An interesting little puzzle from Bangladesh concerning the salt industry. The particular complaint is that certain nefarious types are subverting the tariff protection enjoyed by that Bangladeshi salt industry. There’re substantial tariffs upon the import of sodium chloride – 100% of value. Given that sodium sulphate is an input into the garments industry, that comes in near tariff free. And, of course, there are some who import the sulphate and convert to the chloride in order to beat said tariffs. One problem being that the conversion is being done at an artisanal scale and with all the due care and attention we expect from artisanal operators – not a lot that is.
So, what do we do about this? Crack down? The salt industry itself thinks so. An alternative solution described elsewhere:
How to kill such rent collection is also well known. David Ricardo pointed it out about land rents themselves, if there’s unlimited land then no rent can be charged. In more limited supplies, the more competition there is, then the lower any rent can possibly be. That is, competition among supply is what kills the possibility of collecting an economic rent.
Current Bangladeshi salt supplies are higher than world market prices. Those high prices are protected by those tariffs, exactly the same thing which leads to that sodium sulphate being imported and converted. This is, in our pure economic terms, simply a rent that is being charged to us by the Bangladeshi salt industry. They get to charge us more than they could in the absence of those protective tariffs.
The answer, when it’s put this way, is obvious. Remove the tariffs, remove the protection, and we’ll have removed the opportunity to charge us all that rent. That is, the answer is not to protect the domestic industry more, it’s to remove the protection entirely.
As a result, the country will have clean, safe, and cheap salt — exactly what we would all be aiming for if we sat down and designed the industry from the start. The only reason we don’t have this right now is that the domestic producers are trying to charge us rent.
Just as much as the British did when they taxed all the salt in Bengal. We didn’t like them when they did that, so why put up with it now?
And why not? It would, after all, work. Clean and cheap salt available to all, the very thing we desire.
Nooo!!! If we remove tariffs we’ll be forced – forced I tells ya – to eat chlorinated salt!
Nooo!!! If we remove tariffs we’ll be forced – forced I tells ya – to eat chlorinated salt!