The current proposal for Zero tariff rate on imports of 67 products of the basic basket already included in free trade agreements is a measure that would not have a significant or lasting impact on reducing the cost of food, according to a study by the Dominican Political Observatory (OPD), an entity attached to the Global Foundation for Democracy and Development ( FUNGLODE).
The study, titled “Zero-rate tariff proposal: a measure that should be reconsidered”indicates that the proposal for a zero tariff on the importation of products from the basic basket would not eliminate inflation in the prices of goods, for which the State would be assuming a fiscal sacrifice of RD$256 million without achieving great results.
This is why the research, carried out by Greidys Joel Roa Chalas, coordinator of the OPD’s Public Policy Unit, and Lisleyda Martínez, associate researcher, recommends that this proposed measure be rethought so that the zero tariff rate is approved rather for the inputs of national agricultural production, which would reduce the cost of agricultural production.
The report adds that a zero tariff rate for national agricultural products would also allow food prices to decrease, achieving two results with only one action: raising the purchasing power of households and strengthening national production to guarantee food security of the country.
“Remove tariffs on the 67 proposed products could contribute to a significant decrease in national agricultural production, Due to the fact that businessmen who buy local production will be encouraged to import the products and not buy them from Dominican producers, this will cause many producers to stop producing, which will have a negative impact on the country’s food security and will bring disastrous consequences after the six months of zero rate, where there will not only be inflation, but also scarcity”, the researchers explained.
FTA
Research indicates that of 67 products that are intended to be imported at zero rate, 54 are mainly imported through the DR-CAFTA free trade agreement.
“59% of these products come mainly from the United States, while 14 and 15% are imported from European countries and Costa Rica, respectively. Likewise, 6% comes from Nicaragua; 4% from the rest of the Latin American countries and 2% from Asia”, the document states.
Weaknesses of the agricultural sector
The researchers maintain that from a certain point of view “it is understandable” the position of the Government to protect the local consumer; however, eliminating tariffs on these products would ensure a reduction in the productive dynamics for agricultural producers, production companies and agro-industries, among other suppliers of inputs and services.
They add that the importation of products at a lower cost than the cost of local production will cause a decrease in the sales of local producers and will discourage them, so that in the medium term the country would face a decrease in its productive apparatus and monetary losses.
Bill
Because year-on-year inflation between February 2021 and February 2022 stood at 8.98%, a provisional bill has been submitted in the Dominican Republic that seeks to eliminate import taxes on a list of 67 goods from the basic family basket, which would have a validity of six months counted from its promulgation by the Executive Power.
After being approved in second reading by the Chamber of Deputies, various sectors of the country have expressed concern about the possible decrease in sales of local production, which would reduce incentives for national producers and would result in a worsening of the crisis.