Review removal of protectionism

Editorial, Normal

THE call by the Manufacturer’s Council of PNG for Government and public support for the industry must be taken seriously.
The manufacturing sector, or what remains of it, is suffering heavy and unfair competition such that it is only a matter of time before factory doors close one after another.
Thousands of jobs would be lost.
It all goes back to the time when the Government decided to join the World Trade Organisation and Apec and all other organisations and agencies which promote free global trade and offered its protection of industries as its prize.
This happened in the mid 1990s.
It is as good a time as any to review the removal of protectionism to industry and especially whether any good has come of it.
Some 15 years later, we have seen no tangible benefits come of the Government’s move.
The agriculture and manufacturing sectors in particular are just barely surviving.
Even looking further to other countries, removal of protection does not seem to have done much and in many cases protections are back up and far more restrictive than before.
In Australia, a political party calling itself the Protectionist Party seeks to protect the Australian way of life against a huge influx of foreign immigrants, foreign labour and such like.
To protect Australian jobs and industries, the party proposes the setting up of strict tariff barriers against “cheap foreign imports to encourage the survival, rebuilding, and emergence of local manufacturing industries”.
It proposes to institute a national “buy back Australia” policy for companies, public assets and resources.
Farmers in the United States and in the European Union echo the same sentiments and to an extent are supported by their own governments through protectionist polices such as those extended to European beef or the soya bean and maize farmers in the United States.
So in those countries where we in the Third World think protectionism is absent, there reside enclaves of it that are the most powerful and most stringent and government leaders fear to take them on.
Papua New Guinea, with its all-too-exposed and too dependent economy, removed most protection of industries and of jobs around 1995.
Reserved business and restricted jobs classifications were removed except for cottage industries such as basket weaving and other arts and crafts and jobs such as hotel porters and security personnel.
The fledgling manufacturing industries, which did enjoy quite high protection, suffered also. Tariffs and duties were removed and the PNG Made products were subject to competition with often cheaper imported products.
The tangible benefits to PNG of its membership to organisations such as WTO and Apec is not quite visible, but the effects of such membership and the accompanying policy redirections have had disastrous consequences upon the agricultural sector as in the stiff competition palm oil meets at the hands of the strong US soya bean lobby and the quite unequal competition our manufacturing industry faces.
Believers in unprotected borders for the advance of truly global trade put their belief in the supremacy of the market place, that the market mechanism would enable the surest way to allocated resources.
They claim that governments should intervene as little as possible in resource allocation.
In PNG, the market mechanism never worked as it should. Take the job market, for instance. There was far more supply than there was demand for labour. What was in high demand for (skilled labour and specialists), there was very little supply in the market place.
Only the Government has the capacity and the will to deliver power to the rural masses. Left to the market place, power will never be delivered. The same would go for provision of other public infrastructural needs such as roads, bridges, schools and health centres.
The manufacturing industry in the country too faced its own unique problems. It had to import capital inputs from abroad which drove up its costs but its products competed with cheaper imported products. Domestic demand for manufactured products, excepting food products, was never high in any case.
With government protection at two ends – tax incentives and other assistance to industry to minimise cost and high tariffs at the other end to make imported products no less expensive than the locally produced one, the industry had a chance.
Take the State intervention away and leave it to the market place as has happened and you sound the death knell for the industry.
The market place in PNG was never quite the kind of mechanism that economists had in mind. It was lopsided and needed far more of a managed market to maintain balance. Take away the management (government policies and regulations) and the market would collapse and the industries along with it.
This is what has happened.