Political story of the day

June 20, 2014

While sideshows and mud slinging are getting attention, the government is getting on with business as normal which includes working hard to progress freer trade.

Time to get down to business on tangled trade deal - Audrey Young:

At 3am tomorrow, New Zealand time, John Key will have the second most important meeting of his visit to the United States.

It’s a lunch meeting with US Trade Representative Mike Froman at the New Zealand Embassy, where ambassador Mike Moore, a former World Trade Organisation director general, will also be present.

Froman is effectively leading the Trans Pacific Partnership talks, which are in a parlous state.

Rescuing the deal from a pitiful result is Key’s top priority for the trip. . .

New Zealand already has very open borders which means we have little to lose and a lot to gain from any free trade deals and the TPP would be particularly helpful if it includes agricultural produce.

But negotiations are painstakingly slow.

 


End of Free Trade consensus

June 13, 2014

Wayne Mapp fears for the future of free trade:


. . . For decades now National and Labour have had a cosy little arrangement when it comes to free trade. Both parties could count on each other to provide a solid bloc of votes in parliament to pass any bill implementing free trade agreements.

So any hyperventialting by the Greens, New Zealand First, the Maori Party or Mana counted for nothing. Jane Kelsey might get to write as many op-eds as she likes, but she has virtually no influence on the actual outcome of the free trade agenda. The solid National–Labour coalition ensures that the relevant legislation will pass.

But will this arrangement prevail after this election?

Clearly, if National is elected they will want to pass legislation implementing various aspects of TPP, in the event that the TPP treaty is finalised and signed between 2014 and 2017. Of course any such treaty will not be exactly as New Zealand wants since it will be a compromise between fourteen nations. . .

New Zealand already has very open borders. Other countries with more restrictions will be held back by powerful lobby groups wanting them to continue.

To get consensus will require compromises.

But the shape of the TPP treaty is starting to emerge. There will be a long drawn-out phase down of tariffs and quotas in agricultural products. The timing of the phase down will be dictated by Japan and the United States, and it will extend over many years, perhaps as many as twenty. Copyright terms will be extended to 70 years or more. State trading entities like Pharmac could lose at least some of their exclusive rights. There will be an international tribunal for major investment disputes.

For National this will be OK. Over time the US, Japanese and Canadian agricultural markets will open up. And provided the loss of the Pharmac monopoly is not too dramatic, it will be seen to be a good trade off. . .

National is quite clear it supports free trade – but labour is no longer.

This election could see Labour down in the low 30s as a percentage of the total vote. If a combination of Labour, the Greens, New Zealand First, the Maori Party and Internet Mana can form a government, Labour is only going to be 60% of the government, at most.

That has risks for more than trade.

All its likely partners have opposed every single free trade agreement over the last two decades. Collectively they could demand that Labour not support the TPP as a price of coalition. And could Labour resist such a demand?

What’s more, if the Left (apologies to Winston who is not really left) do not have enough votes to form a government, would Labour still continue the cosy arrangement of supporting free trade agreements? Increasingly Labour activists, including their left leaning MP’s, oppose TPP. David Cunliffe, supported by Phil Goff and others, has positioned the party to be able to vote for TPP. But that is before the election. An election loss could well weaken the free trade faction in Labour.

Such a result would cause Labour to look deeply at it options, just as did with National when it lost in 2005. The Labour MPs will be looking at three terms in opposition. They will console themselves that this is the normal political cycle in New Zealand. But they will not be able to tolerate the thought of four terms in opposition. They will do whatever it takes to make themselves electable in 2017.

And in the event of an election loss, what will be the fate of Labour’s longstanding support of free trade when they weigh up what they will have to do for 2017?

New Zealand is one of the best performing economies in the OCED because of the efforts successive governments have put into opening our borders and developing new markets.

Returning to the bad old days of protection and subsidies would harm our economy and the social and environmental initiatives which depend on its strength.

And if Labour lurches even further left on trade what other dangerous territory might it enter in a desperate attempt to be elected?


Protection costs

February 17, 2014

An educational story about the costs of protection:

In 1990, Brach’s Confections Inc. threatened to close a West Side factory that employed 1,100 people. The candy maker said it would move abroad unless the federal government acted to reduce the artificially inflated cost of sugar. Washington ignored the threat, and Brach’s found ways to keep the plant going. But in 2003, it closed the factory and sent much of the work to Mexico.

The reason for the move was a federal undertaking whose entire purpose is to prop up the price of sugar for the benefit of a small number of growers. It does so by restricting imports, limiting how much farmers can plant and guaranteeing them a certain price. These methods work: The price of sugar in this country is usually double or triple the price in the rest of the world.

That enduring accomplishment comes at a cost to companies that buy sugar, like Brach’s. It also burdens a larger group of people: those who eat. In a typical year, the average American consumes nearly 100 pounds of sugar and other high-calorie sweeteners. The total cost to consumers amounts to as much as $3.5 billion a year.

That doesn’t count the jobs shipped to Mexico or Canada. Defenders claim the program saves American jobs in sugar production. But a 2006 study by the U.S. Department of Commerce found that for each job it saves in those sectors, it destroys three jobs in candy making.

It’s not just that protection costs consumers and taxpayers, it costs jobs as well.

But there is an alternative:

For decades, Life Savers were made at a facility in Holland, Mich. But in 2003, Kraft Foods shut it and moved the production to a plant near Montreal.

What does Quebec have to offer that Michigan doesn’t? The Canadian Sugar Institute is happy to explain: “The Canadian sugar industry is internationally unique in that it does not depend on government subsidies. Basing its prices on world raw sugar markets, it sells sugar at prices that are among the lowest in the world.”

Some companies can afford to eat the extra cost of operating in the U.S. But when the composition of your product is 99 percent sugar, it’s not so easy. . .

Given that sugar is now regarded as a harmful substance this might not cause much concern, but it’s not just sugar producers who are protected in the USA and elsewhere.

Growers have been protected by import barriers since 1789, and the current complicated system dates back to the Great Depression.

The country was a very different place then. In 1930, one of every four Americans lived on a farm. Today, it’s one in 50. But the farm bill passed by Congress and signed by the president this month was a missed opportunity to enact changes that would reflect the vast changes over the past 80 years.

The politicians could have started with this system, which bleeds the many to enrich the few. “No industry is as coddled as farming, and no industry as centrally planned from Washington,” writes Cato Institute policy analyst Chris Edwards. “The federal sugar program is perhaps the most Soviet of all.”  . .

New Zealand farming used to be very heavily protected and subsidised.

Producers responded to the dictates of politicians and bureaucrats rather than the market and as a result we produced food no-one wanted to buy.

Farming became very difficult when we were forced into the real world in the mid-1980s but we got through that and now the industry and the country are far better for it.

If the Trans Pacific Partnership succeeds, farmers in the USA and other countries which sign up to it will go through some short-term pain as we did but they and their countries will benefit in the medium to longer term as we did.

Apropos of the TPP – Pattrick Smellie explains 10 things its opponents don’t want you to grasp.


No exceptions for tariffs under TPP

January 31, 2014

The Trans Pacific Partnership must eliminate all tariffs on agricultural and seafood products:

A coalition of 18 New Zealand agricultural and food organisations, led by Beef + Lamb New Zealand and Fonterra Cooperative Group, has written to the Ministers of Trade and Primary Industries outlining its concern that some TPP members are seeking to avoid tariff elimination on some products.

The letter sets out to Ministers Tim Groser and Nathan Guy that the coalition will not support a TPP agreement that does not include comprehensive liberalisation in the agricultural and seafood sectors by all participating countries.

The group says it is vital that the agreement provides comprehensive tariff elimination as set out in the objectives of the 2011 TPP Leaders meeting in Honolulu. The group is concerned that:

  • If any one country is allowed to claim exceptions for sensitive products, other TPP partners will inevitably demand the right to do the same. This could quickly lead to the unravelling of the agreement.
  • Allowing any one country to claim an exception for “sensitive” products sets a dangerous precedent for other countries in the Asia-Pacific region seeking to join the TPP Agreement at a future date.

A Ministerial meeting to discuss TPP issues is expected to be held in late February 2014.

A little exception for some tariffs would be like being a little bit pregnant – it wouldn’t stop there.

Tariffs protect the inefficient at the cost of better producers .

They also add costs for consumers who pay more and have less choice.

An immediate end to all tariffs might be unrealistic but the TPP must ensure that is the goal that must be reached sooner rather than later.


Welcome progress on TPP

December 15, 2013

Trade Minister Tim Groser has welcomed the significant progress made during the Trans Pacific Partnership (TPP) Ministerial meetings in Singapore.

“I am pleased to report that we have substantially advanced the negotiation here in Singapore.  My colleagues and I were able to make good progress across the negotiating agenda, keeping true to the objectives Leaders have set for the negotiation.  In many areas we have identified potential landing zones that will guide the final phase of work.”

While more work remains to be done, Mr Groser said that momentum is accelerating in the negotiation and he was confident that conclusion of a comprehensive, high quality, 21st century agreement was in sight. 

“However, we will not short change ourselves.  We will take as long as needed to achieve a deal that eliminates trade barriers for New Zealand exporters and can advance our vision of regional economic integration in the Asia Pacific.  The gains a high quality TPP would generate for the New Zealand economy demand we get this right.”

TPP Ministers and negotiators have agreed to next meet in January.

Business organisations in New Zealand have reacted positively to the announcement of substantive progress.

“If it takes longer for TPP to be concluded so be it,” said Stephen Jacobi, Executive Director of the both the NZ International Business Forum and NZ US Council.

“Trade Minister Tim Groser and his officials deserve congratulations for their perseverance in continuing what we know is a challenging negotiation.”

Mr Jacobi said New Zealand businesses wanted to see a high quality, substantive and comprehensive outcome to TPP.

“It’s positive that Ministers have been able to identify what they call “landing zones” in the majority of areas under negotiation. To land TPP clearly requires additional work. We should continue to do all we can to support the achievement of a TPP that meets New Zealand’s interests and makes a strong contribution to growth and jobs.”

Former Labour leader and former Trade Minister Phil Goff says New Zealand would be a winner with the TPP.

New Zealand would benefit more than most countries from a concluded Trans Pacific Partnership deal, former Labour trade minister Phil Goff told the Herald last night.

“We have the least barriers and therefore we have the least we have to give away,” he said. “Other countries have to give away much more.

“While there are all sorts of problems involved in this negotiation, you have to look at the wider picture and the wider picture is that each country will benefit from a successful conclusion to it but New Zealand will benefit more than most.” . . .

This view isn’t shared by all his colleagues nor by potential coalition partners the Green and Mana Parties.

It’s a pity opponents to the deal can’t see past their ideology to the benefits free trade brings to producers and consumers.

The only losers will be the favoured few businesses which benefit from lack of competition and the bureaucrats and politicians who gain power, and money, from tariffs and subsidies.


Rural round-up

December 7, 2013

Lochinver set for record price – Stephen Bell:

Lochinver Station on the Napier-Taupo Road is expected to set a New Zealand farm price record of more than $70 million.

Though bigger farms have been sold in the South Island Lochinver is the most productive rural property ever put up for sale in NZ, Bayleys managing director Mike Bayley said.

The land was waste and scrub when Sir William Stevenson bought it in 1958.

It is now being sold as Stevenson Group, one of the country’s biggest privately-owned companies, rebalances its investment portfolio to exclude farming, chief executive Mark Franklin said. . . .

Trade deals coming thick and fast – Alan Barber:

The TPP may not be happening as soon as expected, but free trade agreements with individual markets, Chinese Taipei and Peru, will come into effect, some aspects immediately, and provide more immediate rewards for our exporters.

Although multinational trade negotiations make more dramatic headlines, history suggests that they have a similar gestation period to an elephant, in fact quite a bit longer in the case of WTO rounds. The TPP looks as if it will follow a similar course because of the USA’s demands about trade partners’ internal arrangements, like Pharmac, and farmer lobbies in countries like Japan and South Korea. This makes it extremely difficult to conclude a binding agreement that meets the requirements of all the countries participating in the negotiations.

Unilateral trade agreements are not as highly regarded or sought after, but they are an essential part of international trade and, for New Zealand with its high trade dependency, very important to our future prosperity. . .

Police fear poaching fatality – Neil Ratley:

Farm workers and their houses are being caught in the spotlights of poachers, and southern police fear someone will be killed unless the illegal practice is stopped.

Constable Steve Winsloe of Winton said police and farmers were taking a collaborative approach to the problem to prevent a potential tragedy.

Landowners had had enough and were working with police to prevent poaching and other rural crime, he said.

“Farmers are getting caught in the spotlights when they are out working after dark. It just takes one poacher to see a glint of an eye that may not be an animal and they pull the trigger” he said.

“The last thing police want is a fatal shooting.” . . .

ANZCO bounces back into profit - Alan Williams:

ANZCO Foods has released early its trading result – a pre-tax profit of $12.6 million – in response to what it says are rumours about its financial strength.

The company was not only profitable in the year ended September 30 but increased its operating cashflow and equity ratio on a year earlier.

Revenue increased to $1.28 billion, from $1.21b previously.

It will also pay a dividend to shareholders, as it has done every year since the shareholding structure was put in place in 2001, chairman Sir Graeme Harrison said. . . .

Alliance operations on move - Collette Devlin:

The Alliance Group is in the process of transferring beef rendering operations to its new $25 million rendering plant at Lorneville in Invercargill.

Alliance Group chief executive Grant Cuff said the company started moving operations from the Mataura beef plant about a week ago.

It was also clearing out the rendering plant at Makarewa, where lamb slinks processing finished about a month ago, he said.

Alliance Group is consolidating its southern rendering operations at the new Lorneville plant to improve productivity. . . .

Flood of interest in storage dam idea- Matthew Littlewood:

The burgeoning Rangitata South Irrigation Scheme in South Canterbury has led to a rush of applications for water storage dams.

Environment Canterbury’s consents spokeswoman confirmed that none of the 21 applications within the Arundel-based scheme’s 16,000 hectare “command area” were declined, because all of them fitted within its notified Land and Water Regional Plan.

“To clarify – these are off-channel storage dams (no waterways were dammed) and these include four certificates of compliance (where a dam met the permitted activity requirements and no consent was required),” she said.

The capacity of the storage dams ranged from 8000 to 210,000 cubic metres. . . .


Rural round-up

October 30, 2013

Beef + Lamb New Zealand Puts Case to Washington:

Beef + Lamb New Zealand (B+LNZ) and representatives from other Five Nations Beef Alliance partners have called on Washington’s Capitol Hill to promote a unified view of how trade in agricultural products – and especially beef – should be treated under the Trans-Pacific Partnership (TPP) agreement.

The TPP, which is currently being negotiated and of which New Zealand is a participant, aims to open up trade in goods and services. Progress towards an outcome was most recently reviewed in Bali, where Prime Minister John Key chaired the meeting of the 12 TPP negotiating countries.

The Five Nations Beef Alliance is made up of the national organisations that represent beef cattle producers in Australia, Canada, Mexico, New Zealand and the United States. Collectively, the five countries account for one third of global beef production and approximately half of global beef exports. . .

New Zealand food and beverage producers need to be bulletproof:

New Zealand food and beverage producers need to ensure their operations are “bulletproof” if they want to compete in an increasingly aggressive global marketplace, an industry expert says.

Grant Thornton New Zealand Partner and National Leader, Food and Beverage, Simon Hunter, is describing the firm’s latest International Food and Beverage sector report, ‘Hunger for growth: Food and Beverage looks to the future’, as a wake-up call for the local industry.

The report, based on interviews with 248 senior executives in seven countries (including New Zealand), says 90% expect revenues to increase in the next 12 months but only half expect to employ more people. . .

Gigatown competition will change the future for one town:

Federated Farmers is excited by Chorus’s year-long competition to bring the fastest broadband speed to one New Zealand town.

“This competition is a great opportunity for rural towns,” says Conor English, Federated Farmers Chief Executive.

“If a rural town wins it will become the first town in the southern hemisphere to receive one-gigabit per second broadband speeds – up to 100 times faster than most cities around the globe.

“New Zealand’s farmers are desperate for new ways to get onto the internet and this competition has the potential, for one fortunate town, to spark innovation and mobilise and transform their local economy and society. . . .

(This is why we’re supporting #gigatownoam and the #gigatown campaign).

Fonterra board to set up separate risk committee after food scare review – Paul McBeth:

(BusinessDesk) – The board of Fonterra Cooperative Group will establish a separate committee to oversee risks facing the dairy group in the wake of the false alarm food scare that prompted a precautionary recall in August.

The company’s board will carve out the risk elements from its audit, finance and risk committee into its own separate committee, which chairman John Wilson said will cover “food safety, food quality and other risks Fonterra in today’s environment faces.”

The measure was one of a raft of recommendations from the board-ordered inquiry, led by Jack Hodder QC, after recall of three batches of whey protein concentrate, which were thought to have been contaminated.

Fonterra’s handling of the fall-out was “inadequate” for the kind and size of the crisis and the company’s lack of responsiveness to external stakeholders was seen as a “fortress” mentality, the report said. . . .

Shareholders’ Council welcomes report, inquiry recommendations:

The Fonterra Shareholders’ Council, which safeguards the interests of the dairy Co-operative’s 10,500 Shareholders, said it welcomed the completion of the Fonterra Board commissioned independent report of the WPC80 issue.

Council Chairman, Ian Brown: “The Council has received the report and we commend the Oversight Committee and the Independent Inquiry Team on the comprehensive nature of the report.

“We also commend the Board on their openness and support their decision to make the report public. . .

New health & safety regulations will increase potential penalties for employers:

The potential for higher penalties for non-compliance as a result of upcoming changes to Health and Safety regulations means employers in the high-risk agricultural sector need to be more aware than ever of their obligations, says Melissa Vining, AGRI Consultant for human resources specialists Progressive Consulting – the HR division of Crowe Horwath.

The government will establish new Crown Agent WorkSafe New Zealand by December 2013, when it also plans to introduce to parliament a new Health and Safety at Work Act, which is expected to come into force by December 2014. . . .

Xero releases farming blueprint:

Xero has released its Farming Integration Guide, a blueprint that helps rural solution providers connect to Xero and deliver integrated farm management and accounting solutions. 

Xero CEO Rod Drury says this is a great example of technology bringing an industry together. “This guide is the key step towards full integration between farmers, rural accountants, rural suppliers, banks and software providers. The innovation we’re experiencing in the tech sector is being applied directly now to the rural economy, the backbone of the NZ economy.” . . .


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