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Feasibility of Trade Protectionism in Bangladesh -By Tansen Rose

National

After the industrial revolution, colonialist countries started mass production of merchandise products. They needed to sell it to the consumers. However, the population of these countries could not consume this large amount of products. Therefore, they needed to encash the goods to another country. It was the time when colonialism was running. The industrial countries easily passed their products to the colonial states such as Indian subcontinent, South America, Africa etc. in the twentieth century, the world had seen two great wars. Though France and England won the war, they collapsed economically. It was the opportunity for the USA to be risen. In addition, America used it for becoming the lord of the world. Globalization was a term, which America used to gain taste of neo colonialism, neo imperialism etc. Recently, developed countries again made their tone up for protectionism. Brexit, Frexit, Trump’s various steps are the examples of it. Despite some negative impacts of protectionism, every country applied protectionism to be economic giant. Although Bangladesh, as a third world country, gets some opportunities for globalization, it also costs so much. It is high time for Bangladesh to embrace protectionism to build the economy, to rule the world and to lead the people. From the perspective of globalization, the country should produce that product which they are best. Suppose, Bangladesh is agriculture based country and the USA is a technological giant. If the United States makes computer and Bangladesh produces rice then the theory says Bangladesh should trade its rice for computers. If Bangladesh imposes tariff on USA made computers and builds its own computer industry then it may become best at making them and can purchase rice from India, Indonesia, and Vietnam. Will it not give benefit for developing countries like Bangladesh for practicing protectionism rather than globalization?
In 1846, Britain applied protectionism policy by imposing tariff, export subsidies, exchange rate control; import tariff rebates for inputs used for exporting and export quality control. In that particular age, Britain heavily protected its industries than other countries. Behind the successful industrial revolution, and holding technologically leading position, there were high and long lasting tariff barriers.  During the same period, Britain, until the 1860s, boasted average industrial tariff rates of 40-50%.On the other side, In the 1800s, American businesspersons visited England and France to learn the manufacturing techniques and implemented it in their country, and made a wall with high tariffs. Even tariff was the main source of government revenue from 1789 to 1914. The first president George Washington passed himlton tariff 1789 that was a custom duties, which increased 80-95% of the federal revenue. To punish Britain and France and reduce import, congress passed Embargo act of 1807 and non-intercourse  act in 1809.Tariff was 25% on cloth and bar iron which Britain produced at low cost in 1824.In the middle of 19th century, tariff was minimized with the hand of democratic party. When the Republican came to the power after civil war, they imposed high tariff rate on the iron, steel industry and the wool industry.As a result, USA steel production jumped more than 500 times from 2200o tons to 11,400,000 tons between 1857 and 1900. In addition, wages of the employees increased respectively. Democratic president alleviated the tariff in 1894 from 50 percent to 42 percent; Republican again raised it to 50% in 1897. Friedrich List, the 19th-century German economist who was a German economist, proposed a theory in the name of “infant industry”. His view was “underdeveloped countries cannot develop new industries without state intervention, especially tariff protection”. Though Britain was the first country who applied this theory, the USA put it on ardently. Even after the Second World War, America was one of the highest tariff imposer. Even the average tariff rate for manufactured goods was 37% in 1925 to 48% in 1931. This rise and fall of tariff was continuing until America embraced GATT in 1947. Therefore, from the beginning of the state, America was accustomed to it and came out as immutable in the industry sector. This happened just for the USA and Britain. The countries, which developed economically, practiced protectionism.  During the 18th century, Today’s developed countries were trying to catch up higher growth with the help of protecting themselves from others. In the 19th and the early 20th century, France and German imposed 15-20% industrial tariffs. Netherlands, Switzerland were also the users of duties. After the Second World War, East Asian countries and Japan were ahead one-step. They invented some new types of protective barrier like investment planning, directed credits, cartel arrangements, research and developed supports, and the promotion to institutions to allow public private cooperation.
When the developed countries saw some emerging developing countries might apply protectionism and challenge them, they replaced free trade in the name of globalization. However, during the bad old days of the 1960s and 1970s, the economy was growing faster than now through practicing protectionism. The world per capita income was growing 3% while the world saw 2% per capita in the past 20 years. Per capita income was reduced 3.2% to 2.2% in the developed countries and 3% to 1.5% in developing countries at the same time. Why did developed countries promote neoliberal economy or free trade while it failed to protect its promise? There is no short cut answer. However, we can argue that the purpose might be to absorb the developing countries. Ulysses S Grant, former USA president, said “For centuries England has relied on protection, has carried it to extremes, and has obtained satisfactory results from it. There is no doubt that it is to this system that it owes its present strength. After two centuries, England has found it convenient to adopt free trade because it thinks that protection can no longer offer it anything”. This statement says that the developed countries do what they think best fit for their countries not developing countries. When they think protectionism may not offer for them rather than it will reinforce the economy of developing countries, then they promoted global village theory.Former American foreign minister Henry A. Kissinger wrote an article in the Globalist on “How globalization divides developing countries”. He described that because of globalization or free trade, Multinational companies manipulate the political process to triumph over the local companies. He also regretted about suppression on developing countries by America for practicing free trade. He now thinks what has worked in the United States cannot exactly work on other countries. Moreover, it took a long time for adapting free trade for America. Globalization offers the countries to be best in which they have advantages. Developed countries like America and Europe also help to build infrastructure, agriculture based economy and low industrial sector, while they are stuck on technology based industry. Bangladesh is the second largest RMG exporter in the world. The developed countries will favor for the country to boost it. They offer updated machineries but never share the technology of these machineries. So that the third world country can never challenge them in industrial sector and they always depend on them. There is another reason, because of competitive advantage; third world country can offer low rate products, which might contain higher rate if developed countries wanted to produce. As a result, developing countries compete with developing countries and they never dare to challenge developed countries. For example, Bangladesh is one of the fastest growing developing countries. Itamplifies in the RMG sector, agriculture sector, and pharmaceutical sector. Nevertheless, there is no automobile industry, strong technology based industry and largely produced electronics industry.Of course, it is growing in some sectors, but not every sector. That is the drawback of globalization for Bangladesh.
As every country, from their beginning period of development, applied protectionism, Bangladesh should also apply it for a healthy economy. In Bangladesh, the highest selling soap is Lux. There are many local soap industries like kohinur, Keya, Square, etc. None of the local companies could achieve the first position in last few years. The reason might be that Unilever offers quality products others are not. Can it be logical statement? To some extent, our local soap is better. Yet they failed. Why? Because of globalization. Because of the large production capacity, Unilever has minimum costs; it uses the best I nfrastructure system and recruits excellent employees. Our local industry cannot go with this opportunity due tore source scarcity. The result is they are not getting better position. Thus, developed countries absorbed economically with the help of free trade. If Bangladesh practices protectionism, it may impose tariffs- import taxes; quotas- quantitative limits on the level of imports allowed. Moreover, local infant industry could be growing. The numbers of foreign employees in Bangladesh have been rising. Most of the foreign nationals grabbed in the top post like production managers, merchandisers, senior sewing operators, cutting masters, designers and washing experts, CEO, Managing Director etc. Their number being more than two lakh and took to their countries more than five billion as salaries, allowance etc. On the other hand, Bangladesh faces 47% graduate unemployment on the basis of Economist Intelligence Unit report in 2015.Some foreign people occupy the best job position in the name of free trade, while local graduates are struggling to live. Bangladesh must take steps to reduce unemployment with a view to flourish its growth. It may limit the foreign employees in the company and coerce to recruit local graduates. When any country wants to have impact on leading the world, it must possess strong economy. In addition, this is possible through diversifying revenue stream. Therefore, the country must establish different types of industries. It may need to protect these new industries from full exposure to international competition for a while. Many developing countries are dependent on import of the commodities. Bangladesh, as a third world country, needs to increase export rather than import. Protectionist third world country would get another benefit. Where protectionism takes the form of a tariff, apart from reducing demand for imports via the impact of a higher price, this will also raise revenue for the government, like any other tax. The revenue raising function will be most successful where the demand for imports is price inelastic.
Though protectionism has negative impact like increasing price of local products, export ‘slow down for a certain period, GDP achievement not satisfactory level for a limited time, it will help to be self-reliant country and develop every industrial sector. Because of having benefit in protectionism, the world also turns recently toward protectionism. Emergence of nationalist in different countries like America, France, Netherland and Britain might support this statement. Bangladesh has great competitive advantages. When it adopts protectionism, it will be getting stronger than now. Moreover, it will have dare to lead the world. n

The writer is an undergraduate student of Marketing Department, University of Dhaka.

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