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Last week, I watched footage on social media that suggested that the domestic market for tie-and-dye/adire fabrics is being gutted by cheap imports of similar looking fabrics from China. The pitch went beyond the now familiar need to protect the livelihoods of domestic producers. It was more wistful pointing out how adire clothing is included in the cultural definition of certain domestic communities
and how the Chinese imports are an identitarian challenge. It was, in this restricted sense, as much an economic argument as it was concerned about the production and consumption of cultural values.
The gut reaction from most who saw the video was conservative. A ban on imports from China was proposed largely in defence of our traditional way of life. Strange construct, this, given that much of the industry today would be familiar to denizens of the Oyo Empire in the days of Bashorun Gaa. In this space even attempts to boost the industry’s productivity
modern technology, work practices, or even processes
will fall foul of the “defence of our traditions” argument. In the end, this is but a part of the problem with most policy responses that seek to circle the wagons in defence of domestic industry.
A simple thought experiment, then? Suppose I earn N100 a month. And because of my love for the adire fabric, now and again, I spend N20 on the Chinese make. What would a ban on Chinese imports mean to me? Caught in a technological and process time-warp, the domestic substitute, obviously more expensive, would surely see my spend rise, say to N30 each time I indulge my taste for this fabric. This is obviously a diminution in my living standards. Thus, as a consumer, a ban leaves me worse off. But it is also a tax on consumption. A transfer of resources from consumers to domestic producers. Admittedly, not all the previous demand supported by Chinese imports will now feed through into demand for the local variety
— simply because the domestic good is that much more expensive.
The first question arising from all this is: “How does the economy benefit from when money remains in the consumers’ pockets (and what are the costs) as against when, through non-market arrangements (fixed prices, or bans on competition), the same money is transferred to producers of goods/services (and at what cost)?”. Rarely is this question properly answered from the couches that are the favourite resting places of our talking heads. Ever more so, especially in the planning, implementation and audit of policies designed to drive positive economic outcomes, we need to go down the data-dependent route.
A far bigger question in the design of policy in this case is, why the local variety of adire is that much more expensive than the Chinese variety? True, the Chinese manufacture at scale, and so are able to force prices down in markets where their products compete. This, however, was not always the case. Even when “Made in Taiwan” was a moniker for cheap knockoffs the Chinese were not a manufacturing presence. Whatever they have done to improve their economy’s competitiveness occurred in the last four decades.
What have we done, or failed to do? Not only do we have a welter of small artisanal producers in sectors where the economy is increasingly expected to compete globally. These producers have opted to remain at operational levels just beneath where they would have to transition to the formal sector. Why? Because the cost of doing business in the country rises exponentially as businesses grow. These latter costs are not just regulatory and financial. Of course, the financial burden, all of it below-the-line, of moving goods across the country is well documented. So, there is no need to dwell on them here. Domestic business costs also include those imposed by decrepit infrastructure.
In other words, without correcting for the impediments to doing business in the country, a ban on imports might simply allocate scarce domestic resources to less optimal uses. No less important, the resulting reduction of consumer purchasing power hurts the economy’s signalling function. Aggregate consumer spending sends signals to the market on what to produce, when and at what price. To mess up with this signalling process is to further foul up the economy’s resource conversion efficiency. Our policy challenge, then, is not to layer more restrictions on domestic businesses in our bid to protect them from imported competition. It is instead to find ways to make the economy more competitive by freeing its animal spirits.
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