‘Protect infant industries’

In a presentation at a breakfast seminar hosted by ZimTrade this week, the Common Market for Eastern and Southern Africa chief technical advisor Dr Moses Tekere said although there was no way a country could sustain a closed economy unless it was resource-rich, there was a need to protect budding industries.
“The infant industry argument is that certain industries or sectors need to be protected from competition (usually by high tariffs or import bans) until such time as they have been able to grow strong and competitive.
“This is a good argument only if governments can accurately identify those industries that can become internationally competitive after initial nurturing and if such                  support can be time-limited and designed so as not to discourage firm and industry-wide innovation,” he said.
He said trade played a part in a wider strategy to enhance the productive capacity of a country and improve the prosperity of its citizens by facilitating the availability of technology, know-how, products, and services thereby increasing choice at lower cost.
“Opening up the economy or trade will lead to de-industrialisation so we can close infant industries that have potential.
“Instead of depending upon imports on products and raw materials that are locally available, Government could initiate that we get those things locally thereby supporting the local industry as well as help small companies fight competition from foreign producers,” he said.
Dr Tekere said the major drivers of the Zimbabwean economy were mainly the agricultural sector, manufacturing (clothing and textiles) as well mining. “Sectors like these ones need protection from imports that come in the country at very cheap prices which local manufacturers can’t compete with.
“Most raw materials are coming at zero duty and I think the ministry of Finance should start rationalising duty as a move to protect local industries,” Dr Tekere said.
He said there was also a need for more in terms of information dissemination concerning trade.
“Small and growing industries need to be helped to understand how to trade both internationally, locally and in open markets.”
Dr Tekere, however, said infant-industry support was rarely successful compared to policies that address obstacles to industry competitiveness.
“Open markets though require parallel investments in human capital (education, health and nutrition) and physical infrastructure, access to credit and technical assistance, as well as social safety nets and policies to promote stability. Such policies reduce the vulnerability of the poor and help them adjust to make the most of new opportunities that are created,” he said.