The use of mechanisms such as import duties, subsidies, import quotas, and other trade-restrictive policies in order to protect domestic industries is known as protectionism. While some of these mechanisms are critical to ensure food safety and sustainable local growth when it is applied in the absence of bilateral trade mechanisms only to protect domestic industries, it presents a protectionist trade scenario. It can lead to a significant shift away from free trade.
Governments adopt protectionist policies to boost national economic activities. However, these policies can have several adverse effects on both individual countries and the global economy and have unforeseen adverse effects on local economic growth too.
Threatening Consumer Choice
Protectionist policies can negatively affect consumers by limiting their choices and increasing the risk of higher prices for domestic products. Import restrictions reduce the variety of available goods, allowing domestic industries to raise prices without necessarily improving quality. Consumers, lacking alternative foreign products, may be compelled to purchase domestic goods regardless of their quality and price.
Consumer spending is a crucial driver of economic growth, and even a slight decrease in spending can slow down the economy. Global competition helps keep prices low, enabling consumers to spend more.
It also poses a dire risk in the case of animal disease outbreaks that impact local producers and, by extension, local consumers.
Stifling Innovation and Competition
Protectionist policies can significantly stifle innovation by reducing competition from foreign businesses. When domestic enterprises are shielded from foreign competition, they may become complacent and invest less in research and development.
Additionally, limited access to foreign technologies and ideas can severely hamper innovation, which often thrives through the cross-border exchange of technologies and ideas. Without access to these resources, domestic industries may struggle to innovate, leading to economic stagnation.
Taking into account that South Africa’s 2030 goals according to the National Development Plan follow the United Nations Sustainable Development Goals, it is important to highlight that true sustainable development can only take place where there is collaboration – across industries and borders.
Global Impact of Protectionism
Beyond the adverse effects on businesses and consumers, protectionism can lead to trade wars and retaliatory measures among nations. When a country enacts trade policies that hinder foreign businesses, those countries may respond with their own restrictive measures, resulting in trade conflicts. These tensions can harm the global economy by reducing foreign investment and increasing unemployment in the protectionist country.
A notable example is the tariffs imposed by the United States in 2018 on steel and aluminium imports from countries like China, Canada, and the European Union. In retaliation, these countries imposed tariffs on U.S. agricultural products and automobiles, leading to a loss of 75,000 jobs in the U.S. steel and aluminium .
It is critical to recognise that reduced trade and increased tensions between countries can lead to decreased investment, lower consumer spending, and slower economic growth. This can have especially significant impacts on economically vulnerable countries like South Africa.
The Impact of Eliminating Poultry Imports in South Africa
In a scenario where South Africa is free of poultry imports, local producers would have an absolute advantage over the country’s most in-demand meat protein. This situation could threaten access to affordable chicken for South Africa’s most vulnerable lower-income earners, especially during periods of disease outbreak and short supply.
The competitive value of chicken imports also helps protect consumers and keeps local poultry prices in check, benefiting both South Africans and the economy.
It also provides access for the developing local producers and traders to learn from and trade with other countries, so enriching our own economy and industries.
South African consumers have a high demand for bone-in chicken cuts (e.g. wings, leg-quarters and thighs). This high demand is driven by their popularity in various culinary dishes and as a favourite snack option. However, local production has not been able to keep pace with this growing appetite. As a result, South Africa relies on imports to meet the shortfall. These imports are crucial to ensure a steady supply and to stabilise prices in the market.
Furthermore, South Africa produces only marginal quantities of mechanically de-boned meat (MDM), making imports of this ingredient essential for the meat manufacturing industry. MDM is the primary ingredient used to produce processed meats like polony and vienna sausages – an essential protein source for lower-income consumers. Therefore it is vital for South-Africa to keep good import relations.
Summarily, balancing domestic self-sufficiency with the advantages of international trade is essential, not only for economic growth, but also for industrial innovation, competitive poultry prices, and sufficient access to South Africa’s most affordable source of protein.
