There is a growing general complaint about Romania’s food trade deficit. That Romanians are victims of globalism, that they buy food from outside that they could produce at home, that they don’t process enough basic food products, and that the situation is getting worse.

Based on this “reality”, Romanian manufacturers demand stronger protection from the state both from external competition and from some “incorrect” players in the value chain (traders, especially large and powerful ones). Brutal populist market interventions aimed at limiting trade mark-ups or profit margins (actually also a form of price capping) are already hard at work and advancing rapidly.

All this struggle can have no other effect than the deterioration of market mechanisms and even greater economic isolationism of Romania in the European and world context. This “economic patriotism” (actually an oxymoron) will backfire on us tenfold.

But is it a real problem? Is it worth such attention from the state and such brutal intervention in the market?

Romania’s trade deficit has been constantly and exponentially growing in recent years (Table 1). This is a real problem, it is clear to everyone. Especially because this deficit increases when the economy is very hot due to the stimulation of domestic demand for government deficits and government debt (mostly foreign and with higher interest rates). Of course, private debt also plays a role in this debt-fueled economic growth equation, but it is far less problematic than public debt.

However, we notice that this deficit grew in different ways. If the total deficit has increased in recent years by approximately 3 times, then the food deficit has only doubled (1.5 times). As a result, the contribution of food deficit to the total deficit fell from 12.09% in 2015 to only 7.58% in 2022.

Structural analysis reveals problems associated with this deficit (Table 2). We really have real problems with almost every product category. The only surpluses are recorded in live animals and cereals. In live animals we have stagnation, but in cereals we have significant growth (tripling the surplus in 2022 compared to 2015).

At first glance, it seems that solving this problem is easy

At first glance, the problem is easily solved: we export more than we import grains, and we import more than we export meat, meat semi-finished products, dairy products, poultry eggs, fodder, etc. In addition, vegetable growing and fruit growing also work under conditions of exponentially growing deficit. It is enough to do the opposite. Easy, but actually very difficult.

In fact, to make a leap in the value chain, you need some resources that are lacking in Romania today:

• capital and access to capital for agribusiness (especially venture capital, which is vital for small businesses);
• high-quality entrepreneurship (especially in rural areas), capable of creating enterprises with a higher degree of processing of raw materials,
• the development of storage and warehouse capacities that correspond to the specifics of agricultural production in Romania,
• improving the qualifications of future specialists in the field with an emphasis on innovation and new technologies in the field (the level of training in specialized schools should be rapidly increased, including by connecting with specialized faculties of advanced countries in the field),
• development of effective market mechanisms for risk coverage (mutual insurance funds in agriculture),
• development of special infrastructure (system of canals for irrigation, specific improvements of the hydrographic network of Romania),
• facilitating access to technology and innovation for agriculture through special funding programs.

The trade deficit in agriculture is an expression of the lack of competitiveness of those working in this sector today. The best indicator of a sector’s value is foreign competition, not flight or protection from it. The fight for consumers and the market at this level continues. The deficit of the trade balance that we have today in agriculture, and not only, is a vivid expression of the deficit of all of the above.

However, one cannot fail to mention another economically correct aspect: any nation should specialize in production according to its comparative and competitive advantages. Today, competitive advantages are more important. You have rich and fertile lands for nothing if you do not have other factors that contribute to their efficient exploitation. You cannot specialize in everything.

There aren’t many sectors where we have a positive trade balance at the moment, but the ones where we clearly have real advantages, we need to take care of them and keep them growing. Obviously, we have to work in parallel to have more alongside the sectors mentioned, but they will only come when we address the deficits mentioned (of which capital and access to capital are fundamental, and not just for agriculture). However, subsidies, government aid, helicopter money, fiscal or quasi-fiscal protectionism, internal trade wars to obtain or protect certain strong positions and privileges do not help, but rather confuse.