Domestic problems have to be addressed domestically rather than imposing import controls or changing foreign economic relations. According to Dr Sarath Rajapatirana, every import control is a tax on exports.
“People don’t seem to understand that in this country. If the problem is in the domestic economy, the answer has to be through changes in policy in the domestic economy and not by trying to influence foreign trade or foreign capital flows. Because that does not address the root of it.” Dr. Rajapatirana told the Advocata Academy-Masterclass programme held under the theme, ‘Industrial Policy’.
Noting that imposing such controls will lead to an increase in domestic prices, he said, “Banning something is okay I suppose for some reasons. But if you do it in a grand scheme you are going to fail on a grand scale. We know where it’s going to end; we have to address the problem domestically. If you don’t increase productivity you can’t sustain. Bite the bullet and make the changes that need to be made.” He noted that at the end of the day international trade is a macroeconomic problem.
“In macroeconomics, if you do something to one side of the economy that will impact the other side of the economy.” He added that if import controls are imposed in order to improve the balance of payments, it has an impact on domestic manufacturing for export.
by Daily News Sri Lanka
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