The case of the tomato trade perfectly illustrates the problems caused by government interventions in the market. Tomatoes are a highly seasonal product. During the summer months, we produce them in abundant quantities in outdoor farms across the country, and they are known for their excellent taste. In winter, outdoor production is replaced by greenhouse cultivation, with production levels matching the lower winter demand. Over the years, even winter tomatoes have become tastier.
During the transitional periods — in spring, before the summer tomatoes are harvested, and in autumn, before greenhouse tomatoes reach the market — imports cover the gaps. Every year, during these “dead” periods, Greece imports a total of 20,000–30,000 tons of tomatoes, mainly from Turkey, but also from the Netherlands, Belgium, and Albania. These imports help maintain affordable tomato prices year-round. Free international trade has made it possible for Greek consumers to have access to tomatoes throughout the year.
In the U.S., Mexico plays the same role that Turkey does for Greece, bridging gaps in American tomato production. Starting this July, however, tomatoes imported from Mexico to the U.S. will face a 21% tariff. Through Mexican imports, American consumers had enjoyed continuously slowing tomato inflation, year-round supply, and more stable prices. That will now change following intervention by former President Trump.
Here in Greece, government intervention has flourished well before Trump’s return to the political scene. In the fall of 2021, the government decided to freeze the gross profit margins of several retail sectors at their 2021 levels. Essentially, this suspended whatever competition existed in the economy. At the time, the move was justified as an emergency response to the extraordinary inflationary pressures caused by the global post-pandemic economy. Everyone assumed, however, that the measure would be temporary — that it would be lifted once inflation slowed to manageable levels, which it eventually did.
The opposite happened.
Today, inflation hovers around 3%, and in some of the affected products it is even negative. Yet the price cap remains in force, for 44 consecutive months now, severely straining the businesses involved. These businesses — virtually all supermarkets and fuel retailers — are not allowed to adjust their prices freely, which has led to reduced investments and decreased availability of basic goods in the market.
In the case of fuels, it has been observed that the continued enforcement of the cap drives many gas station owners out of business, leaving the field to those willing to operate outside the law.
There are rumors that the government might announce an update on the cap today, which was originally set to expire at the end of April. It may be extended, or it may be narrowed to cover fewer products.
But that’s not really the issue.
The real issue is that, 44 months later, we still haven’t found a way to have an honest discussion about whether we value competition and free trade in this country — or whether we simply enjoy inventing imaginary enemies, much like President Trump is currently doing.
Source: OT
