UWI experts say food subsidy not a good idea

Prime Minister Patrick Manning’s statement this week that food subsidies would lead to corruption is attracting mixed reviews. The opposition is demanding subsidies for staples while experts from the University of the West Indies are backing Manning. And the business community thinks it is "premature" to dismiss subsidies.

Speaking in Parliament on Friday, Siparia MP Kamla Persad-Bissessar called on the government to subsidize staples such as rice and flour, noting that some countries are doing that to alleviate the problems created by a global rise in the cost of food.

People have rioted in some countries over rising food prices and in neighbouring Haiti, where 10 people died in food riots, the clamour for lower prices led to the fall of the government.

Persad-Bissessar slammed the government for pumping millions of dollars into the Caribbean Court of Justice (CCJ) and other mega-projects such as the Brian Lara Stadium at a time when a quarter million people can’t buy food.

She noted that the government spent $3.8 million for the inauguration ceremony for the CCJ in 2005.

But a senior Lecturer at the Department of Agricultural Economics at the University of the West Indies says Manning is right to reject the idea of food subsidy.

Dr Carlisle Pemberton said subsidies are usually recommended in terms of the prices of farmers’ output, but said subsidies of input have never made sense. He said subsidies for staples such as flour and rice can be dangerous.

"We see all over the world they lead to riots and so on. They create artificial markets—the Prime Minister is right—black markets and what have you, and they really create a lot of distortions in the markets, and with market distortions we will have serious problems," Pemberton said.

And the head of the University’s Food Production Department also disagrees with subsidies for food. Dr Isaac Bekele said that while the country is facing some unusual price increases he did not believe that subsidies were the way to go.

However, The Trinidad and Tobago Chamber of Industry and Commerce has given a qualified response to subsidies.

In a news release, it acknowledged that VAT has already been removed on many basic food items and said there might be no need to provide subsidies.

But it was not amused at the government’s attitude of shifting blame to the business community.

"The Chamber is however extremely displeased at the aspersions that are constantly being cast on the entire business community about the cost of food and with respect to profit margins by merchants who are constantly accused of not passing on reductions such as may be occasioned by VAT removal," the release stated.

The chamber said food pricing is complex and is affected by constantly increasing global prices, multiple ongoing price increases on imported commodities, rising fuel and transportation costs among other factors.

Economist Jwala Rambarran pointed out that it is a little too early to make any definite decision about food subsidies.

"For one we haven’t seen what plan Government has to deal with the issue of food prices. Part of that plan must contain some element of subsidies but subsidies that are targeted, that go directly to those who deserve it not to the entire population," he said.

Rambarran said given the severity of the food shortage, it is premature to dismiss the notion of subsidies.