The Dominican Political Observatory (OPD) carried out a study that showed that the current rate proposal tariff zero import 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 the entity attached to the Global Foundation for Democracy and Development (FUNGLODE), the zero tariff proposal would also be an ephemeral measure with little positive impact, but with a high negative impact on national production.
The OPD-FUNGLODE study entitled “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 $256 million pesos without achieving great results.
In this sense, the investigation, authorship of Greidys Joel Roa Chalascoordinator of the Public Policy Unit of the OPD, 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.
“Eliminating tariffs on the 67 proposed products could contribute to a significant decrease in national agricultural production, because businessmen who buy local production will be encouraged to import the products and not buy them from Dominican producers, this will cause many Producers 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,” explained the OPD-FUNGLODE researchers.
The OPD-FUNGLODE investigation indicates that of 67 products that are intended to be imported at zero rate, 54 are mainly imported through the free trade agreement DR-CAFTA.
“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.
Due to the fact that the interannual inflation between February 2021 and February 2022 stood at 8.98%, in the Dominican Republic a provisional bill has been submitted that seeks to eliminate the taxes of importation to a list of 67 goods of the basic family basket, which would be valid for six months 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.
Consult and download this and other studies of the Dominican Political Observatory for free on the portal www.opd.org.do.