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.


Human-shaped anthropocene epoch vs overhang idealised historical period

January 28, 2015

Quote of the day from Colin James:

. . . human-made law is for humans’ wellbeing and future, not the preservation of some frozen-in-time environmental mix. We live in the human-shaped anthropocene epoch, not in an overhang of some idealised historical period. We started the shaping millennia ago with shovels and fire. . .

He was discussing the dilemma facing the Green Party and their tendency to see economic development and environmental protection and enhancement as mutually exclusive.

Environmental awareness is growing and in spite of what they would like to believe, green issues and initiatives are not the preserve of the left of the political spectrum where the Greens are mired.

Both the will and means to have green growth are increasing with the economic, environmental and social benefits it brings.

The Greens no doubt feel threatened by that because the country grows greener their radical left agenda becomes even less relevant.

 

 


Practical change

January 24, 2015

Quote of the day:
We need to reform the RMA to protect the great Kiwi lifestyle and the great Kiwi environment.</p><br />
<p>Like and share if you agree.


10 major changes to RMA proposed

January 22, 2015

The government will be including 10 major changes to the Resource Management Act in the second stage of reforms:

Overhauling the Resource Management Act (RMA) is critical to addressing housing supply and affordability, and maintaining the momentum of economic and job growth as well as better managing New Zealand’s environment, Dr Nick Smith said today in his 20th annual speech to Nelson Rotary.

“The Resource Management Act has produced over 80,000 pages of plans and rules across New Zealand’s 78 councils. This 10-metre mountain of red tape is holding back the development of new houses and jobs, and it is not performing well enough in managing key resources like freshwater,” Dr Smith says.

“The Government is planning the most significant overhaul of the Act since its inception 25 years ago. We want to modernise the purpose to make it more practical and relevant, standardise council plans and simplify the process for gaining consents.”

It shouldn’t be necessary for every council to have their own individual plans and rules for every aspect of resource management and planning. At least some of these could be standard across the whole country.

Dr Smith today also released an independent report by Motu Economic and Public Policy Research – commissioned by the Treasury and the Ministry of Business, Innovation and Employment – into the impacts of planning rules, regulations, uncertainty and delay in residential property development.

The report concludes that the RMA is adding an extra $30,000 to the cost of an apartment, an extra $15,000 to the cost of a home, and that it is reducing the capacity of housing development by 22 per cent.

“This report is consistent with the conclusions of the Productivity Commission and the Organisation for Economic Cooperation and Development in highlighting the high administrative burden of our system of environmental regulations, but also adds new information by estimating the actual cost of its flaws. It indicates that over the last decade, the RMA has added $30 billion to the cost of building and reduced new housing stock by 40,000 homes,” Dr Smith says.

Dr Smith also cited practical examples in his speech of where the RMA had wasted health and education funding, and where councils were using the RMA to unnecessarily interfere in people’s lives.

“Our first phase of RMA reforms has made a positive difference in getting consents processed more quickly, including for major projects like the Waterview Connection in Auckland, but we have always made plain more substantive change was required,” Dr Smith says.

Dr Smith outlined ten major changes the Government would be including in its second phase of reforms in 2015:
• Add natural hazards
• Recognise urban planning
• Prioritise housing affordability
• Acknowledge importance of infrastructure
• Greater weight to property rights
• National planning templates
• Speed up plan-making
• Encouraging collaborative resolution
• Strengthening national tools
• Internet for simplicity and speed

“Today’s speech sets the direction for reform. We have a power of work ahead to do with officials, our support parties and Cabinet committees to finalise and draft the required Bill. Our ambition is to have the Bill before Parliament and through a full select committee process this year,” Dr Smith says.

“These reforms will be pragmatic and moderate. We want to reduce the mountain of plans and rules that make the RMA a barrier to new housing and jobs, but retain the core environmental controls that ensure we keep New Zealand special and such a great place to live.”

The proposed changes won’t discount the importance of the environment but will ensure that environmental, economic and social considerations are in balance.

The full speech is here. In it Dr smith says:

The big challenge in the environmental area is finding a path that better manages New Zealand’s water, air, oceans and native flora and fauna while
enabling our economy to grow and prosper. Key priorities this year will be passing a new Environment Reporting Act to give greater clarity to New
Zealand’s important clean, green brand. . . .

Environmental protection and enhancement and economic development aren’t mutually exclusive.

 . . . the most challenging of my jobs this year will be the reform of the Resource Management Act. The Act, in governing the use of water, land, air and the coast, and which is responsible for protecting heritage, native plants and animals is so wide-ranging that it has implications right across the economy and into almost every facet of life.

There is not a single official anywhere who understands this huge pile of RMA plans and rules. Even at a local level, only a few individuals working in council or in planning consultancy will fully understand how the rules work in their city or district. . .

If they don’t understand it how can anyone else?

  The OECD published in November a comparative study of its 34 member countries on the cost burden of environmental regulation. In most OECD reports New Zealand ranks very well as a good place to do business and create jobs. We ranked bottom when it came to the administrative burden of the Resource Management Act. I have no problem where there are costs to achieve good environmental outcomes. The OECD study actually showed that many countries had more stringent
environmental policies than New Zealand but a far lesser administrative burden.

A key difference of the New Zealand system of environmental regulation under the RMA is that we have a very fragmented system where there are
differing rules in every district and region, and secondly that we require consents for most activities when most other countries simply had national
standards that had to be met.

National standards would be far better for many activities.

Examples can be more powerful than national or international studies. I get inundated with hundreds of complaints from all corners of New Zealand and
from people from all walks of life with frustrations over their experience with the RMA.

My first example is the Stoke Medical Centre, a typical suburban GP clinic on Main Road Stoke, employing 15 full-time staff. Three years ago the practice
wanted to expand its staff and extend its permissible opening hours. This required a change to their resource consent which Council ruled under the Act
had to be notified. Six months and $57,000 of bills later the amended consent was granted with the requirement that they had to provide seven new bike
stands. And this cost excluded the time doctors and practice staff had spent on the process. The bike stands cost $35 each but the bureaucratic paper
associated with each meant they ended up costing over $8000 a stand. The tragedy of this case is that the $57,000 consent cost will ultimately come out
of the health budget and people’s GP charges in an area where there are many low income struggling families and retirees.

It is not just health dollars that are being wasted under the RMA. The resource consenting process for Nelson’s new Young Parents’ School
officially opened by the Prime Minister last year was a fiasco. The new school is smart social policy aimed at supporting teenage mums by enabling them to
continue their education, while also ensuring their pre -school children are engaged in education from an early age. The school is sited at Auckland
Point School where the roll is a lot less than the school’s capacity. The Principal and Board of Trustees fully supported the initiative being on their
school site.

The problem was that the school is designated under the RMA for “primary education” and the Young Parents School was about providing education for
secondary school age mums and early childhood education for their children. This meant under the RMA a change of designation, notification of neighbours
and a full Commissioner hearing at a direct cost of $64,000. There would have been no change out of $100,000 if you included the considerable staff
time of the Education Ministry, Kindergarten Association and school. This process also delayed the Young Parents School’s opening by more than a
year. More was spent on the RMA bureaucracy than on the facility for the specialist teachers, young mums and their babies.

The nonsense of this case is that the RMA is meant to be about protecting the environment and whether Auckland Point School has primary, pre-school or
secondary students, makes not a jot of difference. The early childhood regulations and building consent requirements are separate and ensure the facilities are safe and appropriate. More good would have been achieved for the environment had the $64,000 of cash been deposited in the school’s composting bins.

I could give hundreds of examples of the RMA wrecking Kiwi family dreams of building their own home. I choose this Nelson example because it illustrates how far council planners under the RMA are now intruding into people’s lives. A couple in their 60s bought a 630 square metre flat section in Sanctuary Drive in the Marsden Valley. Their architectural designer produced plans for their dream home that included an internal access garage in the front corner to minimise the portion of the section used for the driveway and located their living area so as to maximise the sun. The orientation was similar to 14 other homes in the subdivision. They were gobsmacked to have their consent application declined on the basis of a new RMA rule that had just come into
effect in late 2012. They were told they had to relocate the garage out the back and have their living area face the road. 

The RMA justification for rejecting the design was that the house failed to provide for a “positive private to public space relationship”. In plain language they wanted the living area to face the road so the residents would keep a safe eye on the street. The couple abandoned the section at a cost of many thousands of dollars. So much for a person’s home being their castle.

The RMA is being used to micro-manage building designs down to the extent of what direction people should look.

This sort of madness has been repeated in Auckland and had property magnate Bob Jones venting his spleen late last year. He owns a 17-storey CBD building and wanted to re-establish a ground-floor shop window that had been blocked off by a previous tenant. Not only did this minor work require a $4500 resource consent, but because it would have people looking out on a designated heritage site, the consent required a cultural impact statement and consultation with 13 iwi. This is all for permission to replace a window!

This isn’t only madness, it’s expensive, wasteful and the triumph of bureaucracy over common sense.

These and many other examples show why change is needed.

The Motu Economic and Public Policy Research report is here.

 


Poverty biggest enemy, development biggest friend

January 20, 2015

Quote of the day:

. . .  This is the ugly underside of environmentalism, the unpleasant truth, which is:

The biggest threat to the environment is poverty. 

This is not some theoretical future danger. As the firewood man showed, this is going on now. And remember that the woodcutter was not the poorest of the poor, far from it. About half the world lives on less than $2.50 per day, and an empty stomach cares nothing for the environment. For example, the larger primates are all greatly reduced in numbers, with some being heavily threatened. Is this because humans enjoy killing chimpanzees? Nope. The root cause is poverty. They are being killed for food, by people who have nothing to eat.

And when people do not have cheap energy to cook with, they burn up their forests, despite their good intentions.

Finally, since the biggest threat to the environment is poverty, that means that the biggest friend of the environment is development … Willis Eschenbach in Four Stories, Two Worlds at What’s Up With That?

Hat tip: JC

 


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