Protectionism as New Pandemic

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Camille Pissarro: Picking Peas (ca. 1893) // Public domain

History repeats itself. Unfortunately, 2022 is no exception. The pandemic and the ensuing war have raised fears about food sufficiency, which politicians around the world have turned into old-fashioned solutions. What people do not like to hear is that many measures not only do not address food security but may make it even worse.

Protectionism, or trying to protect the domestic economy, sounds like a worthy goal in the ears of the average person. After all, every state is supposed to think first and foremost about protecting its citizens. However, when we break down slogans such as more self-sufficiency, support for domestic producers or export bans into small pieces, we find that behind them are measures that neither protect nor help.

The popular self-sufficiency sounds like resilience at first hearing. Even in the context of anti-Russian sanctions and dependence on Russian gas and oil, this idea sounds rational. When projected onto the individual, everyone wants to be self-sufficient from childhood – to be able to earn a living, look after themselves and not be dependent on others.

But it doesn’t work like that on a large scale. The rule here is similar to that of personal finance – diversification. The more options we have, the more resilient we are. If we bet everything on just that one domestic option, we are not more resilient, but much more fragile. All it takes is an unexpected frost, drought or African plague and the abundance is gone.

Moreover, where unneighborly squabbles over fences and land are the order of the day, we suddenly want to cheer on the fact that most of our food should come from Slovakia and should be produced together. Ideally, without foreign participation, because after all, foreign investors export profits (!).

Of course, everyone would be delighted if the supermarkets were full of quality Slovak fruit, vegetables, meat, and other products. However, this ideal cannot be achieved by a policy of self-sufficiency, but by a policy of cooperation.

In the same way that we can, thanks to international cooperation, be number one in the number of cars produced per capita or win an Olympic gold medal in skiing (I salute the Italian part of Petra Vlhova’s team), we can, thanks to open borders, be inspired by entrepreneurial ideas from all over the world, acquire cutting-edge technologies and, by competing with the competition, constantly improve the products that Slovak hands produce. And if an unexpected crisis does occur in our country, we can rely on supplies from abroad.

Support for domestic producers in the form of a race for subsidies with other EU countries has become something of an incantation of agricultural policy in recent years. Although the word ‘support’ can mean anything, what entrepreneurs like to see most is the promise of money from the state. But subsidies do not solve all farmers’ woes.

The constant problems of fragmented land ownership come back to farms every year like a boomerang. Instead of looking for new practices and trying to bring the best quality to their customers, they spend their time on bureaucracy. Whether it’s managing leases with hundreds of owners or proving their eligibility for government subsidies.

In May, MPs revived the idea of banning the export of selected commodities. In the end, a law was passed again hastily through a parliamentary submission and without public debate, stipulating that any business exporting more than 400 tons of a commodity must report twice a year on the volume of stock during an emergency situation (which has been almost constant for the last 2 years).

Which commodities will be involved is to be determined by the Ministry by regulation, but the restriction is likely to apply to grains. However, the export ban does not guarantee that food will reach all those who need it. We see this with Slovak fruit, where the problem is not the willingness to grow, but the lack of storage.

And so, history repeats itself, and everywhere in the world we are witnessing growing protectionism, as in the 1930s or after the Second World War. Governments are trying to block the export of certain commodities under the pretext of protecting consumers or combating rising prices. In Ukraine, this is partly understandable; it is in a state of war. In other countries, it is more a case of trying to please the electorate.

The US Treasury Secretary, Janet Yellen, may have raised a warning finger against protectionism, but she added in the second breath that the US should reorient its trade relations. In April, Indonesia suspended palm oil exports, but recently reversed this measure, having seen surpluses and a significant drop in the price of the commodity, which domestic producers were suffering from.

Hungary stopped wheat exports as recently as March, and Serbia, Ghana, and Uganda decided to extend the “temporary” ban on wheat exports they had imposed last autumn. Argentina extended its beef export ban earlier this year. The reactions of farmers who live on exports are the same everywhere – they are asking governments to withdraw these measures as they fear for their income from sales abroad.

Add to this the attempt to halt the rise in grain prices when the cost of fertilizer or fuel is rising, bringing many to the brink of bankruptcy and reduced production. In addition, the bans are adding to the panic in the markets, which is driving prices even higher. Government ‘solutions’ threaten to cause a real food crisis.

Many politicians have used first the pandemic and now the Ukrainian misfortune to fulfil their dream of power. What they fail to recognize, however, is that action will provoke a reaction. Every ban or tariff spreads like a pandemic and in a moment infects the whole world.

It is not only Slovak farmers who will pay the price, but especially the poorest consumers in the desert or colder zones, where domestic farmers are unable to meet their calorie needs. The populists in rich countries are thus depriving the poorest of their last bowl of rice.

 


The article was originally published in Slovak in Agrobiznis


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