Korea FTA worth million$

March 24, 2015

The signing of the Free Trade deal with Korea, singed by Trade Minister Tim Groser yesterday  has the potential to add millions of dollars in extra export earnings.

“Improving access to international markets through free trade agreements is a key component of the Government’s Business Growth Agenda. Supporting our exporters is crucial to creating new jobs and boosting incomes for New Zealanders,” says Mr Groser.

“This Agreement secures the long-term future of New Zealand exporters to Korea whose international competitors were benefiting from Korea’s other FTAs.

“It reduces barriers to trade and investment, provides greater certainty about the business environment and ensures our exporters remain competitive in each other’s market.”

On entry-into-force, tariffs on 48.3 percent or NZ$793.7 million of New Zealand’s current exports to Korea will be eliminated. The Agreement will progressively remove tariffs on 98 per cent of New Zealand’s exports to Korea.

“Particular success stories include the removal of wine tariffs of 15 percent on entry into force, and the removal of 45 percent tariffs on kiwifruit effectively five years after entry into force,” says Mr Groser.

“It will also make possible a new level of cooperation in areas like agriculture, the creative economy, the environment and education, and spur greater investment.”

The FTA will offer improved protections for New Zealand investors in the Korean market, and reinforce the attractiveness of New Zealand as a stable investment destination.

Prime Minister John Key and President Park Geun-hye of Korea witnessed the signing of the Agreement by Trade Ministers Tim Groser and Yoon Sang-jick in Seoul.

“The Agreement shows the strength of the relationship between New Zealand and Korea. It symbolises our countries’ commitment to economic openness and market integration in the Asia-Pacific region,” says Mr Key.

“Korea is one of New Zealand’s biggest and most important trading partners. This Agreement makes it easier for Koreans and Kiwis to do business with each other, and the removal of tariffs will benefit consumers in both countries.

“At the moment, New Zealand exports into Korea attract NZ$229 million a year in duties.  Tariff reductions in the first year of the FTA alone will save an estimated NZ$65 million.”

The Agreement now needs to be ratified by the New Zealand Parliament.

“We are keen for the Agreement to come into force this year,” says Mr Key.

“With a population of over 50 million and as the 13th largest economy in the world, Korea is an attractive market for New Zealand exporters.” . . .

Korea is New Zealand’s sixth largest export destination for goods and services and our eighth largest import source, with total two-way goods trade of NZ$4 billion.

Once ratified by parliament, the FTA will open the door to better business for Koreans and New Zealanders.

It makes the eggs in other trading baskets than China more valuable, will give better returns for our exporters and more choice and lower prices for consumers in both countries.


Quote of the day

March 24, 2015

Real people live in places like the West Coast. At the moment we are doing it hard. We know that prices will recover, but we have to ask if there will be an opportunity to benefit. We want to be more than a picture post card on an Auckland coffee table. We want a reasonable future alongside a responsible mining industry that knows that it must look after the environment that we actually live in every day. We want a fair go. New Zealand prides itself on a concept of fairness. Sadly that seems to have gone out the window where mining is proposed.Paul Wylie, chief executive Buller District Council in the foreword to From Red Tape to Green Gold

 


Quote of the day

March 18, 2015

In self-proclaimed intellectual circles, it has long been fashionable to belittle the idea of economic growth. “GDP is not the same as happiness”, some critics of growth will explain. Others will warn that excessive growth could destroy the environment and leave our planet uninhabitable. Others still will warn that the finite nature of our resources does not allow continuous growth in any case.

This kind of critique has become a pastime of the chattering classes. It is now part of polite conversation in the better suburbs of developed world cities. To question the value of growth at dinner parties in air-conditioned or heated houses while sipping French champagne and eating Italian prosciutto presumably adds a sense of intellectual gravitas to one’s physical well-being. These people probably do not even realise the self-contradiction in condemning economic growth while enjoying its blessings.  . .

Economic growth is no silver bullet to all the world’s problems. But it comes close. There is overwhelming evidence that the unprecedented economic expansion humanity has experienced roughly over the past three centuries has been a great force for good. It has made our lives better in ways that would have been unimaginable to previous generations.

This should also be the response to the aforementioned critics of growth. At which stage in history do they believe we should have proclaimed the end of economic development? Certainly not in Plato’s time (4th century BC) since that would have prevented the invention of the canal lock (3rd century BC) and paper (2nd century BC). Development should not have stopped at the time the Gospels were written either since otherwise we would not even have invented the wheelbarrow (2nd century AD).

To move to more modern times, had economic development stopped when Ernst F. Schumacher suggested it should (Small is Beautiful was published in 1973), we would have never seen CD-ROMs, the Internet or the first vaccine for meningitis. And even if we had only stopped to grow and develop when Pope Francis told us to in November 2013, we would have never seen the first human clinical trials in the United States for a wearable artificial kidney – or the new iPhone 6.

Economic growth is the driver behind all of these developments because at its core, economic growth is not mainly about the production of more but about the discovery of better (though often it is both). Economic growth helps us to find new and improved ways of combining resources. The outcomes could be a new medicine, a faster way of travelling, a healthier way of eating or a better way of learning. . . Dr Oliver Hartwich

This is an extract from the New Zealand Initiative’s report The Case for Economic Growth by Eric Crampton and Jenesa Jeram.

 


Surplus for 7 months

March 11, 2015

The government books are showing a surplus:

The operating balance before gains and losses (OBEGAL) for the seven months to January was a surplus of $77 million, driven by higher than expected tax revenue and lower than expected operating expenses, Finance Minister Bill English says.

“This is the first time the Government’s books have shown a part-year surplus since 2009. Although it is too early to say whether we will have a surplus for the full 2014/15 year, this result demonstrates the strides we have made in improving the Government’s finances,” Mr English says.

The OBEGAL outturn was $712 million better than the $635 million deficit forecast by the Treasury in the Half-Year Update (HYEFU) in December, but was still $120 million below Treasury’s Budget 2014 forecast, undertaken at the start of the fiscal year.

Corporate tax was $158 million, or 3.2 per cent above the HYEFU forecast and source deductions were $146 million, or 1.0 per cent above forecast.

“Although corporate tax and source deductions were both ahead of forecast for the seven months to January, these latest figures underscore the difficulty in forecasting the difference between two large numbers,” Mr English says.

“We won’t know until the final accounts are published in October whether we will achieve a surplus for the whole year. The variance of both tax and expenditure from forecasts reinforces that message.”

Core Crown expenses for the first half of the financial year were $249 million lower than forecast at HYEFU.

“The Government is continuing to responsibly manage its finances. Core Crown expenditure for 2014/15 is forecast to be $4.1 billion lower than forecasts made when we first set the surplus target back in 2011,” Mr English says.

This is on-track to an annual surplus.

Whether or not that is reached this financial year or next it is a significant achievement and good reflection on the government’s careful management.

It has turned around the decade of deficits forecast in Labour’s last year in government and has been achieved in spite of the financial turmoil and natural disasters the government had to face.


Protection penalises poor

February 17, 2015

Protectionist trade practices penalise the poor:

Trade policy adjustments to insulate domestic markets when world food prices spike have been ineffective in dealing with food price shocks that exposed millions of people to poverty in developing countries, a World Bank researcher told a New Zealand agricultural economics conference this week.

Dr Will Martin, the manager for agriculture and rural development research in the World Bank is an Australian who has worked for the Washington-based World Bank for the past 25 years. He is also President-Elect of the International Association of Agricultural Economists. He was speaking to more than 250 international delegates attending the Australian Agricultural & Resource Economics Society’s conference in Rotorua this week.

His analysis of detailed expenditure and agricultural production data from 31 developing countries assesses the impacts of changes in global food prices on poverty in an effort to understand their impacts on the poor.

Food price increases unrelated to productivity changes in developing countries raise poverty in the short run in all but a few countries. “That’s because the poor spend large shares of their incomes– frequently about 60-70 percent–on food and many poor farmers are net buyers of food,” he says.

“However, in the longer run, if prices stay high, two other important factors come into play. Poor workers are likely to benefit from increases in wage rates for unskilled workers resulting from higher food prices, and poor farmers are likely to benefit from higher agricultural profits as they produce more food. As a result, higher food prices appear to lower global poverty in the long run.”

He says a natural and understandable policy reaction for many countries when food prices rise is to lower domestic prices through levies on exports, temporary import tariff reductions, or import subsidies. “But these are beggar-thy-neighbour policies that push up world prices,” he says. He estimates that these policies accounted for nearly half the increase in world rice prices in 2007-8. Individually, most countries took action that reduced the impact of higher world prices on the poor. But, when the contribution of these policies to the higher world prices is taken into account, they turn out to have been ineffective.

“What countries need is a collective approach that enables relatively open trade to continue in those circumstances. Clearly, this still needs to be combined with social safety nets so poor people can cope in the short term, but then realise the longer term benefits of higher prices. We need to deliver policies that actually work rather than policies that appear to work.”

Dr Martin says countries need to develop this ‘social safety net’ so the poorest can get access to what they need when they need it.

He says the World Trade Organisation (WTO) showed with the abolition of variable import levies in the Uruguay Round that it can introduce trade policies that bring about the kind of collective action needed to tame food price spikes.

“The collective agreement of the EU-US over export subsidies in the Uruguay Round also showed what can be done when there is clear recognition of the problem. It’s much more complex when many more countries are involved but we need to keep working away at the challenge if we are to make progress. Getting the confidence of policymakers to act differently will require a lot more research and policy formulation.”

Most people, rich or poor, farmers or not are net buyers of food. All will be affected by price rises and the poor, who spend a greater proportion of their income on food,  will be hardest hit.

Export bans and other protectionist measures might help the poor in the short-term but it is a temporary fix.

Policies which increase wealth rather than those which artificially keep prices low provide the best long-term solution to poverty and hunger.

The solution to poverty and food shortages isn’t restrictive trade practices, it’s liberalising trade.

The challenge is how to help the poor cope with price rises in the short-term until they benefit from improved incomes which enable them to afford more food.

 


Rural round-up

February 14, 2015

Drought déjà vu

Dairy production plunging at the same time prices are spiking.

Lamb prices soft on drought impact.

Reserve Bank signals OCR could go up or down.

Stronger dairy prices in the most recent dairy action are a double-edged sword, according the latest ASB Farmshed Economics Report.

“Strengthening dairy prices in the 2 February dairy auction have given upward momentum to prices,” says ASB’s Rural Economist Nathan Penny. “However, farmers still have to navigate this summer’s drought and potential falls in production. But if farmers can manage through this tough drought and low milk price combo, we expect a rebound in the milk price for the 2015/16 season to around $6.00/kg.” . .

Farmers need to evolve new systems:

New Zealand farmers face a new evolutionary pressure – farming within nutrient limits – and together with scientists and industry bodies, they will need to evolve new farming systems in response to this challenge, a University of Waikato economist told the Australian Agricultural & Resource Economics Society’s conference in Rotorua this week.

Associate Professor Graeme Doole, an economist who specialises in the connections between agriculture and the environment and acts as an advisor to the government on water issues, says the economic impact of nutrient limits that are now being developed and implemented around the country will be significant for farmers.

“It is something that the industry has to deal with because generally around 75 to 90 percent of Nitrogen eaten by cows is lost in urine,” he says. . .

Future proofing our pastures against drought – Lynley Hargreaves:

New Zealand may have escaped another official declaration of drought, but climate-change forecasts make dry periods more likely. Good news, then, that a New Zealand high school student has helped improve the drought-resistance of future pastures. Former Palmerston North Girls’ High School student Minushika Punchihewa explains her Gold CREST research that ensures successful cross-breeding just by looking closely at a clover plant.  

Why are clovers being cross-bred?

Currently Trifolium repens (White Clover) is the most common species of clover used in New Zealand’s agricultural sector and is depended upon by farmers to feed their live stock and for pastoral growth. However, a relativity new type of clover called Trifolium ambiguum was introduced to New Zealand from regions surrounding the Black Sea. This clover has many advantageous traits such as drought tolerance, pest and disease resistance and strong rhizomes for spreading, so scientists are beginning to cross breed this clover with T.repens to try incorporate some of these beneficial traits. . .

New Zealand captures over 10% of its freshwater resource – Waiology:

Following a recent Timaru Herald article (3 February, 2015), I learned of a claim that 98% of NZ’s rainfall is left to flow out to sea, and that we only capture the other 2%.

‘‘This country doesn’t have a water shortage issue. What it has is a water storage issue. We capture a mere 2 per cent of our country’s total rainfall, the rest pours out to sea!’’ – Waitaki MP Jacqui Dean’s office.

‘‘It is wasteful that we only capture around 2 per cent of rainfall in New Zealand, with the rest roaring out to sea.’’ – Minister for Primary Industries Nathan Guy, in a speech to Crown Irrigation Investment Ltd.

These statements aren’t quite right, but because the topic is of vital importance, it is worth commenting on what is actually happening. Some of the rain evaporates before it can reach the sea or get used by us, and the “2%” isn’t actually how much we capture anyway. . .

 Liveweight breeding values and breeding worth calculations change this month:

Liveweight breeding values for dairy cattle are to improve as a result of data analyses carried out by NZ Animal Evaluation Limited (NZAEL), a wholly owned subsidiary of DairyNZ.

Changes to these breeding values and the flow-on effects for the overall measure of cow and sire genetic merit; Breeding Worth (BW) will be implemented from 16 February 2015.

These improvements are focused around the conversion of liveweight information into a mature weight equivalent.

“Historically this conversion has been done within the liveweight animal evaluation model, but over time the information that we receive has become heavily weighted towards data for two-year-olds which skews the calculation,” says NZAEL Manager Dr Jeremy Bryant. . .

 


NZ 3rd for economic freedom

January 28, 2015

New Zealand has overtaken Australia to 3rd place in the  economic freedom index published by the Wall Street Journal and the Heritage Foundation.

The media release (the link to which is under press releases overview here) says:

The world economy is “moderately free,” with a slight rise in economic liberty leading to a third annual global increase, according to the editors of the 2015 Index of Economic Freedom, released today by The Heritage Foundation and The Wall Street Journal.

The world average score of 60.4 is only one-tenth of a point above the 2014 average, but represents a 2.8-point overall improvement since the inception of the Index in 1995. Thirty-seven countries, including Taiwan, Israel, Poland and Colombia, achieved their highest-ever Index scores. Among the 178 countries ranked, scores improved for 101 countries and declined for 73. Ninety economies, or about half of all nations and territories graded in the Index, provide at least a moderate level of economic freedom for their citizens.

Yet the number of people living in economically “unfree” countries remains high: 4.5 billion, or about 65 percent of the world’s population. More than half live in just two countries: China and India. Twenty-six countries have “repressed” economies (scores below 50), while only five have earned the Index’s designation of “free” (scores above 80).

“The fundamental relationship between economic freedom and prosperity is readily apparent worldwide,” the editors write. “No matter the region, per capita income levels are consistently higher in countries that are economically freer.”

Despite being the only North American economy to improve in the 2015 Index, the United States remained stuck in the 12th spot globally and the second one regionally (behind Canada, which is once again No. 6 globally despite a 1.1-point drop in its score). The 2015 Index reports modest gains in six categories for the U.S., including control of government spending, which outweighed a small decline in business freedom.

Hong Kong and Singapore finished first and second in the rankings for the 21st consecutive year, although only two-tenths of a point separate their overall scores. New Zealand, which logged almost a full-point improvement last year, moved up two slots and reclaimed third place in the rankings, outperforming Australia (4th) and Switzerland (5th).

Chile’s score declined slightly, but it took seventh place. The score for Mauritius, the only Sub-Saharan country to rank among the top 10, declined one-tenth of a point, and it slid from eighth place globally to 10th. Estonia, meanwhile, rode an improved score into the world’s No. 8 slot, while Ireland again finished ninth.

The Most Free

  1. Hong Kong
  2. Singapore
  3. New Zealand
  4. Australia
  5. Switzerland
  6. Canada
  7. Chile
  8. Estonia
  9. Ireland
  10. Mauritius

The Least Free

  1. North Korea
  2. Cuba
  3. Venezuela
  4. Zimbabwe
  5. Eritrea
  6. Equatorial Guinea
  7. Turkmenistan
  8. Iran
  9. Rep. of Congo
  10. Argentina

Launched in 1995, the Index evaluates countries in four broad policy areas that affect economic freedom: rule of law; limited government; regulatory efficiency; and open markets. There are 10 specific categories: property rights, freedom from corruption, fiscal freedom, government spending, business freedom, labor freedom, monetary freedom, trade freedom, investment freedom, and financial freedom. Scores in these categories are averaged to create an overall score. . .

Countries which have more economic freedom are also more prosperous with the social benefits which flow from that.


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