Protectionism Hurts the Poor, Madagascar Edition
February 26th 2010 16:07
In a not-so-common piece of good trade legislation, the U.S. government eliminated trade barriers on products from several African countries with the African Growth and Opportunity Act (AGOA). Clinton signed this legislation into law in 2000, with the goal of assisting poor African nations. According to William Easterly, "Madagascar’s exports tripled in the first three years of the program, and the textile sector, which made up 60 percent of Malagasy exports, accounted directly for 50,000 jobs and indirectly at least 100,000 more." By all accounts, this program was a success for people in Madagascar.
Unfortunately, the Madagascar government committed the crime of having a President who was not "democratic enough." In December, the U.S. declared Madagascar as no longer eligible to receive the benefits of the AGOA. This meant the U.S. imposed fairly substantial tariffs (up to 34%) on products coming into the U.S. from Madagascar. I wonder what this might have done to the economy of Madagascar? Let's take a look:
If the goal of AGOA was to help Africans in poverty, then this policy is seriously failing Madagascar and a handful of other African countries. If AGOA was meant to bring more democracy to Africa, then this policy is failing on those grounds too, as nothing has changed in Madagascar's political regime. Democracies are nice things, but why punish innocent Africans so that a couple of bad guys will straighten up? Should the U.S. adopt the policy that if they cannot catch a Most Wanted criminal, they should torture the entire city in which he lived?
Final line, from William Easterly:
Follow me on Twitter: @AGoldenDoor
Unfortunately, the Madagascar government committed the crime of having a President who was not "democratic enough." In December, the U.S. declared Madagascar as no longer eligible to receive the benefits of the AGOA. This meant the U.S. imposed fairly substantial tariffs (up to 34%) on products coming into the U.S. from Madagascar. I wonder what this might have done to the economy of Madagascar? Let's take a look:
* Factories closing and factory jobs lost: “As lead times [expire] on orders placed before the agreement [came to an end], factories are laying off workers and we are seeing an explosion in the numbers of unemployed,” said the director pf the Association of Free Trade Business in Antanarivo.
* Increased competition among street traders now that former factory workers are pushed out to sell goods in overly crowded street markets (and lower wages now for both): “‘I used to be able to earn 20,000 ariary ($9.30) a day,’ said Soloniaina Rasoarimanana, who has been selling clothes from a pavement stall for 10 years. ‘Now, with the political crisis and more competition, I earn around 5,000 ariary ($2.30) a day.’”
* Knock-on effects in neighboring countries (Mauritius, Swaziland, Lesotho, South Africa) which made inputs like zippers to Madagascar’s factories.
* Increased competition among street traders now that former factory workers are pushed out to sell goods in overly crowded street markets (and lower wages now for both): “‘I used to be able to earn 20,000 ariary ($9.30) a day,’ said Soloniaina Rasoarimanana, who has been selling clothes from a pavement stall for 10 years. ‘Now, with the political crisis and more competition, I earn around 5,000 ariary ($2.30) a day.’”
If the goal of AGOA was to help Africans in poverty, then this policy is seriously failing Madagascar and a handful of other African countries. If AGOA was meant to bring more democracy to Africa, then this policy is failing on those grounds too, as nothing has changed in Madagascar's political regime. Democracies are nice things, but why punish innocent Africans so that a couple of bad guys will straighten up? Should the U.S. adopt the policy that if they cannot catch a Most Wanted criminal, they should torture the entire city in which he lived?
Final line, from William Easterly:
Ineffective sanctions, effective job destruction. An unaccountable branch of the US government hurts poor people far away who have no voice in US politics.
Follow me on Twitter: @AGoldenDoor
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