Protecting infant industries

By Tim Worstall | 31 May 2005

The London Daily Telegraph carried a report on the Fanjul brothers which should serve as a warning to those who think that a little protectionism is a good thing. I have in mind those like Christian Aid who seem to think that the poor countries should be protecting their infant industries from competition.

Allow me to assume, just for a moment, several things which I do not actually think are true. That infant industries do indeed need protection (although if that were true why, as they have been protected since 1975 under the Lome Convention, do they still need it?), that this is the correct road to industrial development and that the current governments of the poor countries are sufficiently competent to work out which industries should be protected and which should not. You might also be surprised by my contention that the US is a relatively uncorrupt society but according to Transparency International it is. What then happens in a wealthy, uncorrupt, nation when there is a little, just a soupcon, of protectionism?

Although the sugar industry generates only one per cent of US farm industry revenues, it is one of the most generous political donors in the agricultural sector, contributing $3.2 million in last year's election cycle...

Thanks to the excellent political connections carefully, and expensively, cultivated by the Fanjuls, the United States sugar industry seems to be winning the day - defying the wishes of Congress, the White House and American public opinion...

America's nascent sugar industry prospered on the back of quotas which currently limit imports to about 15 per cent of domestic consumption and guarantee US producers about twice the world price for their crop. The Fanjuls reaped the profits even as American sugar consumers found themselves paying about 21 cents a pound, compared with less than nine cents on international markets.

"A small number of farmers basically control the US sugar programme to their benefit, to the detriment of US consumers and to the detriment of other countries that do not have a chance to export to us," said Donald Mitchell, a senior World Bank economist.

Is there anyone, anyone at all, who does not think that such behaviour would be rampant in poor corrupt countries? Yet people still seriously propose such a system as a solution to poverty? Please, get a grip.