Protectionism harms consumers

Some of the newly bought Elysee taxis in Wuhan, capital of Central China' Hubei province, reportedly have mechanical problems, despite their high prices, which were set by the local government. The braking system in some of the taxis is faulty, says an article in Beijing News Daily. Excerpts:

The incident sheds some light on the dark areas of taxi management in some regions. Various problems of the monopolistic market were already exposed before.

Many local governments implement bidding systems to buy taxis. But some of these systems are easily manipulated. Only local automakers with good connections with local governments can be the winners.

Monopolies of local taxi markets act like local trade protectionism barriers.

The final choice is not made according to the cost of the cars but according to the automakers' connections with local decision makers and their contributions to the local economy.

As the Wuhan case shows, monopolies harm the consumers' interests. And local government's images and reputations may also be damaged.

Such unfair practices are not new in the automobile market. To boost consumption and economic growth, some local governments provide subsidies for consumers buying certain models from automakers with special relations with local decision makers.

Local governments' protectionism splits the national market and makes it harder for companies in the same industry to grow healthily across the country.

For instance, the difficulty of reorganizing the excessive production capacity of the iron and steel industry in China is due to the narrow protectionism of local governments.

To promote competition, governments at various levels must change their roles and become public service providers, without manipulating the market. This is the best way to promote the vitality of local economies and good governance.