Economic policy making

2009-01-05 00:00

When restrictive quotas were placed on textile imports from China in 2006, it seemed a sensible move. Retailers bemoaned the loss of cheap merchandise, but it was felt that the competition from abroad was seriously damaging the domestic textile industry. In the interests of local manufacturers and their employees, a degree of protection seemed a logical move.

Very soon, however, it became clear that the plan was not having the desired effect and, after the two-year period initially agreed between the two governments, the quotas are to be dropped. To the lay person, the flaws in the scheme may seem contradictory. With Chinese textiles blocked, other foreign suppliers stepped in so that the flow of cheap imports continued. At the same time, local manufacturers found it difficult to source certain fabrics that had previously come from China, including materials for sports kit and firefighting gear. The fashion industry also complained. With domestic businesses under pressure, jobs were lost rather than assured.

These unexpected and damaging consequences of a seemingly sensible decision need to be put in a broader context. In the globalised environment with its complexity of interlinkages, solutions to problems that appear simple and logical are not necessarily workable. And, with the world’s finances in continuing and probably worsening disarray, pressures are likely to grow. To hope that South Africa may somehow be protected from a global economic meltdown would be naïve.

As the major political parties start to apply their minds to economic policies and devise their election platforms, they need to note the lesson from the textile industry. There is a pressing need to alleviate poverty and create employment, but, as with the textile quotas, the simplistic solutions favoured by the populists and trade unions could well prove counterproductive. There are no quick fixes, and in a world where common-sense solutions are probably wrong, a far more sophisticated debate is needed than the current rhetoric.

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