Trade Minister must get his act together

Minister of Trade, Commerce, and Food Security Wasantha Samarasinghe has dominated the news ever since the formation of the new Cabinet following the Parliamentary Election last September, though not for the right season. His stubborn insistence on maintaining price controls in respect of rice in spite of its failure has been met with widespread criticism. 

Few days ago, our sister newspaper The Daily Mirror reported that price of red rice in Ambalanthota had shot up to Rs. 265 per kilo, above the controlled price of Rs. 220, and people in the area were standing in queues to buy red rice when the Ambalantota Trader Association had issued five kilos of rice to each consumer at the controlled price.

The acute shortage of red rice within the market has angered consumers. At the Parliament, the Trade Minister was reported to have blamed the previous Ranil Wickremesinghe administration’s move to distribute 20 kilos of rice per person freely prior to the Presidential Election for the prevailing scarcity of red rice. His utterance did not receive a positive response, however. Meanwhile, despite the rice imports being permitted until the 20th of this month, importers had expressed difficulty in selling them at the regulated price levels. The empirical evidence has proved again and again that maximum price controls, in particular, cause goods to disappear from the market, causing unwarranted inconvenience to consumers, traders, and producers.

Although Governments in the past cut tariffs and allowed rice imports between January and February, the inexperienced ruling outfit did not remove the import tax and as a result, prices did not come down. Highlighting the gravity of the dearth of kekulu rice variety, the latest Central Bank daily reports did not even quote the retail price of both Red Kekulu and White Kekulu types at Pettah market.

Nevertheless, the failure of price controls with regard to rice has not discouraged Samarasinghe from applying the same unsuccessful formula even on canned fish. At the end of last month, the discredited Consumer Affairs Authority (CAA), which comes under the purview of the Anuradhapura District MP’s ministry, slapped a maximum price of Rs. 380 for tuna, Rs. 420 for mackerel, and Rs. 560 for jack mackerel. What was the sudden necessity to impose such controls on canned fish? High-quality canned fish products could possibly vanish from the shelves due to short-sighted measures of the CAA.

The past pupil of Thambuttegama Central College is also a keen advocate of trade protectionism, a move which could push consumers further into peril. Recently, Samarasinghe had conducted a meeting with representatives from the little known Local Tyre Manufacturers’ Association to deliberate on measures to reduce the country’s reliance on imported tyres. At the discussion, the representatives had proposed implementing restrictions on tyre imports to which the Trade Minister seemed to have responded positively.

There is a view that some of the locally produced passenger vehicle tyres are of poor quality and restricting high-standard passenger vehicle tyre imports would weaken road safety apart from limiting the freedom of consumers. We all experienced how local tile oligarchs exploited consumers when the Gotabaya Rajapaksa Government banned tile imports. This slogan of safeguarding domestic industries via curtailing imports in Sri Lanka is driven by few powerful businessmen to earn supernormal profits by lobbying politicians and the media. 

Reducing competition within the local market by restricting imports contradicts with the Government’s lofty ambition of increasing the export income by a substantial margin. One simply cannot develop competitive export industries by closing the local market to foreign products.

It appears that Samarasinghe is a follower of old-fashioned, outdated ideas that have been discarded by mainstream economists a long time ago. If the Government is genuinely interested in supporting local industrialists, attention needs to be paid towards removing bottlenecks such as high cost of energy and bureaucratic red tape without resorting to impulsive, lopsided actions.