Dr. Nick Steen CEO of Sheraton Textiles suggests in a Business Day article (29 March 2010) that economists have it wrong when they demonstrate that free trade benefits the majority of poor South Africans that are able to purchase cheaper goods, particularly clothing and textiles from Chinese manufacturers, and that the age old observation that free trade is the engine of economic growth for any economy might be wrong in special circumstances
Dr Steen asks the question, Both Pakistan and India have targeted SA for textile exports and, besides general support measures, have specific subsidies for textile products sold to this country. Should this be regarded as a reason to allow the industrys demise or a reason to support it against unfair competition?
Well I am certainly glad that India and Pakistan have targeted SA for their generous welfare, making the vast majority of South Africans better off through their gift of cheaper textiles, which I am sure also benefits other manufacturers in SA that benefit from cheaper inputs. Dr. Steen seems to suggest that we should match the welfare policies of Pakistan and India and provide other countries citizens with welfare through subsidised textiles from SA. This is not a good idea, Dr Steen, we have problems of our own that are not only limited to the textile industry. I am sure that if some of the perverse trade barriers protecting local clothing and textile manufactures in SA (which are amongst the most protected sectors in SA) are reduced or eliminated there will be some job losses but the net effect will be that the majority of South Africans will be made better off and we wont be killing off our export sectors, which are earning valuable foreign exchange.
Jasson Urbach is an economist at the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the authors and are not necessarily shared by the members of the Foundation.
For text: http://www.businessday.co.za/articles/Content.aspx?id=104843
FMF Policy Bulletin/ 30 March 2010