Quotas in Fashion

The Malta Independent on Sunday   

   

   

When benchmarked against the performance of Cyprus and Singapore, the long term performance of our economy is dismal.  

 

Cyprus and Singapore ought to be valid benchmarks as they are both micro-states having gained their nationhood approximately at  the same time as we did.   The economies of all three nations  started roughly from the same backward undeveloped position.

“Malta unfortunately remained far more inward looking than both Cyprus and Singapore”

 

By the very nature of things a micro economy can only prosper if it opens up and becomes competitive in a global market.   The domestic market is too small to permit economies of scale efficiency.    Whilst keeping strategic control over crucial sectors which cannot withstand the openness of the economy,   a micro economy benefits from wide liberalisation which allows the market to maximise the use of resources.

 

Malta unfortunately remained far more inward looking than both Cyprus and Singapore.   We continue to regulate far too many economic activities.    Most activities are subject to specific licensing when qualitative minimum standards are more appropriate than quantitative restrictions.

 

Entrepreneurs complain bitterly about such over-regulation.   The port operations are often singled out as being monopoly driven giving rise to high tariffs rendering international trade from Malta disadvantaged.   Often we hear declaration of intention to liberalise port services .   But there are other economic activities that are still regulated in quantitative terms.   Public and private transports, including taxi service, chemist shops, postal services  amongst others are still subject to licensing quotas.

 

Being a small economy it has been assumed that the government knows better than the market what the optimum number of participants should be.   The  right of entry into certain areas of economic activities is severely restricted.

“The freedom of establishment gives EU nationals the right to implant themselves in Malta as self-employed without suffering discrimination.  The rules which apply for Maltese nationals will have to apply to them.”

 

The argument has been made that it is these rigidities that have rendered our economy static  and have caused us to lose international competitiveness    falling well behind when compared to Cyprus and Singapore who liberalised their economy more substantively.

 

With the government over-committed to seeking  and achieving full EU membership by early 2004, one would think that EU membership is meant  to bring about a paradigm change in our mentality; the growing out of the culture of protectionism and the liberalisation of the restricted economic sectors   These will in normal circumstances be open not only to all Maltese nationals but eventually to all EU nationals.    This will spur local operators to maximise their efficiency to keep up with the competition rather than continue seeking shelter under protectionist measures.

 

This government has been harshly critical of quotas operated by former Labour administration.   The numerus clausus for tertiary education is probably well remembered.   Import control, whether outright exclusion, tariff barriers or  quota restrictions have been harshly criticised and gradually dismantled leading to basically a free trade area even sacrificing jobs in industries formerly protected against import competition.

 

But the unbelievable seems about to happen.    Instead of using the quest for EU membership to bring about a paradigm shift to liberalise the economy the opposite is just about to occur  in the sector involving small enterprises and self-employed.

 

The freedom of establishment gives EU nationals the right to implant themselves in Malta as self-employed without suffering discrimination.  The rules which apply for Maltese nationals will have to apply to them.

 

Labour opposition has been critical of the fact that the government did not negotiate any transitory provisions regarding the right to limit the entry of self-employed as it has done in case of normal employees.       It has maintained that the self-employed sector is in bad shape to withstand competition from EU nationals who would be attracted to implant themselves amongst us.

“In short, to keep the Sicilian pasticciere away, we may have to deny young talented Maltese the right to set up their own pasticceria.   I don’t understand anything anymore.”

 

Although Labour is often depicted as advocating extreme protectionism and inward looking policies this is not so.    Labour inward looking policies apply only to agricultural and fisheries sector knowing so well that these sectors would be wiped away if exposed to EU rules and that such wiping away would be strategically dangerous even if commercially expedient.

 

In so far as general non-agricultural trade Labour’s policy promote free trade arrangements not only with the EU but also with other trading partners.   But Labour favours a phased approach to give time and assistance to local entrepreneurs to restructure and be able to face competition even in the freedom of labour and services that would eventually be introduced as part of the enhanced free trade arrangements.   Labour knows only too well that such freedoms have to be phased in within the context of a growing and vibrant economy as their sudden application on a stagnant economy could cause unpleasant and damaging shocks.

 

But now it seems that the government, in trying to protect the local economy from the influx of EU self-employed, is bent to bring quotas back in fashion and subject the right of entry into sectors of self-employed dominated economic sectors. To stay within EU rules the restriction would have to apply to all EU nationals including the Maltese themselves.

 

Rather than bring about a needed paradigm shift to liberalise restricted economic sectors we are risking EU membership to subject more areas of the economy to stiffer controls restricting the right of entry to Maltese nationals.   In short, to keep the Sicilian pasticciere away, we may have to deny young talented Maltese the right to set up their own pasticceria.   I don’t understand anything anymore.