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Sri Lankan tea, a tale of Mercantilism and oppression

28th January 2016
  • a tale of Mercantilism
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Sri Lanka has a ban and taxes on the import of tea, preventing domestic value addition for export, supposedly to protect a Ceylon Tea brand, while also taxing exports of raw produce of farmers including cinnamon, supposedly to boost domestic value addition.

Both these positions cannot be true, since they are contradictory.

Both these acts of coercion and repression are supposed to benefit farmers, or the \\\'country\\\', either in the long-term or short term.

Many of Sri Lanka\\\'s tea exporters who export branded or bulk tea want to import and export blended tea. But companies like Dilmah tea in particular have been opposing the people\\\'s freedom to import tea for a long time. So far they have been very successful in lobbying politicians and bureaucrats.

The arguments are all tied up in a lot of nationalism, patriotism and a case against blended versus \\\'pure Aryan\\\', sorry \\\'Ceylon\\\', tea.

But Sri Lanka\\\'s tea industry was started by British planters when this country was under colonial rule. Therefore it is not a product to be very nationalist about and oppress an entire population. Cinnamon plantations were started during Dutch rule. Before that cinnamon was gathered in the wild. Cinnamon was a key source of export revenues, until ironically, export taxes killed the crop.

Why Blend?

There is no crime in blending tea grown in two areas. For people who are not familiar with the industry, all tea is blended.

In a factory the black tea that is produced today will be different from yesterday because the temperature or humidity that influenced the fermentation process and bacterial growth inside the factory is variable.

So what used to be called one 20-chest lot, similar to a day\\\'s production, was different from another such lot.

Similarly, the tea in different elevations, different districts and produced at different times of the year do not taste the same. The challenge for an exporter is to deliver substantial quantities of tea to a foreign buyer with a uniform taste.

This is where tea tasting and blending comes in. Sri Lanka has expertise in this area.So-called \\\'quality\\\' of tea and its demand is based on individual preferences, or advertising and there is no objective measurement of quality.

After the British owners were expropriated in a state intervention in Sri Lanka, they were given land by African nations. Countries like Britain became large importers of African tea. In Africa less labour intensive CTC tea is made.

It is to the credit of Sri Lankan exporters that they developed these new markets in the Middle East and Central Asia.

Sri Lanka\\\'s key trading families who have historic links to the Middle East either through Arabian or Persian culture and religion have played a large part in this transformation. But they keep a very low profile.

Not many people even know that Akbar Brothers is Sri Lanka\\\'s largest tea exporter.

Capitalists or owners of free enterprises work every day and look for ways to please their customers at the best quality and at different prices which are affordable to them and gain market share and profits. They typically do not have political skills, since their skills in pleasing customers are quite enough to make large profits. As a result they are frequently the target of taxes and other oppressions by the state, interventionists and nationalists.

Mercantilists and nationalists also try to make the highest profits but not by giving a free choice to the customer.

Mercantilists collude with those who have coercive power like politicians and bureaucrats and try to control either the customers or the producers by applying the power of the state backed by its capacity to wield violence either through customs duties, fines or jails. In other words, profits are made by robbing a freedom by tying the hands of a consumer or supplier, not through free competition with another enterprise.

Today, low grown teas fetch higher prices than high growns. Even Nuwara Eliya teas, once highly prized, are barely managing to trail behind.

Source : 
www.economynext.com