There’s a conceptually absurd argument being made about Bangladesh’s largest land port, Benapole. Trucks are having to wait long periods of time, pay vast fees and even bribes, all of which is reducing the number of them crossing the border and bringing in imports.
But then this is the very point of much of the law we have about imports: To impose fees so as to reduce the number of them.
Thus, either we complain about what is happening at Benapole and so logically argue that we should reduce barriers to imports, or we applaud what is happening at Benapole as being a valid outcome of our planned policy concerning imports.
But no one has been using either of those arguments; instead, we have got a mixed message here: “It’s terrible what’s happening at the land port but we must continue with our policy of making exactly the same thing happen everywhere.”
This is not just not sensible, it’s absurd.
The complaint is that it can take 15 to 20 days to get a truck across that border from India. This obviously adds to the costs of imports and we’re being told this is a very bad thing. That time delay is in addition to the import duties that must be paid.
A great truth of political economy is that concentrated interests always beat dispersed ones
And the very fact that there is a border to cross means that all sorts of people can ask for a little bit of money here and there in order to grease matters along.
Hmm, OK, so we are deliberately making imports difficult and expensive. But then that’s also our basic government policy!
There are high import tariffs on a vast number of goods. They exist specifically to make imports more expensive. So, do we now say that delays to trucks with imports are a good idea? We should, shouldn’t we? Because that is what we do at every port, charge people vast sums so as to discourage imports.
But as this newspaper recently reported, we also worry about the fact that much of the material for the garments industry is imported. Along, obviously, with imports for all sorts of other industrial processes. So this is bad then, delays and extra expense upon imports lower our own industrial output. So why are we doing this?
Special interest groups
The answer is political, not economic. There are those who will tell us that economic development depends upon us producing all the things with which we make other things. This is, sadly, nonsense.
Economic development is about adding value -- the more value added the more developed we are. It doesn’t matter whether we’re adding value to imports or to exports or to home production or whatever in fact. Adding value is it and the all of it.
However, this idea that we should be producing from domestic resources is very helpful to those who control and produce those domestic resources. For they get to use the excuse to place a barrier in the way of those imports which would compete with their own production.
Which is where we get to the political aspect of this.
All of us consumers, we’re not really that worried about imports. Oh, sure, there are things we’d love which aren’t produced domestically – say an iPhone. But in general we don’t see the costs of those barriers to imports. And we’re certainly not going to go to the barriers and demonstrate about a 10 or 50% tax on one good or another. Because that one item might be 1% of our spending, a small price change in it doesn’t make that much difference there are other things to worry about in this life.
That’s what’s known as a “dispersed interest” -- tens of millions of people only mildly interested.
Now think of it from the other side, that of the producer. Say you make widgets -- economists’ jargon just for something being made. Your costs inside Bangladesh are 50% higher than the more efficient producers out there in the world market. If all those imports are allowed in then you go out of business overnight. You’re intensely interested in that 50% import tariff that means you can keep going, not go bankrupt.
This is what is known as a “concentrated interest.” Some small number of people extremely keen on one single piece of political or economic policy.
A great truth of political economy is that concentrated interests (lobbyists or special interest groups, who are usually producers and corporations) always beat dispersed ones (in this case, consumers). Simply because the first group really care, the second don’t very much.
Despite the manner in which a select group of producers are protected at the consumers’ expense, there isn’t a lobby group for consumers to countervail the influence of the producers’ lobby groups; that is, those who will protest, meet ministers, vote on this issue and this issue alone and so on, on the consumers’ behalf.
And that, usually, is why we have import tariffs -- because those who benefit from them, domestic producers, are so much more interested in having them than the rest of us, who are actually being harmed by them.
But this still does leave us with this absurdity. We’re being told that these delays and extra expenses at Benapole are a very terror, something harming the economy. Which it is true, they are. But then we’ve also got exactly the same policy being followed in general, import tariffs to ensure that imports are expensive applied more generally to the entire economy.
The truth is that if the extra costs at Benapole are something we can and should do without then so are all of the extra costs imposed by tariffs something we can and should do without.
Let’s not just try to sort out Bangladesh’s largest land port, let’s really solve the problem and move to proper free trade -- no barriers to imports -- allowing more consumption for all of us.
Tim Worstall is a Senior Fellow at the Adam Smith Institute in London.