Harvard economist confused by ‘para tariffs’ in Sri Lanka


by Sanath Nanayakkare

I have never heard of 'para tariffs' on imported goods in any other country other than in Sri Lanka, Professor Robert Lawrence, faculty chair of the Practice of Trade Policy Program at Harvard University’s Kennedy School said in Colombo recently.

"I am not suggesting that Sri Lanka shouldn't attempt to protect its infant-industries through tariff barriers when there is an economic rationale for trade protectionism. The core of this trade protectionism argument is that nascent industries often do not have the economies of scale that their older competitors from other countries may have. And so they need to be protected until they can attain similar economies of scale", he explained.

"However, even when infant industry protection is well–intentioned, it is difficult for governments to know which industries they should protect and to what extent they should do so, because goods and services of such infant industries may never grow up to enter the global market. In many cases, a tax on imports is a tax on exports. Hence tariffs such as these (para tariffs) could hurt the same industries the protectionist measures intend to help", he pointed out.

"After China joined the WTO and opened its gates to imports, there was a correlation of acceleration in both imports and exports. India's international trade figures also show this correlation of acceleration in its ratio of exports to imports. Even though they experience a trade deficit as a result, that's a manageable one for them in the context of overall international trade performance", he noted.

Professor Lawrence was speaking on the topic," The Path to Prosperity: Protectionism or Free Trade?", hosted by the Adocata Institute and held under the aegis of the Lakshman Kadirgamar Institute of International Relations and Strategic Studies, Colombo.

Finance Minister Mangala Samaraweera had said during the presentation of Budget 2018 that 'para tariffs' on 1,200 imported items would be abolished to end protectionist policies brought in to strategically help boost exports.

A para-tariff is an extra fee or tax imposed on imported goods in addition to the tariffs stated in the country's tariff schedule.

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