Minister of Agriculture Leslie Miller says local egg producers should be protected from competition by foreign egg producers.
According to press reports (Tribune Business, Thursday, March 9, 2006) he has "moved to prohibit the importation of foreign eggs, and yesterday warned that tariffs will be imposed on any Bahamian company failing to comply" with the import ban.
This debate over tariffs has raged for centuries, but when John Stuart Mill wrote his Principles of Political Economy in the mid 1800s and said, "It cannot be expected that individuals should, at their own risk, or rather to their certain loss, introduce a new manufacture…" it provided support for the protectionist argument.
It is reported that Mill retracted these sentiments in later editions of his book, but the damage had already been done. When according to Douglas Irwin, "Mill saw how U.S., Canadian and Australian protectionists had used his work to justify higher tariffs on imports", he changed his tune. (Against the Tide: An Intellectual History of Free Trade.)
Tariffs are a tax alternative to other forms of taxation such as income tax. In most instances in The Bahamas tariffs are not meant to control or limit trade.
Checking egg prices and selection at a local grocery store revealed the following:
Rainbow Farms Large $1.50 per dozen
Rainbow Farms Extra Large $1.55 per dozen
Egg-Land’s Best $3.09 per dozen
Organic Extra Large $5.99 per dozen
It is obvious that price is not why people buy the foreign eggs, when locally produced eggs are roughly half the price.
Based on this information increased tariffs are not likely to make people shift from buying the eggs they prefer…they would still not buy the eggs the Ministry of Agriculture wants them to. Consumers make decisions to suit their personal needs and desires, not those of government, which explains why government planning usually fails to meet the stated intentions.
Then the power of government will be applied even further…as already threatened…and imported eggs will be banned. And as with previous bans on agricultural products, the imported eggs will find their way into the country through ‘illegitimate’ businesses where they will be stored in less than ideal circumstances, creating a possible health problem.
The effort of local egg producers should be applauded. They have taken personal risk to develop their businesses. Not all people are born with this entrepreneurial spirit, but the answer to their sales decline is not to use the power of the government to force Bahamians to buy their product.
It might take a little more effort, but the local producers need to educate consumers about their product and the benefits of buying from them. They should also consider surveying potential customers in the local grocery stores to see why they do not buy the homegrown product. They might find that something as simple as packaging has an impact on their sales.
It is interesting that bureaucrats believe they know best what eggs everyone should buy, but to allow any government minister the power to apply tariffs or import bans at the stroke of a pen is dangerous, no matter how well intentioned.
Dr. Milton Friedman said it best: Concentrated power is not rendered harmless by the good intentions of those who create it.
If the Ministry of Agriculture is allowed to enforce this policy, more businessmen can then seek protection from competitive imports. But just as it would be unconstructive to prevent Bahamians from buying and importing what they wish of other products – like food, clothes, furniture, appliances, cars etc – the egg industry should not be exempted from competition.
In his recent book titled Free Trade Today, Jagdish Bhagwati noted that trying to correct market failure with government intervention only makes matters worse. Hopefully cooler heads will prevail and the coercive force of government will not be implemented and the egg industry will resolve their issues on their own.
The Nassau Institute
March 12, 2006.
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References:
1. Cato Journal, Vol. 22, No. 1 (Spring/Summer 2002)
2. David Boaz – The Greatest Story Ever Mistold – Cato
3. Larry Schweikart – A Tale of Two Tariffs – FEE
