Free trade falters

Free trade is faltering:

The man who led the New Zealand team in key global trade negotiations says the world is seeing the worst rise in trade protectionism in 23 years.

Vangelis Vitalis, from the Ministry of Foreign Affairs and Trade, spoke to RNZ at a conference of the meat industry in Napier.

He said years of eased trade rules were in danger of being reversed, and this must be dealt with.

“We have seen 400 new protectionist measures to May have been put in place.

“We know that non-tariff barriers cost the wider agricultural sector of New Zealand up to $6 billion a year in restricted access. These have a profound impact.

“We are seeing the sharpest rise in protectionism since 1995, especially in the last six months.” . . 

This isn’t just a threat to exporters, it’s a threat to the whole economy.

Trade restrictions don’t just hurt businesses exporting to a country which imposes tariffs. They hurt businesses in the importing country trying to export to other countries which impose tariffs in response.

There’s no better illustration of that than this Trump Toon at Inquiring Mind.

By making it harder for businesses to sell their goods to the USA, Trump’s tariffs are making it harder for USA producers to export their goods.

Trump responded by giving subsidies which is a cost to taxpayers who are the consumers who are having to pay more for imported goods.

The inability to export will result in a glut in the domestic market which will depress prices. That might help consumers in the short-term but anything they gain in lower prices will come at their cost as taxpayers who pay for the subsidies.

I’m old enough to remember what it was like in New Zealand before we embraced free trade.

Tariffs were in effect a consumer subsidy for local industries which left consumers with less choice, often lower quality, and always higher prices on a whole range of goods from necessities to luxuries.

The whole system of tariffs, import and export licences, and subsidies was ripe for exploitation, manipulation and corruption.

It gave power to politicians, created work for bureaucrats and helped the favored few at the cost of the many.

The transition to an open economy wasn’t easy, but it has been worth it.

We are no longer producing low quality food in quantities too great to sell. Production is market led, aimed at what consumers want not political and bureaucratic whim.

There is little risk that New Zealand will close its borders again but we could be caught in the crossfire as trade wars between other countries escalates.

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