How free should trade be?

15 July 2003




In an earlier Limeblast, I have tried to explain how the poor Africans subsidise the poor Americans by buying secondhand shoes and clothes. As a matter of fact, some African countries prohibit the import of secondhand shoes or leather products in general, whereas others accept this unfortunate trade. Unfortunate because it undercuts the development of the leather industry in Africa where such a development is most needed. In principle, I am absolutely in favour of free trade, but I have to recognise that there are circumstances in which tariffs or certain trade restrictions are warranted and maybe even desirable or necessary. If, for instance, by prohibiting the import of secondhand leathergoods, you give the African leather industry a long needed boost, well, to hell with free trade, because certain aspects of the free trade seem to be custom-tailored for a number of industrialised countries to boost or sustain their industry rather than helping the developing countries to set up some sort of industry. Dumping is another problem that inhibits the development of industries in poor countries. At first sight, it sounds great to make brand-new $10 shoes available to the poor in Sub-Saharan Africa, to help get these people a pair of new shoes for their feet. But try to look at this in the long run. What happens is that some huge Chinese factory has an excessive inventory and sells it at the best possible price wherever that price can be obtained. The philosophy is that selling at a few dollars is better than not selling at all. The Chinese have to get rid of their excessive, out-of-fashion or defective stocks and turn over their money. African shoe factories, like any other producer in the world, are unable to produce shoes cheaper than what the Chinese offer to clean their warehouses and, hence, the business goes to China. The result is that African shoe factories are forced to close due to lack of sales, whereas the Chinese have turned their useless stocks into hard currency. The same hard currency returns to Africa to buy, some times at a premium, the raw hides and skins, adding insult to injury. Free trade ensures that Africa exports its raw materials which are then no longer available to the African leather industry, and at the same time the same free trade ensures that cheap leather products of basic quality enters the continent. The same leather products could have easily been made in Africa itself if laws would be in place that take into account that Africa must emerge from the industrial nowhere rather than being suffocated. It simply doesn't make sense that my friend John Doe in Kinshasa subsidises the poor bag lady in the Bowery in New York City. Let the Salvation Army give the lady in the Bowery the refurbished secondhand shoes which have been so generously donated by her rich countrymen rather than sell them to exporters. Let's give John Doe the opportunity to pay for a new pair of shoes produced in his own country or continent from hides and skins processed by the tannery around the corner, where his countrymen are making an honest living. If we have to subsidise someone, let's subsidise the African leather industry to create jobs, to produce acceptably priced leather and a pair of shoes that John Doe can afford. John Doe must have the opportunity to buy his new clothes and shoes, Made in Africa, at the same price at which he would have bought the same items shipped out of the US by large exporters who bought them from the charity organisations or the goods that were dumped by some large Chinese factory. If, at the same time, the big tanneries in China cannot buy their cheap raw material anymore in Africa, and if that raw material goes to the African tannery to supply the African shoe factory, a lot of people along the road would have jobs, and enter a new phase of their existence which allows them to buy the shoes they produce themselves. There are 1.5 billion Chinese people, a wonderful market for the Chinese home industry to dump their own excessively produced or defective shoes, and leave Africa alone. Free trade, therefore, is great for countries that are on the same industrial and social level. It would be logical for there to be free trade between Europe and America, being two equivalent industrial entities. In reality there isn't because at some level both industrial entities protect their home industries. Europe and America can put up a fight amongst equals. Africa doesn't stand a chance in a trade 'war'. It is, in my view, just as logical that we create some kind of industrial scheme that favours production in such areas, rather than bleed them of their raw materials and money since, in theory, we all want to see the third and fourth world countries develop. Thirty years ago India called such a scheme 'be Indian, buy Indian' and it worked beautifully. It helped India to produce virtually anything and to make it the most important industrial power in the region. At the beginning, quality was downright awful but, with time and experience, the Indian industry has become an important player. The west shifted its industries east to China in order to produce cheap affordable consumer goods, something that made almost all consumer goods available to almost anybody in the developed world. The result is that, in theory, everybody can afford several pairs of shoes, the latest T-shirts, unless that is you worked in those industries that closed leaving you with your pink slip to deal with. Many industries, including the leather industry, have closed down in many parts of America and Europe, something that is now regretted. Simultaneously, in just ten years, this move to the east lifted certain industrial areas in China to a level of progress that would have left Chairman Mao dumbfounded, had he have lived to see it. Until an equilibrium is reached, we should sustain the African countries to impose tariffs on exports of their raw materials and duties on the imports of finished materials with the understanding that the generated funds are used to help the industry and not the lining of pockets. Sam Setter [email protected]



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