Amid economic contraction Open market policy keeps NMI consumer prices down

Despite fluctuations in consumer price index with latest figures pointing to higher price levels, the Department of Commerce believes the prevailing open market policy continues to hold basic commodities within the reach of an ordinary Northern Marianas minimum wage earner.

Commerce officials said the Northern Marianas market is open enough to allow the entry of new industry players in case existing businesses are considered selling items at higher price levels.

Acting Commerce Secretary David S. Palacios said counter prices of commodities sold in various CNMI stores reflect the items’ true market value although some goods are being passed on to consumers at a higher price level compared with those in other countries.

Overhead costs, import duties, shipping charges, labor and utilities are among the factors being looked at by businesses in considering the fair mark up prices of the items they sell in the local market.

Business analysts said an open market policy could never allow overpricing of goods because it allows new players to come into the trading of the same goods if the existing merchants are perceived to be making a killing in profits.

These new entrants will most likely offer the same items at prices lower than that of the overpricing merchant. To stay in competition, the overpricing merchant will be forced to lower his prices to stay in the market.

According to Mr. Palacios, an open market policy better serves the interest of the community. He explained that although the overall consumer price index had gone up in 1999, it does not necessarily mean that prices are higher in the CNMI than elsewhere.

However, the acting commerce chief admitted that the increase in the consumer price index last year reveals a higher cost of living compared with the CPI September 1977 base period.

A weighted consumer price survey released by the Central Statistics Division of the Department of Commerce for the 4th quarter of 1999 revealed a 3.4 index increase in the five commodity sectors to 269.6 from the previous year’s 266.2.

The 4th quarter of 1999 tally registered a slight increase for the five commodity groups — food, housing, transportation, apparel & upkeep, and health & recreation — at 1.1 index points when compared with the previous quarter’s 268.5 points.

Economic experts said the marginal increase in the consumer price index amid slowdown in business activities only strengthened the importance of an open market in regulating the prices of basic commodities and services.

Mr. Palacios said the competition that an open market policy fosters promotes efficiency by allowing firms to produce the types and quantities of products or services that consumers want.

“The prospect that a competitor will offer a better product or service at the same price or lower, forces each firm to maintain quality and restrict price increases,” he pointed out.

The commerce official stressed that an open market policy helps regulate the price of goods by enhancing the consumers’ control over price and quantity decisions.

In addition, other measures had also been put in place by the CNMI government to protect the interests of both consumers and businesses in the Northern Marianas.

Mr. Palacios said the Consumer Counsel of the Attorney-General’s Office had been established to coordinate preventive and remedial consumer protection programs, and to prosecute those who violate CNMI’s consumer protection laws.

Also, a legislative measure — the Disaster Price Freeze Act of 1996, was already institutionalized to ensure consumers are protected against overpricing merchants in special cases or situations.

The CNMI has a consumer protection law which guarantees that the public interest requires that consumers be protected from abuses in commerce which deprive them of the full value and benefit of their purchases of goods and services.

It described as illegal the increasing of the cost of merchandise that has been previously been placed into the stream of commerce by having been offered to the public for sale at a specific price, indicated by the price tag or marking placed on the goods.