The Arguments of "The Rice Import Liberalization
Agenda in Liberia"
By Geepu Nah Tiepoh
Sept 6, 2000
The need for economic research and analysis as prerequisite
for policy decisions is an elementary and obvious fact, which
we should waste no time to debate. And yet, some people have superfluously
stressed this need for policy research, as if others were not
aware of it. Every Liberian economic policy, not only agricultural
policy, requires research for its successful formulation and implementation.
This is a given, and we do not have time to waste on debating
whether or not Liberia should carry out agricultural policy research.
Project feasibility studies and cost/benefit analyses are routine
procedures that have to be conducted before instituting any economic
policies and programs. No serious Liberian government will embark
upon an economic policy or project without the appropriate research
to determine its implications for resource allocations and economic
and social returns. Unlike our critic, Harry Greaves, I have never
heard any serious Liberian economist advocating rice self-sufficiency
as a policy option without the need for research. And I, for one,
have never in any of my writings, especially those carried in
this magazine, proposed this policy option without the need for
appropriate research. So, why is he still insinuating that I am
calling for rice self-sufficiency without research, when in fact
he has been adequately informed that this is not my position?
Why is it that instead of debating the main issues raised in my original submission, "The Rice Import Liberalization Agenda: Some Critical Policy Issues", our critic continues to avoid them, but quibble over elementary and obvious matters? And although such diversionary attitude and sophistry was brought to his attention in a previous rebuttal, "Blinded by Free Trade and Comparative Advantage Dogma", he has neither acknowledged nor amended it in his latest rejoinder, "The Continuing Debate about Self-Sufficiency in Rice Production for Liberia". Not only did he refuse to address the critical policy questions raised in the original piece, he was also unable to identify where in that article I expressed "emotion-laden cant, hype and theology about the need for Liberia to be self-sufficient in rice", and where I advocated "policy prescriptions purely on the basis of emotion", as he claimed in his earlier reaction. Instead, he continues to perpetuate the distortion, insinuation, and falsehood that I am advocating for rice self-sufficiency without research.
Let it be known that I have nothing against our critic for being "an advocate of free trade", as he professes. What I have problem with is the apparent severity of his ideological zealousness. It is still believed that his reaction to my original article stemmed more from his free trade ideological convictions than from any genuine desire to discuss the important policy issues raised in that article. In his first reaction, "What's the Case for Self-Sufficiency in Rice Production?", he was clearly suggesting that the policy implications of import liberalization discussed in the original article should not have been raised in the first place because Liberia does not need rice self-sufficiency since, according to him, the country can have its rice consumption needs met through importation. Such is the kind of ideological arrogance that I detest. Because of one's belief in free trade he does not want others to have the freedom to criticize it! In essence, he is precluding all other policy options, except those in line with his free trade ideology. Thus, he was the one passing policy judgement without research. If this was not the case, why then has he persistently evaded the central arguments of the original article? Why has he reduced the whole debate to the trivial issue of how Liberia needs agricultural policy research? This is not an issue to debate; it is an obvious and elementary requirement of any economic policy making. My original article did not advocate rice self-sufficiency without the need for research. Again, can our critic show me where?
The main objective of the original article (and let me emphasize) was to expose some of the policy contradictions and problems inherent in the Government of Liberia's longstanding flirtation with rice self-sufficiency and the present government's new policy of rice import liberalization. Upon coming to power, Taylor had decried Liberians for being too "lazy" to produce their own rice and had threatened them that they would pay higher prices for imported rice, if they did not become self-sufficient. Few months later, this same government started a rice import liberalization program aimed at removing all necessary barriers to importation of rice to Liberia. Not only was such a shift self-contradictory, but the new policy of rice import liberalization also contains serious negative implications for macroeconomic stability and the government's own dream of rice self-sufficiency. My article was designed to expose some of these policy implications. Let me put these questions to our critic: Isn't it true that a broader policy of import liberalization, involving rice, petroleum, and possibly other sectors of the economy (as envisaged by the government), could have a destabilizing effect on the government's own objective of fiscal restraint, in terms of revenue loss? In spite of its commitment to balanced budgets, the government has been running deficits since it came to power (about 0.5 percent of GDP for 1999). Broad-based import liberalization could lead to the loss of government revenue and, if this happens, then balancing the budget would be effected further from the expenditure side, possibly exerting greater pressure on the already thin public and social sectors of the economy. Isn't it true that cheaper importation and influx of foreign rice and other commodities on to the Liberian market could have a negative impact on Liberia's balance of payment, and since the country now faces a binding external financing constraint (huge external debt and so forth), government would most likely resort to a fast devaluation of the Liberian dollar in order to diminish such influx? Wouldn't this devaluation of the dollar, in turn, possibly lead to increases in rice prices and inflation in general? Finally, isn't it possible that if import liberalization involves more economic sectors, then the overall level of import restriction in the economy will substantially fall, and as the economy grows and export earnings (foreign exchange) increase, government could be tempted to allow more importation of foreign rice and other commodities? And if such inflow of rice were so strong that it penetrated rural households, wouldn't this have a detrimental effect on rural subsistence farming?
Those were the policy issues that the original article was about. Are these issues not worth discussing, just because international trade is "free" and Liberia is assured of getting its rice supply from foreign countries? Thank Allah, our critic has now agreed with me that Liberia cannot rely solely on world markets to deliver all of its rice consumption needs. In his latest rejoinder, he wrote: "So, what are the alternatives between the extremes of 100 percent importation and 100 percent self-sufficiency in domestic production? The reality is that there are many people in rural Liberia who are engaged in subsistence farming, including rice production. Clearly they need help and some resources should be directed at helping them. But devoting some resources to assisting subsistence farmers to expand rice production is a far cry from deploying very significant resources to attain 100 percent self-sufficiency in rice production." First, this statement is one of the generalized insinuations by our critic that I detest. Have I ever written anywhere that Liberia should strive for 100 percent self-sufficiency in rice production? Second, by this statement, our critic has finally agreed with me that Liberia cannot depend solely on the importation of rice, but the country can also assist its rural farmers to contribute to rice production. But if he agrees to this point, why then has he accused me of "emotion-laden cant" just for discussing the implications of rice import liberalization for rural subsistence farmers? Okay, let us suppose, for the sake of argument, that the country has agreed to import 80 percent of its rice consumption, and the remaining 20 percent from rural subsistence farmers. Shouldn't we still be concerned about the possible negative implications of an economic policy that promotes unrestricted importation of foreign rice? The only time the country may afford to ignore such policy implications is perhaps when it imports all of its rice consumption needs from abroad. So, you see, our critic cannot have it both ways. He cannot be saying that rural farmers should be encouraged to contribute to domestic rice production and then crucify those who are concerned with the negative implications of a policy that may endanger such rural economic contribution. This is self-contradiction at its maximum!
With respect to Harry's continuous renditions about comparative advantage and free trade, I have already provided an in-depth analysis of the international operation of these theories in my last rebuttal, "Blinded by Free Trade and Comparative Advantage Dogma". Most types of comparative advantage are deliberately constructed by nations. They are not handed down to countries on silver platters. In fact, a careful examination of the history of global economic relations indicates that the dominant powers of the world economy had deliberately influenced the development of present-day patterns of international trade. It is about time that we stop viewing comparative advantage in static terms. Even if Liberia does not have comparative advantage now in rice production, does it mean that she can never have such an advantage in the future? Did we have comparative advantage in rubber plantation before Firestone? The acquisition of comparative advantage is a dynamic and developmental process. Hence, to believe that Liberia should abandon rice production once a cost/benefit analysis rules that it has no comparative advantage is not only shortsighted but also self-defeatist.
In previous analysis, it was made sufficiently clear that I am not opposed to international trade. It is the extreme inequalities underlying international trade and capital movement that annoy me. Is it economically fair, or can we even call it free trade, when some countries are pressured into opening their economies wide to the consumer products of countries which restrict similar flows to their economies? Can we say that there is a leveled playing field in international trade when some countries are spending billions of dollars in subsidies to restrict entry to their markets while enforcing their entry into the markets of others? Our critic appears to be less concerned about such inequalities. In his latest submission, he writes: "There are many great and noble economic practices in the West (to use a generalization) which we in Liberia would do well to emulate. Broad-based price supports for special interests, such as is accorded textiles and sugar in the United States, butter and wine in some European countries, and, yes, rice in Japan, are not amongst the practices which I think we would be wise to emulate. The reasons these industries are protected in the West often have more to do with politics than sound macro-economic policy making." This conclusion that agricultural industries in the West are protected more for political than macroeconomic reasons is highly refutable. But let us agree for the benefit of our critic that this is true. Isn't it still unfair to ask Liberia not to emulate provision of price support to its industries when countries with which she trades are providing such support to theirs? When some countries are allowed to provide price support to their industries and others are prevented from doing so, can we say that the patterns of trade established among those countries are truly based on comparative advantage and free trade? I do not believe so.
Finally, in the context of the Liberian economy, as explained in my last rebuttal, there is a strong link between food self-sufficiency and food security. The exact rates of self-sufficiency that Liberia could strive for, say 35 percent, 50 percent, or 75 Percent, or whatever, are to be determined from economic studies and research. Nevertheless, in order for the country to be secure of its rice and other major food supplies, there are very compelling economic reasons why she should strive for such food security through raising its overall self-sufficiency rates in the production of not only rice but also other major food commodities, such as cassava, sweet potatoes, and yams. Paramount among these reasons is the fact that Liberia's current sources of export earnings and foreign capital inflows are not reliable, stable, and everlasting. Our critic's statement that "...if Liberia did not produce one grain of rice..., the country's food security would still not be in jeopardy" can only be true if these sources of foreign exchange were dependable, stable and sufficient. In order for the country to resign itself to importing most of its major food supplies, it must not only have a lasting and sufficient source of other resources to export to world markets, but such resources must also be valued at adequate and stable world prices. Do we have a lasting source of such nonrenewable mineral resources as iron ore? Are we managing our tropical forests the right way so that they provide a continuous source of exports? Can we continuously depend upon rubber export to pay for our food? From the existing knowledge and past experience, these export sources are not only exhaustible, but they have been insufficient and unreliable. Even if the answer to each of the above questions were 'yes', does Liberia have any control over how these traditional exports are valued on world markets? There is a great deal of volatility in these markets, and a small country, like ours, has virtually no influence on how its exports should be priced on world markets. Moreover, Liberia's unsustainable external debt burdens (e.g., a debt service-to-export ratio of 70.8 percent) now render most foreign capital flow to the country uncertain.
It is in light of the above and other economic reasons that Liberia cannot solely rely on importation of its major foods. We do not have industrial products to sell to world markets, and the export base we have is very narrow. From such a narrow base we have been unable to derive all of the financial resources needed to pay for our food imports and other foreign inputs required for economic development. And partly because of this, we are now fatally indebted to foreign countries. Now, should we still continue to rely on this dwindling base which may soon collapse under us, or should we strive to do something different and possibly improve our chance of survival? If we agree that the external sector of our economy is deficient, then doesn't it make sense that we should supplement it with a strong domestic sector capable of seriously contributing to the production of our major foods? Finally, to our friends who are concerned, rightfully so, about comparative advantage and resource allocation, which of these two activities is Liberia, with all its fertile and adequately watered land and no flooding, capable of achieving with the least technical, financial, institutional, and international political barriers: Establishing and owning a car manufacturing plant in Monrovia, or providing a rice-processing mill to rural farmers in Tappita? A food for thought.
Geepu Nah Tiepoh is a development economist and consultant with ACLAD Development, Canada.