that initial level of protection and promotion.
 

Tuesday, 1 April 2014

Towards economic efficiency and social responsibility


By Bernard Bwoni

As economic theory dictates, all removal of trade barriers is beneficial to the global economy. The argument is that by increasing trade barriers through tariffs, domestic consumer costs increase, foreign exporters’ sales decline and efficiency gains through comparative advantage are hampered. The developed economies often tell the developing countries of the benefits of free markets with promises of wealth and progress if they opened up their markets. Many developing countries have in the past and more recently taken such advice on board only to find that the markets from the very same developed countries tightly closed for them in return. Protectionist policies for the developing countries are essential but need to create a balance between social responsibility and economic savviness. In as much as the developed countries need to be sincere about free trade, local producers in developing countries also need to be sincere and honest in their conduct when barriers are put in place to support them. Protectionism must never be used as a way of creating artificial shortages to inflate prices and maximise profits. The priority must be the creation of a nation that is socially responsible and economically efficient. When it comes to trade liberalisation, the developed countries’ policies have their flaws but developing countries also have a responsibility to their own citizens to provide quality products that remain affordable to fill the gap left by the cheap imports foregone.

The Zimbabwe government’s decision to suspend importation of all agricultural produce and cancelling all import permits is a socially responsible and economically efficient strategy if domestic producer’s prices remain as competitive as the imports given up to make way for local produce. Competition is good for the economy as it increases efficiency, better service for consumers and lower prices. Protectionism in the initial stages of economic transformation is equally good for the economy as it offers the domestic producers that cushion to establish themselves and be able to learn to compete in the global market. Domestic producers in Zimbabwe have in the past been insincere and less than honest when government had intervened to offer that initial period of protection and promotion. Some domestic producers have deliberately induced a sense of severe shortages to allow them to hike up prices on basic commodities. Thus the call by local farmers for government to establish local production deficits first instead of directly exposing domestic producers to cheap competition is welcome. The government should be looking at importing only those products that local producers are failing to meet local demand and in return local producers need to offer a quality product at prices that do not impact on the welfare of the local consumer and a product that remain competitive for export.

There nothing unusual about domestic producers and farmers in Zimbabwe clamouring for protection against dumping from foreign producers. The European Union’s Common Agricultural Policy (CAP) protects EU farmers from foreign competition by deterring imports from outside the European Union through heavy import tariffs. The EU also protects producers against price drops by buying up and storing surplus crops or exporting them to developing countries at below market prices which exert unequal competition as has been happening to local Zimbabwean farmers. The EU’s free trade agreements force developing countries to open up their markets for European surplus production. Zimbabwean farmers cannot compete with subsidised EU goods, cheap imports from China and South Africa and in effect face risk of being displaced by unfair competition. Having said that, the cheap foreign imports sustain livelihoods in Zimbabwe in this severe economic climate and thus benefits to society are significant. The dilemma is how to sustain the same livelihoods at the same time protecting and promoting the domestic producer. The trade-offs are complex and with Pareto optimality in mind it is going to be impossible to improve livelihoods of Zimbabwean consumers without the producers becoming worse off because of the influx of cheap imports or vice-versa.

A strong agricultural sector is vital for the highly competitive food industry to remain an important part of the Zimbabwean economy and trade. The marginalisation of local farmers is precisely the risk associated with the ongoing dumping of cheap foreign food imports. For Zimbabwe just like other developing countries to be competitive there is an urgent need to significantly reduce the unsustainable import dependency that characterises the market at present. The country has to immediately switch from being a net importer to a net exporter and the government needs to pursue a policy trajectory that fosters domestic agricultural production and limits import dependency. Facts are stubborn and the fact of the matter is that there is no country in this world that has transformed its economy to an advanced economy through imports. It is stating the obvious that you have to make and sell more and buy less to make a profit and even if you buy more, you have to buy at a cheap price to sell at a higher price on a very large scale. There is need for a policy shift that allows Zimbabwe to protect itself from lowly priced imports. In the short term society benefits from cheap imports however the long-term effects on the national economy are devastating. However any government has to remain socially responsible to the plight of its citizens when addressing this issue and looking at policy shift.

 It is a delicate situation developing countries find themselves in, how to balance economic efficiency and social benefit. It is a sad situation that Zimbabwean farmers are being forced out of their own local market because of the cheap foreign dumping that the country is faced with. The cheap subsidised import means that local farmers cannot even compete on a level playing field on their own land. The developed countries such as those in the China, EU and the USA dumps cheap food stuffs in poor developing countries with the help of export subsidies which only further undermines the livelihood of farmers in those developing countries.

Zimbabwe just like other developing countries find herself in a very difficult position with the IMF and World Bank putting pressure on the country to scrap tariffs and subsidies as part of the free trade rules. In contrast, EU farmers are guaranteed a price for their produce at prices almost three times higher than world prices and there are stringent restrictions on foreign imports into the EU backed up by very high tariffs on imports. Export subsidies allow surplus EU produce to be dumped at bargain prices in developing countries. The EU Common Agricultural Policy uses quotas and very high tariffs to effectively block the importation of foreign food stuffs. It is interesting to note that the EU tariffs vary and rise in proportion to how processed the product is. Partially processed products face an average of 20% higher tariffs than raw resources and finished products face almost 50% higher tariffs (FAO, 2013). To put it simply, developing countries can export the sugar cane but not the sugar made from the sugar cane. Zimbabwe mainly exports horticulture products, tobacco and other unprocessed raw products and in return imports in bulk the finished products from those raw materials.

According to the United Nations, EU protectionism deprives developing countries of nearly US$700 million in export earnings a year. The US$50 billion a year EU agricultural subsidy regime is one of the biggest impropriety facing farmers in developing countries as Zimbabwe. The Sugar Industry is a good example in Zimbabwe where the EU has duty-free access which allows additional imports at reduced duty and below world prices. Thus significantly lower international sugar prices and a surge in sugar imports onto the domestic market has severely reduced domestic sales volumes in Zimbabwe.

From an environmental sustainability point of view, agricultural success needs not simply be viewed on successes at the auction floors alone but need to prioritise the environment and the impact of agriculture on the environment. Some of the current agricultural practices in the resettled farms need to be revised as they are not sustainable. The environment and the resources produced have a relationship that is multipurpose in nature and offer people a wide range of valuable goods and services such as renewable and non-renewable resources, landscape and amenity resources, waste assimilation capacity and life support system. Environmental goods and services are valuable products that humans derive from natural and managed ecosystems. The environmental services production of food; protecting water quality; water regulation; maintaining healthy waterways; natural climate regulation; provision of shade and shelter; soil regeneration; forest regeneration; carbon sequestration; nutrient cycling; waste assimilation; pollination; biological pest control; natural hazard regulation; maintenance of natural genetic material; and maintenance of native habitat. It is not just the farmers who have to be environmentally responsible, but every citizen’s duty.

 

The recent concerns expressed by the Forestry Commission of Zimbabwe that the rate of deforestation at over 300000 hectares per year would wipe out the country’s entire forest in 50 years’ time must be taken seriously. The small-holder farmers in particular tobacco farmers must take responsibility and use this valuable resource responsibly in curing their golden leaf. The issue of property rights remains a multiplex one and still needs to be understood from the complex corner it occupies in the Zimbabwean context.

 Farming and the environment are inextricably linked. The main functions of agriculture are often put into three broad categories namely economic, environmental and social. The economic functions of agriculture are assigned a value by the market since they generate tradable goods. Environmental and social goods and services have no markets and no markets prices hence non-marketable and non-tradable nature. This is because of absence of the demand and supply mechanisms for such goods. Valuation of environmental functions which are unpriced is an important in order to correct economic decisions which treat natural environments as if they are free goods and services hence overuse and misuse. . The indiscriminate clearing of forests for curing tobacco if unchecked are ecological and environmental time bombs for Zimbabwe. Intensive and poorly timed application of fertilizers and pesticides often results in` high run off into rivers and ground waters whereas intensive stocking of livestock which give rise to overgrazing and the creation of animal slurry which pollutes rivers.

There is an urgent need for a national trajectory that seeks to improve the lives of all citizens, have an acute awareness that our actions today have a bearing on future generations and whilst doing all this ensure that an economically efficient society is created. There should be a commitment uphold uprightness and contribute to economic development of Zimbabwe while improving the welfare of society at large. It is every Zimbabwean’s duty to play their part in maintaining that balance.

Bernard Bwoni on twitter@bernardbwoni/ www.bernardbwoni.blogspot.com

Thursday, 27 March 2014

Zimbabwe, Africa will not develop without protectionism

DEVELOPED countries have often argued that developing countries should open up their international trade because it is good for them. However what is interesting to note is that the same developed countries that have succeeded in developing their economies have done so by ignoring that very same advice.

Adam Smith, in his ‘Wealth of the Nations’, advised the Americans not to “artificially promote manufacturing industry and argued that any attempt to stop the importation of European manufactures would obstruct instead of promoting real wealth and greatness”. The Americans did not listen to Adam Smith but rather to their then Treasury Secretary Alexander Hamilton who argued that American industries were still in their infancy and as such could not be expected to compete against the mature industries in the more advanced economies without an initial period of deliberate government promotion and protection.

The prevailing situation Zimbabwe where capacity utilisation has been declining to alarmingly low levels is not sustainable. For domestic manufacturers, competiveness has been diminishing in the face of stiff competition from cheaper imports from much larger manufacturers from neighbouring South Africa and from the Far East, mainly China, who benefit from economies of scale. Zimbabwe’s manufacturing sector is in a dire state due to poor infrastructure as well as shortage of capital, electricity and water. Most companies are operating under 40% of their capacity according to the Zimbabwe Investment Authority.

A good example is the textile manufacturing sector in Zimbabwe. Over the past few years there has been an influx of indigenous clothing manufacturers. However, only a very small number, less than 10%, manufacture for export despite the growing regional market and inroads in past years into new markets mainly in Europe and America (Zimbabwe Investment Council, 2013).  There is a great deal of opportunities to develop this side of the industry through investment work with a sound marketing base. The sector has a highly skilled clothing sector which is able to produce clothing to world standard requirements for export (ZIA, 2013) and, importantly, at competitive prices.

The textile industry has gone through a severe down period and requires investment in new technology which will enable it to compete with imports into the Southern African region and the Far East. It is important for local textile manufacturers to focus on competiveness as the ultimate long-term objective but government needs to initially offer the sector a period of infant industry protection as they build up their competiveness.The Zimbabwe Textiles Manufacturers Association recently lamented that current tariffs on finished dyed and printed fabrics at 10% were detrimental to the country’s textile manufacturing sector as we are allowing a finished product into the country which does not require value addition.






Duty on spare parts for machinery, which is currently pegged at between 15% and 40% is also highly prohibitive. According to the Zimbabwe Textiles Manufacturers Association (2014) the current duty exemption structure which allows clothing factories to import finished fabric at 0% duty goes against the principle of industry infant protection. It would be very difficult to revive the ailing textile manufacturing sector by allowing downstream firms to import duty free fabrics that should be made locally.

All economic theories are based on restrictive and unrealistic assumptions and thus are not absolute. Empirical historical and modern-day evidence clearly shows that it is nearly impossible for a developing economy like Zimbabwe to develop without some form of trade protection and subsidies. Evidence shows that trade liberalisation works only when it happens gradually and selectively as part of a long-term industrial policy.
Even the guru of New Trade Theory, Paul Krugman, has changed his position on free trade over time even though he retains his position on competitiveness. Krugman has relaxed his initial assumptions of constant returns to scale and argues that using the protectionist measures to build up a huge industrial base in certain industries will then allow these sectors to dominate the world market. The value of protecting infant industries has been vigorously defended since the 18th century by economists such as Alexander Hamilton in 1791 for the USA trade policy.

Protectionist policies facilitated the development of the Japanese auto industry in the 1950s when quotas and regulations prevented import competition and Japanese companies were encouraged to import foreign production technology but were also required to produce 90% of their parts domestically within five years. Given that our manufacturing sector is emerging from over 10 years of a downturn or should I say still on the ground, thus in its infancy, it cannot be expected to compete against the mature industries in the more advanced regional and advanced international economies without an initial period of deliberate government promotion and protection.

It is going to take time and, more importantly, investment in technological capabilities for manufacturing companies in Zimbabwe to absorb advanced technologies. Without this initial period of protection the sector is going to struggle to survive international competition. The manufacturing sector in Zimbabwe requires government protection and subsidies at the initial stages so that they can absorb the technologies and learn to complete in the global market. It is easy to say that the key to industrialisation is competiveness, not protectionism, but a baby has to learn to crawl before they can walk.
Free trade is one of those theories that is logically consistent with itself but not in the real world as it has not been universally linked to subsequent economic growth. This is evidenced by the economic chaos unleashed by the structural adjustment programmes of the early 1990s in Zimbabwe and other developing countries. Without some sort of infant industry protection the economy will have little hope of diversifying through industrialisation and accelerating growth on a sustainable basis. Zimbabwe’s manufacturing sector, in this early stage of revival, would benefit from this critical period of protection to enable it to maintain output and employment and this will subsequently spearhead economic growth.

All things being equal, lowering the tariffs as has happened in the textile manufacturing sector has indeed made clothes and textiles imports cheaper, benefiting the consumers. However this has had a negative impact on local manufacturers who have been exposed to import competition. It is true that increased import competition may make domestic producers more efficient and the current situation in the textile industry the assumption is that everyone would be better off. However the stark realities on the ground are not necessarily taken into account by new economic theory.

It is important to make a strong argument that premature trade liberalisation has been a failure and characterised by negative economic growth in per-capita terms and collapse of manufacturing with our domestic production swamped by cheap imports as capacity utilisation has dropped to alarmingly low levels. Let me briefly touch on the success story of China which has shown that while some trade liberalisation may be necessary and beneficial, in the early stages of development, some form of protection is still necessary. With very few exceptions, tariff cuts and other measures of trade liberalisation have not brought about the anticipated economic growth and, in a lot of cases, have in fact brought economic collapse. China’s economic success story in the 1990s took place on the background of tariffs over 30% (UNDP, 2003, pg. 29) and Zimbabwe’s current 0% tariff on textile imports will not stimulate the textile manufacturing sector but rather stifle it. However, the relationship between trade policy and growth is likely to be different in terms of structure for countries at different levels of development.

In the 1950s most of the now developed western economies and more recently China and Taiwan in the 1980s had very high tariff rates, averaging 30-40% and protectionist policies in place in the initial stages of their development. As they have developed their economies they have substantially reduced their tariff regimes because they can compete in the world market. Brazil has kept imports very low by imposing very high tariffs which have stimulated their manufacturing sector and exports and, in 2013, the European Union took legal action against Brazil’s high import tariffs on European imports. The concerns expressed by the Zimbabwe Textiles Manufacturers Associations are genuine concerns based on the realities on the ground. Economic theory can help us understand the realities on the ground; however the practical realities on the ground offer us an informed inference into the economic discourse.

I am particularly intrigued by the fact that the USA, the UK and other EU developed economies, Japan, China and more recently countries like Brazil have used an industrial development strategy in which industry protection was key and the most important component in the earlier days of their economic development. I strongly believe that an initial period of protection for the manufacturing sector is necessary and tax rebates for manufacturing inputs especially for spares and machinery parts imports and those inputs used in the production to encourage the emerging industry.

Industry protection however, needs to be combined with an export strategy as export earnings are crucial in allowing the manufacturing sector to upgrade its economic activities as export earnings will provide the means to purchase advanced technologies and machinery and machinery spares and parts. Zimbabwe just like other developing economies has a fundamental right to reconstruct a new future through an initial period of industrial protection and subsidies.
Bernard Bwoni on twitter@bernardbwoni/ www.bernardbwoni.blogspot.com.