All things considered, return of this protectionism has been negative: Zahid Hussain

In their Country Economic Memorandum 2022, the World Bank spoke in length about this issue. 

Bangladesh provides a high level of protection to local industries through high tariffs and complex and not transparent para-tariffs, such as regulatory and supplementary duties. Overall, the total tariff may go as high as 27-28%; of course there are product to product variances. If we take into account non-tariff barriers, the rate is even higher.

However, the 74% tariff measured by the US has been done in a very basic way. They have simply divided the trade deficit by imports. 

That being said, how do we measure whether we have benefited from the high tariffs? If we measure it using industrial production then we have been able to establish some big local conglomerates in capital intensive production. 

So local production has increased. However, the rate at which it was claimed to have increased was incorrect. We saw in the White Paper that the manufacturing growth rate we were told was incorrect.

But some 15-20 years ago, local brands like Walton were not here; today they are available in the market. So, even though there has not been a 15-16% growth, we did see a 6-8% growth year on year. So a domestic market oriented manufacturing base has been created. But at what cost?

Since we have made selling at the local market more profitable through protection, the export-orientation did not increase. In fact, the export-GDP ratio has decreased. Exports have not been diversified. We have failed to create an alternative to RMG export. Pharmaceuticals had potential. Leather goods had potential. However, since investing in the local market is so safe, no one wants to export in the international market and bear the risks and face the stiff competition.

The result of which was that good quality jobs have not been created. We have failed to create any industries that can survive without government support. 

All things considered, overall, the return on this protectionism has been negative. We have done domestic market oriented industrialisation but we have failed to diversify our exports and increase export intensity. So although it seems there have been some gains and some losses, the loss is more as the local market is small compared to the vast global market.

There is also the argument that the products the end consumer is buying from local companies are significantly lower in quality compared to their foreign counterparts. This has been a downside of protectionist tariff policy. 

If we had targeted the global market we would have more labour intensive industries which in turn would have generated more employment. Also, the higher your tariffs are, the more under invoicing it encourages. This also encourages the hundi market. As, instead of coming through the proper channel, the payment is made through informal channels. 

TBS' Nasif Tanjim spoke to Zahid Hussain over the phone