Iranian home appliances | Mechanism to protect domestic industries during the import ban / حمایت The duration of protection should not be unlimited

‌According to the economic correspondent of Fars News Agency, the protection of home appliances is one of the issues that has many proponents and opponents these days. The ban on imports of Korean products into the home appliance market has changed, but one of the most important issues for proponents of this kind of support is the technological advancement of these companies, who believe that if this support eventually leads to growth If technology is not in this industry, it can not be useful for these industries.

In this regard, Dr. Houshang Shajari, Professor of Economics, University of Isfahan, regarding the requirements for supporting the home appliance industry, believes: In the early twentieth century, Germany banned the import of English fabrics to support its clothing and textile industry. Time was of the essence for the German infant and clothing industry, which was in its infancy. Is not resistant to British industry; So they should be temporarily supported.

These protectionist policies did not continue in Germany for several more years. German politicians believed that in order for domestic industries to grow, they would have to face stiff competition in order to force themselves in terms of technology and cost, and all that. Can no longer compete with similar foreign goods.

The following is Fars News Agency’s interview with Houshang Shajari:

Fars: As a first question, what is your opinion about the ban on the import of foreign home appliances, especially accessories made in South Korea?

شجری: This decision, which is taken to support the domestic home appliance industry, can have many benefits for the industry, but this model of decision can create two major problems for the industry and the people, the first issue to be addressed is illegal growth and The smuggling of these goods is the same, this issue can destroy all the income that this plan has for the country, if the smuggling of these goods is not confronted, both these goods will be found in the market at a higher price and the country will be subject to customs duties and Other incomes are cut short.

The next issue to be addressed in this regard is the issue of inflation, the government should be able to implement the implementation of this decision, the rapid rise in prices of similar domestic goods and goods imported from other countries, if the government has a comprehensive plan to If such decisions are not implemented, after a while, usually due to smuggling and high inflation, they will be forced to lift these prohibitions and lose the intensity of their action in this matter, in other words, because such decisions are properly implemented. A time frame must be set for it, and an alternative solution must be chosen for each event. In general, if such prohibitions are not implemented properly, it will not be positive for a country in the long run.

* Germany uses the 90-year-old theory of domestic industry protection

Fars: With these issues raised, what policies should the government implement to support domestic appliances?

شجری: There is a theory that it is more than 90 years old. In this theory, it is said that in order for domestic production to strengthen and grow, the import of similar foreign goods should be banned. The title of temporary protection and in the second stage is called permanent protection of industry in economic literature, many countries have implemented this theory, one of the countries that has succeeded in implementing this theory has been Germany.

In the early twentieth century, Germany banned British textiles from entering the country to support its clothing and textile industry, a ban that was very effective at the time for the German infant and textile industry. This theory was put forward by German politicians at the time, arguing that because the German textile industry was in its infancy and had just begun, it could not resist British industry; So it should be temporarily supported. These protectionist policies did not continue in Germany for several years.

* Supporting domestic production should lead to competitive industries

Fars: How long did these German protectionist policies for their fledgling industries last, and how did they withdraw that support?

شجری: German politicians believed that in order for domestic industries to grow, they had to face stiff competition in order to compete with similar foreign goods in terms of technology, cost, and all other issues. They said that the growth and development of industries is due to competition. If you support industries for decades, these industries will not move towards technological innovations, nor will they be driven to lower the cost price, and in such circumstances, only the consumer will be harmed. Industries are in place.

* Industries must invest in R&D to thrive

Fars: Other countries have also supported their other industries. Has this support been able to advance their domestic production in competition with the products of other countries?

شجری: The Japanese car industry can be cited as an example, which is a common example, their growth and development was due to the assumption that they could compete with the US car industry. So Japanese manufacturers saw themselves as having to grow their technology to compete, that is, they were in a state of life-and-death that needed to invest in R&D for their technological needs. , Do; If these investments are not made, they will be eliminated from the competition, in other words, they will disappear. These industries were finally able to flourish, as has happened in Europe, after a period of restrictions on imports. Different countries and in different industries, many countries have come to the conclusion that there is growth in competition.

* Support for different industries must be timely

Fars: It means you make conditional support one of the main ‌Most Do you know the preconditions for supporting domestic industries?

شجری: Rest assured that if we unconditionally support domestic industries, not only will they not grow but they will succeed, and it is only the domestic consumer who must buy low-quality, high-priced goods. Permanent support could not find its way into global markets and experience real growth and development, so support must be in a very short period of time in the field of baby industries and emerging industries. . In this situation, support can be expected to lead to the advancement of technology, and immediately in order for these investments to lead to development, these companies must be exposed to competition. Therefore, in the long run, if this support continues, it will usually not be a good result for the industry.

* Chinese companies have taken over the global market with government support

Fars: Do you consider conditional and timely support suitable for industries? How long do you think this support should last?

شجری: Yes, In different industries the support period is different, in heavy industries and accessories this time is between 7 to 10 years, in consumer industries it should be between 3 to 5 years and in industries that produce light goods, the time of this support should be about two years. And it should be a maximum of three years. For example, in a specific 5-year plan, we should give these industries time to do the necessary work to compete with foreign products.

It is also important that home appliance companies know that they do not spend the profits for their own consumption only, and that they have a plan for a significant portion of the profits they make during the support period. In R&D, it means investing in research and development, in order to create competition for themselves. China, which has supported its industries in this way, has now been able to conquer global markets. So to be able to compete with other countries in this type of industry is for industries to invest in R&D. In China, industries that the government has outsourced to the private sector have forced them to invest in R&D.

* The secret of companies’ survival in competition with other countries

Fars: So you believe that in order for the home appliance industry in Iran to grow and develop, they must be supported in a timely manner?

شجری: Yes. The issue with support is that these industries need to know that they only have time for a certain period of time and that support is not extended. So no matter how much money they have, they have to spend on research and development to get the best product down Most If they produce prices, the home appliance industry in Iran will also disappear if it behaves otherwise.

In other words, these industries need to know that they need to invest a significant portion of their profits in order to survive. This capital is not only physical capital, but also research capital, this temporary support during this period should be such that they can establish themselves and be able to gain a share of the global market, when these industries are established and developed, they must be supported. So that they can continue to grow their factories in the context of competition, if real growth and development is done, they can hope to make a profit in today’s world in addition to sustainability.

We have seen examples of this in many countries, such as China, Japan, Malaysia, South Korea, and Taiwan. Like the rice industry in Japan, agriculture is an industry in itself. When Japan wanted to become a member of the WTO (WTO), according to WTO rules, rice tariffs had to be reduced. کاران The Japanese faced the problem that if these protections were suddenly lifted, they would not be able to compete with American rice, and demonstrations began in the streets of Tokyo demanding support, with Japan asking the WTO to extend its support for a certain period of time. From rice farmers until Japanese technology in rice cultivation reaches the level of the Americans, this temporary support, which is provided with many conditions, destroys industrial profiteering and rent-seeking, and creates a special situation in which In its shadow, industry can grow and develop, not just stand on its own two feet.

Fars: According to existing reports, we have more than one thousand home appliance companies in the country. Do you think these companies should be merged or should they continue to operate in the same way?

شجری: Small companies must first be able to compete with their domestic competitors, while large companies can take advantage of economies of scale, and small companies may be forced to merge because they do not have these savings, but in the same situation, medium-sized industries can. He implemented this support scenario well.

Fars: Thanks for your explanation

According to Fars, the users of this media in Fars section have asked me to follow up on the issue of non-monopolization of the home appliance market.

end of Message/