3 reasons why you shouldn’t buy local

16/02/2016

Buy local

Buy local“Buy Local!” It’s a common plea of the manufacturing sector.

The idea of supporting local businesses is inherently appealing.  It resonates with our sense of nationalism and supports a notion of “doing good” for our economy and our country – preserving jobs, supporting national development and keeping money in our country. But is it that simple?

No, it’s not.

In fact, I’m going to argue that “buy local” campaigns may even hurt the very same businesses these campaigns are designed to support.

Full Disclosure: While this piece has been written from the perspective of a Canadian-Barbadian about Barbados and considers the unique peculiarities of a small island economy, many of the supporting arguments used are relevant to other markets as well.

Here are three reasons not to buy local.

1. It impedes competitiveness

Whereas once there were many products protected by high import duty rates, the force of globalization has caused this to change.

High duty rates now exist only on a handful of protected products, such as jewelry, furniture, t-shirts, printed products and clothing – vibrant industries that the government hoped to preserve and develop.

The premise was that high duty rates would push Barbadians to buy locally manufactured products and give companies in these areas a chance to grow unperturbed by competition.

This didn’t happen.

Instead, these sectors, in the absence of the helpful push of competition, became less and less internationally competitive, while the tastes and needs of consumers kept up with global trends.

Eventually, the disparity between what was being offered locally and what was wanted by consumers, in tandem with increased online access to products from around the world, pushed Barbadians to buy these products from overseas, despite the high rates of duties.

For example, the number of wood furniture manufacturing enterprises has fallen in the past 10 years from 46 to approximately 20. Exports of wood furniture and wood products in 2013 and 2014 totalled USD $135,198 and USD $302,141 respectively, down from over USD $2 million in 2009.

Furthermore, protection offered to businesses in one area invariably impedes the development of businesses in other areas. For example, in the U.S., original t-shirt design is a US $262 million industry and the annual growth rate of this industry is over 20%.

There are also several small, young businesses seeking to enter this area in Barbados. However, these businesses are faced with the challenge of low quality, locally made t-shirts and duties of 115%, in addition to the requirement of an import license on imported t-shirts.

A top Barbadian designer voiced his frustrations in a newspaper article in August 2014.

“These guys [local garment manufacturers], I swear they are committed to mediocrity. I am not seeing the evidence of them trying to upgrade their product.”

Are they just trying to stop other people from getting their thing in, so that they could maintain a monopoly? So that they can maintain a hold in the local market? I don’t think that is acceptable.

In a December 2013 newspaper article, the Executive Director of the Barbados Manufacturing Association expressed concern with the influx and preferential treatment of imports by supermarkets.

In the same article, however, the ED also observed that there had been a “noticeable increase in the production of unique products ranging from footwear, food and toys.” There is certainly a correlation between globalization and the development of new ideas.

2. It’s hypocritical

We speak out of both corners of our mouth when we discourage imports and encourage exports.

Given the small size of our national market, we depend on exporting for business growth.

We would not be OK with strong buy local campaigns in key export markets, or with these markets imposing high import duties on the products which we manufacture. In fact, there are international trade rules discouraging these practices.

Let us also consider just who is doing the buying. In 2014, Barbados had nearly 520,000 stayover visitors (note: the population of Barbados is 285,000). Is it not disingenuous to push buying local, when many of those actually doing the buying are not in fact local?

Lastly, on the point of hypocrisy, we in the region are members of the CARICOM Single Market and Economy, a union that seeks to establish a single economic space along with 11 other Caribbean countries. Buy local campaigns fly in the face of our region’s efforts to encourage economic integration.

In 2008, the WTO raised an eyebrow at Barbados’ buy local campaign (100% Bajan), claiming that it was anti-competitive and in contravention of the General Agreement on Tariffs and Trade (GATT), which speaks to national treatment.

In response, the buy local campaign was revamped – funded by manufacturers, rather than the government.

3. What Does ‘Local’ Even Mean?

The fact is, not much produced in Barbados is really “100% Bajan”. Even a product as inherently Bajan as Bajan pepper sauce (a mustard-based hot sauce) is made up of imported products.

Would you have guessed that the pepper mash used in this product is imported (as is the mustard, vinegar and, of course, the packaging)?

This holds true for almost every locally made good produced or service offered; they would not exist without imported inputs.

Let’s expand on this point – what qualifies as ‘local’?

If a foreigner moves to Barbados and opens a restaurant, is it local? What about buying a meal from a big franchise (i.e. Chefette with 15 locations on this 430 square kilometer rock) versus your neighbourhood rum shop; do both qualify as ‘local’?

How about buying a meal at a Burger King, a locally owned franchise (owned by the well-known Barbadian, Ralph “Bizzy” Williams)? Or supporting a restaurant owned by a Barbadian who lives abroad?

The definitions for ‘local’ are inconsistent and unclear.

Lastly, let us be cognizant that importing products actually supports local services such as shipping, transportation and distribution.

But, what about jobs?

In closing, let’s consider the most used argument in support of the buy local campaign – that buying locally made products preserves jobs.

In 1996 (the first year in which this data is readily available), the GDP composition by sector in Barbados looked like this:

  • Agriculture – 7%;
  • Industry – 17%;
  • Services – 76%.

The unemployment rate stood at 16.2% that year.

In 2015, almost 20 years later, the GDP composition by sector looks like this:

  • Agriculture – 3.1%;
  • Industry – 11.8%;
  • Services – 85.1%.

Despite the decline in the manufacturing sector, the unemployment rate is in fact lower (11.5%) than it was when manufacturing played a larger role.

In addition, the GDP per capita is higher now, even when inflation over this period is accounted for. Any jobs lost in the manufacturing and agricultural sector transformed into new, typically higher paying jobs in the services sector.

Conversely, over the last 30 years, with the rise of manufacturing in China, the number of Chinese families living in extreme poverty has dropped from 84% to under 10% – that’s 680 million Chinese people no longer facing possible imminent death (i.e. the entire population of Barbados almost 2400 times over).

There is nothing I enjoy more than to see a local business thrive in the face of competition. For many commodities, buying local is almost always a good choice, particularly when it comes to agricultural products like bananas, coconuts, mangoes, etc.

But businesses in this global marketplace don’t need protection in order to grow – not in the long term; they need to innovate, diversify and improve their international competitiveness.

Instead of focusing on whether a product is produced locally or not, consider the factors that are important to you, such as: Is it best priced? Is it well-made and well-designed? Is it conveniently available? Is it made/produced in an environmentally sustainable manner?

And then make the most sensible purchasing decision – whether that be local or imported.

This is a perspective from a 440 sq. km2 island country of 280,000. I am interested in the perspectives from larger economies. Share your comments below!

Disclaimer: The opinions expressed in this article are those of the contributing author, and do not necessarily reflect those of the Forum for International Trade Training.

About the author

Michelle Hustler, CITP®|FIBP®

Author: Michelle Hustler, CITP®|FIBP®

Michelle Hustler is a Trade and Business Development Specialist, focusing on trade in services. Canadian born, Michelle now lives in the Caribbean. In fact, she wrote this article from a lounge chair on a beach in Barbados!

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