By Dr Asanka Wijesinghe
Uncooked turmeric roots on the cabinets of roadside distributors are frequent today. Because of import controls, turmeric now reaches the next value on the home market; with costs having climbed 275% from Rs. 80 per kilo to Rs. 300 per kilo. The turmeric scarcity, studies of adulterated turmeric powder, the ceiling value, black market gross sales and sensational tales of tried smuggling are manifestations of the affect of import controls.
The latest waves of import restrictions imposed by the Sri Lankan authorities have totally different justifications reminiscent of rising home manufacturing and stopping the re-export of substandard merchandise and forex leakage. Nevertheless, protectionism has prices. The numerous prices are: 1) risk of tariff retaliation by buying and selling companions; 2) affect on home manufacturing for export; and three) misallocation of sources.
These prices may have a critical affect on the restoration of the financial system affected by COVID-19. On this article, the prices of protectionist commerce insurance policies and the alternatives out there for a sooner post-COVID financial restoration are mentioned.
The financial literature completely paperwork the political and financial price of the Sino-US commerce battle. China’s focused agricultural tariffs, which have been in retaliation for Trump’s unilateral tariffs, price the Republican Social gathering the 2018 Home election. From a mercantilist perspective, international locations wish to export however are reluctant to import. However commerce is not a one-way road. The EU, in a press release on Sri Lanka’s new import controls, factors out that “a protracted import ban doesn’t adjust to World Commerce Group laws.”
Going again to the turmeric story, the principle supply of importation of turmeric from Sri Lanka was India. In 2017, 97% (USD 7 million) of Sri Lanka’s turmeric imports got here from India. Media studies present that Indian farmers and merchants have expressed considerations over the ban on turmeric in Sri Lanka. Whereas these considerations should not have rapid injury to the nation’s exports, Sri Lanka nonetheless must be cautious to keep away from the Trump administration’s awkwardness in launching right into a sequence of tariff battles with essential buying and selling companions.
These days, the vertically linked manufacturing course of by international worth chains (GVCs) is the norm. Manufacturing in Sri Lanka isn’t any exception. About 49% of Sri Lanka’s imports are intermediate items and 14% are capital items (Determine 1). Import controls disrupt the provision of inputs and may adversely have an effect on the export efficiency of industries that use overseas uncooked supplies. Vital injury from the commerce battle between China and the US has been accomplished to the American manufacturing sector. Likewise, Sri Lanka’s import controls in April 2020 severely affected sectors that used imported uncooked supplies. It’s commendable, nevertheless, that the federal government relaxed a number of the import controls in June to make sure an uninterrupted provide of uncooked supplies.