Free trade 2-way street

October 21, 2017

Free trade is vital to New Zealand, Horticulture NZ Mike Chapman says.

New Zealand is a trading nation. We rely on export earnings from free trade for our financial prosperity. But free trade is a two way street – the countries involved open up their borders to allow free movement of goods and services on an equal basis. This includes property ownership.

The pathway to premium export earnings is through innovation and having a point of difference. Access to the latest techniques and innovations is key to New Zealand remaining competitive and market leaders.

The truth here is that to do that, New Zealand needs strong links with the international science community, companies involved in innovation, market leaders and companies with scale and market penetration. Many of those international companies have operations based in New Zealand. Equally, New Zealand also has operations based in their home countries. That involves property ownership. Here, I’m not talking about residential properties.

The importance of trade was recently highlighted in a report by the New Zealand Institute of Economic Research (NZIER). Here are a couple key points from their analysis:

– Trade accounts for $85 billion (43%) of New Zealand’s GDP.
– Trade gives each household in New Zealand improved product choice worth $3.9 billion, or $2,300 per household.
– A US study estimates that trade contributes about 30% to the average US household’s purchasing power. In New Zealand this would be far higher, given how trade reliant we are compared to the US.
– More free trade agreements will increase New Zealand’s GDP by $18 billion and create 42,000 skilled and 20,000 low skilled jobs.

Freeing up trade and keeping trade free are vital for New Zealand’s continued prosperity.

Tightening up on any aspect of our free trade may have a ripple effect. As a country, we do not want to slip into economic decline. So Horticulture New Zealand’s plea to New Zealand’s new government is to keep the previous Government’s free trade agenda running. Foreign investment in New Zealand enhances our economic prosperity.

We need to keep the door open for three key reasons:

– New Zealand’s prosperity depends on free trade – we can’t compete if, due to tariffs and other barriers, our goods and services are more expensive than those from other countries. Simply put, our goods and services will not be purchased.
– Many overseas companies that have invested in New Zealand enhance our ability to be market leaders and innovate, provide many jobs, and contribute to our economic prosperity and ability to buy goods from around the world.
– New Zealand’s companies need to invest in overseas countries to enhance our ability to compete for premium prices and keep ahead of innovations – it is a two way street.

We can’t win the fight to open doors for our goods and services if we close our own.

Successive Labour and National governments have agreed on the importance of free trade and worked to advance it.

We’ll all lose if the new government attempts to return to the bad old days of fortress New Zealand.


Frédéric Bastiat on free trade

September 25, 2017

Debate on free trade isn’t new.

Frédéric Bastiat  wrote this in 1845.

A PETITION From the Manufacturers of Candles, Tapers, Lanterns, sticks, Street Lamps, Snuffers, and Extinguishers, and from Producers of Tallow, Oil, Resin, Alcohol, and Generally of Everything Connected with Lighting.

To the Honourable Members of the Chamber of Deputies.

Open letter to the French Parliament, originally published in 1845 (Note of the Web Publisher)

Gentlemen:

You are on the right track. You reject abstract theories and have little regard for abundance and low prices. You concern yourselves mainly with the fate of the producer. You wish to free him from foreign competition, that is, to reserve the domestic market for domestic industry.

We come to offer you a wonderful opportunity for your — what shall we call it? Your theory? No, nothing is more deceptive than theory. Your doctrine? Your system? Your principle? But you dislike doctrines, you have a horror of systems, as for principles, you deny that there are any in political economy; therefore we shall call it your practice — your practice without theory and without principle.

We are suffering from the ruinous competition of a rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price; for the moment he appears, our sales cease, all the consumers turn to him, and a branch of French industry whose ramifications are innumerable is all at once reduced to complete stagnation. This rival, which is none other than the sun, is waging war on us so mercilessly we suspect he is being stirred up against us by perfidious Albion (excellent diplomacy nowadays!), particularly because he has for that haughty island a respect that he does not show for us [1].

We ask you to be so good as to pass a law requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull’s-eyes, deadlights, and blinds — in short, all openings, holes, chinks, and fissures through which the light of the sun is wont to enter houses, to the detriment of the fair industries with which, we are proud to say, we have endowed the country, a country that cannot, without betraying ingratitude, abandon us today to so unequal a combat.

Be good enough, honourable deputies, to take our request seriously, and do not reject it without at least hearing the reasons that we have to advance in its support.

First, if you shut off as much as possible all access to natural light, and thereby create a need for artificial light, what industry in France will not ultimately be encouraged?

If France consumes more tallow, there will have to be more cattle and sheep, and, consequently, we shall see an increase in cleared fields, meat, wool, leather, and especially manure, the basis of all agricultural wealth.

If France consumes more oil, we shall see an expansion in the cultivation of the poppy, the olive, and rapeseed. These rich yet soil-exhausting plants will come at just the right time to enable us to put to profitable use the increased fertility that the breeding of cattle will impart to the land.

Our moors will be covered with resinous trees. Numerous swarms of bees will gather from our mountains the perfumed treasures that today waste their fragrance, like the flowers from which they emanate. Thus, there is not one branch of agriculture that would not undergo a great expansion.

The same holds true of shipping. Thousands of vessels will engage in whaling, and in a short time we shall have a fleet capable of upholding the honour of France and of gratifying the patriotic aspirations of the undersigned petitioners, chandlers, etc.

But what shall we say of the specialities of Parisian manufacture? Henceforth you will behold gilding, bronze, and crystal in candlesticks, in lamps, in chandeliers, in candelabra sparkling in spacious emporia compared with which those of today are but stalls.

There is no needy resin-collector on the heights of his sand dunes, no poor miner in the depths of his black pit, who will not receive higher wages and enjoy increased prosperity.

It needs but a little reflection, gentlemen, to be convinced that there is perhaps not one Frenchman, from the wealthy stockholder of the Anzin Company to the humblest vendor of matches, whose condition would not be improved by the success of our petition.

We anticipate your objections, gentlemen; but there is not a single one of them that you have not picked up from the musty old books of the advocates of free trade. We defy you to utter a word against us that will not instantly rebound against yourselves and the principle behind all your policy.

Will you tell us that, though we may gain by this protection, France will not gain at all, because the consumer will bear the expense?

We have our answer ready:

You no longer have the right to invoke the interests of the consumer. You have sacrificed him whenever you have found his interests opposed to those of the producer. You have done so in order to encourage industry and to increase employment. For the same reason you ought to do so this time too.

Indeed, you yourselves have anticipated this objection. When told that the consumer has a stake in the free entry of iron, coal, sesame, wheat, and textiles, “Yes,” you reply, “but the producer has a stake in their exclusion.” Very well, surely if consumers have a stake in the admission of natural light, producers have a stake in its interdiction.

“But,” you may still say, “the producer and the consumer are one and the same person. If the manufacturer profits by protection, he will make the farmer prosperous. Contrariwise, if agriculture is prosperous, it will open markets for manufactured goods.” Very well, If you grant us a monopoly over the production of lighting during the day, first of all we shall buy large amounts of tallow, charcoal, oil, resin, wax, alcohol, silver, iron, bronze, and crystal, to supply our industry; and, moreover, we and our numerous suppliers, having become rich, will consume a great deal and spread prosperity into all areas of domestic industry.

Will you say that the light of the sun is a gratuitous gift of Nature, and that to reject such gifts would be to reject wealth itself under the pretext of encouraging the means of acquiring it?

But if you take this position, you strike a mortal blow at your own policy; remember that up to now you have always excluded foreign goods because and in proportion as they approximate gratuitous gifts. You have only half as good a reason for complying with the demands of other monopolists as you have for granting our petition, which is in complete accord with your established policy; and to reject our demands precisely because they are better founded than anyone else’s would be tantamount to accepting the equation: + x + = -; in other words, it would be to heap absurdity upon absurdity.

Labour and Nature collaborate in varying proportions, depending upon the country and the climate, in the production of a commodity. The part that Nature contributes is always free of charge; it is the part contributed by human labour that constitutes value and is paid for.

If an orange from Lisbon sells for half the price of an orange from Paris, it is because the natural heat of the sun, which is, of course, free of charge, does for the former what the latter owes to artificial heating, which necessarily has to be paid for in the market.

Thus, when an orange reaches us from Portugal, one can say that it is given to us half free of charge, or, in other words, at half price as compared with those from Paris.

Now, it is precisely on the basis of its being semigratuitous (pardon the word) that you maintain it should be barred. You ask: “How can French labour withstand the competition of foreign labour when the former has to do all the work, whereas the latter has to do only half, the sun taking care of the rest?” But if the fact that a product is half free of charge leads you to exclude it from competition, how can its being totally free of charge induce you to admit it into competition? Either you are not consistent, or you should, after excluding what is half free of charge as harmful to our domestic industry, exclude what is totally gratuitous with all the more reason and with twice the zeal.

To take another example: When a product — coal, iron, wheat, or textiles — comes to us from abroad, and when we can acquire it for less labour than if we produced it ourselves, the difference is a gratuitous gift that is conferred up on us. The size of this gift is proportionate to the extent of this difference. It is a quarter, a half, or three-quarters of the value of the product if the foreigner asks of us only three-quarters, one-half, or one-quarter as high a price. It is as complete as it can be when the donor, like the sun in providing us with light, asks nothing from us. The question, and we pose it formally, is whether what you desire for France is the benefit of consumption free of charge or the alleged advantages of onerous production. Make your choice, but be logical; for as long as you ban, as you do, foreign coal, iron, wheat, and textiles, in proportion as their price approaches zero, how inconsistent it would be to admit the light of the sun, whose price is zero all day long!

Frédéric Bastiat (1801-1850), Sophismes économiques, 1845

Notes:

[1] A reference to Britain’s reputation as a foggy island.

More than 150 years later too many people don’t understand the arguments in favour of free trade and are convinced by poor ones against it.


NZ-Korea FTA completed

November 16, 2014

New Zealand and Korea have completed a Free Trade Agreement which will save our exporters $65m in the first year.

Prime Minister John Key today announced that New Zealand and the Republic of Korea have completed Free Trade Agreement negotiations.

“Korea is New Zealand’s sixth largest export destination for goods and services and eighth largest import source of goods and services, with total two-way trade of $4 billion in the year ending June 2014,” says Mr Key.

“The FTA will put New Zealand exporters back on a level playing field with competitors from Korea’s other FTA partners, such as the United States, Chile and the European Union.

“At the moment our exporters to Korea pay $229 million a year in duties. Under the FTA, New Zealand exporters will save an estimated $65 million in duties in the first year alone. . .

This is very good news for producers, manufacturers and consumers in both countries.

One of the messages from Rabobank’s F20, which we attended last week, was that protection threatens food security and hurts the poor most.

Free trade is fair trade.

 

 

 

 


Free trade fairest

August 28, 2014

Prime Minister John Key says free trade will lift kiwi incomes:

National today released a set of policies that reinforces the Party’s commitment to openness with the world as the path to lift New Zealanders’ incomes, in contrast with opposition parties that want to isolate us from the rest of the world.

“New Zealand’s economic prosperity relies on selling our goods and services to the rest of the world,” says National Party Leader John Key.  “The fewer barriers there are for our exporters, the better off New Zealanders will be.”

“That is why as Prime Minister I have been working hard on behalf of New Zealanders to crack open more doors to free trade, alongside Foreign Affairs Minister Murray McCully and Trade Minister Tim Groser.

“This includes pushing for a high-quality free trade agreement under the Trans-Pacific Partnership, which includes economic giants like the United States and Japan.

“The choice for voters in this area, like so many others, is stark.

“The Greens want to end free trade and Labour, riven by caucus division, is very confused about what it wants after previously being in favour of free trade.  The Dotcom party, of course, is totally opposed to free trade.

“There can be no doubt that this combination in government would damage the cause of New Zealand’s exporters and damage New Zealand’s economic prosperity.

“Raising barriers to the rest of the world and halting the momentum of trade agreements with key markets like the US, Japan and Korea, would be disastrous,” says Mr Key.

“Our policy to encourage free trade is one of the most important ways we can become more prosperous.

“Trade agreements allow New Zealand companies to access big international markets as if they were part of New Zealand’s domestic market.  For a small country they are hugely important.”

Mr Key made the comments at the opening of the New Zealand Winegrowers conference in Blenheim today as National released its Trade, Foreign Affairs and Tourism policies.

“The wine industry is a leading example of New Zealand companies thriving on the world stage,” says Mr Key.

“The policies we are releasing today show our commitment to remaining open to trade with the world, having an independent foreign policy, and encouraging and supporting our crucial tourism industry.

“Should National have the privilege of forming a government after the election, I would continue as Minister of Tourism, working hard to promote New Zealand as a tourism destination,” he says.

Mr Key also announced along with Education Minister Hekia Parata that the National Government has decided to create a $10 million fund over five years to increase the provision of Asian languages in schools.

“These policies together demonstrate National is committed to seeing New Zealand remaining open to the world, continuing to generate economic prosperity through good relations with other countries, and lowering barriers to trade.”

New Zealand would not be where it is economically or socially if it wasn’t for the free trade agreements negotiated by successive governments.

Until recently National and Labour have had a reasonable degree of consensus on the importance of free trade.

That is no longer the case.

Labour is back tracking on its commitment to open borders and it would be dragged further back if it needed the support of the Green, New Zealand First and Internet Mana parties to govern.

Only a National-led government will guarantee continuing focus on free trade and the economic and social benefits which come from that.

 


EU-NZ free trade deal on table

March 26, 2014

Prime Minister John Key has more good news for trade:

New Zealand and the European Union are to pursue a free trade pact – but don’t expect any action until at least 2015.

Prime Minister John Key made the announcement in The Hague after meeting European Commission president Jose Manuel Barroso and European Council president Herman Van Rompuy. He described it as “quite an important” meeting

Two-way trade between New Zealand and the 28 members of the EU totals $16 billion a year.

Key said the EU has, for the first time, agreed to consider a free trade agreement.

But he admitted an ambitious EU-US trade deal, as well as a pact with Canada, will take priority for the Europeans. 

Further progress is also not possible until after European Parliament elections this year, but officials will undertake a scoping study.

“We are actually seeing progress and a breakthrough that historically hasn’t been a option available to us,” Key said.

The deal has the support of both the British Prime Minister David Cameron and German Chancellor Angela Merkel, who he met on the sidelines of the major international summit. . .

Some of the credit for this must go to the good relationship between them and Key.

Two-way trade between New Zealand and the EU is worth about $16bn a year and has the potential to rise to $20bn by 2020. 

But exporters are hamstrung by hefty tariffs – including 8.2 per cent on kiwifruit. By comparison, Chile pays nothing because it is already signed up to an FTA with the 28-country bloc.

“It is easy to look at Europe and think Greece and Spain and some of the well pronounced debt problems,” Key said. “But sitting in amongst that are hundreds of millions of very wealthy consumers who earn a lot, spend a lot and fundamentally are the target market for what we sell.” . . .

A free trade deal with the EU won’t happen quickly but it would bring benefits for producers and their consumers who are paying far more than they need to for our produce because of tariffs.

The EU is our third biggest trading partner in spite of the handicaps we face from duties imposed on our products.

Spain is our biggest market for kiwifruit, even with that 8.2% tariff. The only other New Zealand produce I’ve seen there was apples.

It’s not hard to find New Zealand lamb in the UK and our venison in Germany.

A free trade deal would make it easier for our produce to compete on price and give people their more choice at a lower cost.

It would allow us to put our trading eggs in more baskets which would give better security and bargaining power.


WTO delivers

December 8, 2013

The World Trade Organisation has delivered:

The World Trade Organisation (WTO) has agreed on its first-ever global deal aimed at boosting commerce. Analysts say it could add $1 trillion to the global economy.

The agreement – reached in Bali after marathon negotiations between trade ministers from 159 nations – simplifies trade procedures and also makes it easier for the poorest countries to sell their goods by reducing export barriers and allowing such nations more scope to use subsidies to safeguard food supplies.

It is seen as an important step for the WTO, which has struggled to make new trade agreements since being founded in 1995, the BBC’s economics correspondent reports.

“For the first time in our history, the WTO has truly delivered,” says WTO chief Roberto Azevedo. “This time the entire membership came together. We have put the ‘world’ back in World Trade Organisation.”. . .

The core of the deal is trade facilitation:

. . . This is about reducing the costs and delays involved in international trade. It is often described as “cutting red tape”.

Some analysts suggest the benefits could be large. An influential Washington think tank has put the potential gains to the world economy at close to $1tn and 20m million jobs.

It also estimates the cost of administrative barrier as double the cost of tariffs.

The rich countries have agreed to help the poorer WTO members with implementing this agreement.

Another important aspect of the Bali package is about enabling poor countries to sell their goods more easily. This part is about tariffs, and also quota limits on imports.

Rich countries and the more advanced developing countries have agreed to cut tariffs on products from the poorest nations.

The head of New Zealand’s International Business Forum says a new global trade deal agreed by the World Trade Organisation (WTO) will mean cheaper and faster exports.

International Business Forum executive director Stephen Jacobi says exporters’ goods will be fast-tracked through international customs as the facilitation part of the deal cuts down on red tape for traders.

“The main benefit of this agreement is that it will become easier and faster and cheaper to move goods around supply chains, to export our goods around the world, and indeed to import our goods from other countries.”

Business New Zealand chief executive Phil O’Reilly says the WTO deal will boost the confidence of trade ministers meeting in Singapore to try to reach agreement on the proposed Trans-Pacific Partnership trade deal.

The deal marks the WTO’s first global trade agreement since it was created in 1995 and follows years of failed attempts to secure the required unanimous approval from all its members. . . .

British Prime Minister David Cameron says the deal could be worth more than £1 billion a year to British businesses and £70 billion globally.

“. . . By slashing barriers to trade, this deal will also provide a lifeline to the world’s poorest people. Helping developing countries to grow is not only the right thing to do, but it also increases potential markets for us all. So this really is win-win and the World Trade Organisation is to be commended for this historic deal.”

Trade restrictions mean people get less for what they produce and pay more for what they consume and this hurts poorer people and poorer countries hardest.

Freer trade is fairer trade and poorer people and countries have the most to gain from it.


Free trade is only real fair trade

July 31, 2013

Fair Trade – that’s got to be good, hasn’t it?

No.

Over at Anti Dismal, Paul Walker discusses an article in The Economist by Amrita Narlikar and Dan Kim which argues that like a lot of other ideas that sound good in theory,  it does more harm than good in practice:

Despite the claims of its champions, the fair-trade movement doesn’t help alleviate poverty in developing countries. Even worse, it is just another direct farm subsidy of the kind most conscientious consumers despise. In the long term, the world needs free trade, not fair trade. . .

The stated purpose of the fair-trade movement is to give economic security to producers in developing countries — often of unprocessed commodities such as fruits, live animals, and minerals — by requiring companies and consumers to pay a premium on the market price.

Until now, any questioning of the fair-trade movement has been limited to the micro level. The movement has faced repeated criticisms, for example, for the relatively expensive fees that producers must pay to get a fair-trade label, which make it ineffective for many poor farmers. Another area of concern is just how lucrative the process is for middlemen and retailers. Finally, several studies show that very little of the premium that consumers pay actually reaches needy producers. Consumers might be surprised to learn that only one or two percent of the retail price of an expensive cup of “ethical” coffee goes directly to poor farmers.

The adverse effects of fair trade are even more worrying at the macro level. First, fair trade deflects attention from real, long-term solutions to rural poverty in developing countries; and second, it has the potential to fragment the world agricultural market and depress wages for non-fair-trade farm workers. . .

Walker points out in spite of the marketing which tries to convince consumers that Fair Trade is good for producers, they get only a tiny percentage of the money made:

An interesting statistic is that in 2010, retail sales of fair-trade-labelled products totalled about $5.5 billion, with about $66 million premium — or about 1.2 percent of total retail sales — reaching the participating producers. There has to be a better way of helping poor farmers. Having only 1.2 cents out of every dollar spent on fair-trade products reach the target farmers is a hugely inefficient way of helping these people. If people wish to help these farmers there has to be charities out there that can transfer more than 1.2 cents per dollar to them.

Also a more efficient and straightforward way to help poor farmers is to remove the massive OECD subsidies and tariffs we see on agricultural products. In other words, a move towards free trade is needed.

Fair Trade has a powerful brand but it’s not one which really helps producers.

They, and consumers, would have much more to gain from free trade, which is the only real fair trade.


Free Trade made simple

February 19, 2013

Immeasurable amounts of time, effort and money go into free trade negotiations but Tim Worstall shows it doesn’t have to be difficult:

Exports are simply the dreary drudge work we do in order to be able to afford those lovely imports. So, for the EU to “negotiate” a free trade area with the US is very simple. Just stop taxing EU citizens who purchase American goods by imposing tariffs upon them. Similarly, for the US to have free trade with the EU just means lifting those portions of the US Customs code that tax imports from Europe. There, all done. Extraordinarily simple, easy to achieve and yes, it would make us all richer to boot.

Sadly, the economically deluded, the protectionists and others who make money from trade barriers won’t take the simple solution.


Protection, subsidies incentivise meat cheats

February 11, 2013

The discovery of horse meat in burgers in Ireland has been followed by news that up to 100% of meat in some lasagne came from horses too.

Liberty Scott points out that protection and subsidies incentivise the meat cheats:

This is fraud, and should be treated as such.  However, secondary to this are the market distortions created by the Common Agricultural Policy.  Meat moves freely and tariff free within the EU.  However, the EU imposes strict quotas on beef from outside the EU, such as a limit of 1,200 tonnes a year from New Zealand.  It also imposes a 20% tariff within that quota.  Although it allows outside quota beef in, it must have a tariff of around 100-250%.  All NZ beef imported into the EU must meet strict labelling and traceability conditions, unlike the subsidised EU beef.

 
There are obvious pressures to source cheap beef for low priced products, but the EU Common Agricultural Policy prevents this by propping up inefficient producers in the EU.  The quotas on imports should be abolished immediately, and tariffs abolished, so that beef can be imported at low cost and high quality.  It wont stop fraud happening, but reduces the pressure to substitute real beef for cheap alternatives due to trade protectionism.
EU residents pay higher taxes to subsidise inefficient producers and consumers pay more for food, some of which is of lower quality, because of tariffs and reduced competition.

Horse meat is widely eaten in Europe so it might not be a food safety issue though it does call into question the effectiveness of strict food labelling requirements.

Whether or not it’s a food safety issue though is no excuse for fraudulently labelling horse meat as beef. However, there would be a lot less incentive for this if the EU had freer trade with countries outside its borders.


Unions oppose freer trade

October 31, 2012

Unions on both sides of the Tasman are opposing freer trade between Australia and New Zealand.

. . . Approaching the 30th anniversary of Closer Economic Relations (CER), the CTU has teamed up with its counterpart the Australian Council of Trade Unions (ACTU) to fight some of the key recommendations made by productivity commissions of both countries.

The unions have written to the productivity commissions rejecting a proposal to reduce all remaining tariffs to five per cent, unless there is a public inquiry into the impact on jobs. . .

This is a blinkered approach which would hold back both countries.

Tariffs are a subsidy for businesses paid for by consumers.

They are anti-competitive, protect inefficient businesses and workers, restrict choice for customers and inflate prices.

Australia is our biggest trading partner. We have far more to gain from access to a market about five times bigger than ours than we have to lose.

But the gains aren’t all one-way.

The freer trade is across the Tasman the better it is for both countries.

 


Consumers pay price for protecting producers

May 8, 2012

The Canadian commitment to dairy farmers to continue protection is putting the interests of the minority ahead of those of the majority.

It’s consumers who pay the price of tariffs on dairy products of up to 300% . The cost isn’t only a monetary one, they also pay the price of fewer choices.

Most New Zealand farmers resisted being dragged into the real world but now, nearly three decades on, it would be difficult to find any who would want to go back to subsidies and tariffs.

The process of losing subsidies was painful but the result is worth it.

Forcing us to meet the market has made us much better at what we do. We think about, and act on, what people want to buy rather than what the government is going to pay us to produce. Consumers here and overseas have benefitted from that.

The only fair trade is free trade apropos of which Anti-Dismal shows how it started.


Democracies don’t have famines

July 31, 2011

Quote of the week from Roger Kerr:

Less edifying was a session titled ‘An Uncertain Harvest: Investigating Global Food Security’. Malthus seemed to have a couple of seats at the table in a round of agonizing about food security and whether the world can feed its population in the 21st century.

I made the point that food security is often the code word for agricultural protectionism. It has been the excuse for the common agricultural policy and protection of Japan’s rice farmers, for example. If markets are allowed to work, trading is free, and property rights and contracts are secure, it is hard to see why global supply and demand will not balance over the longer term.  As one delegate said, there’s never been a famine in a democracy.  

Consumers never win from protectionism and in the long-term producers don’t either. New Zealand is proof of that.

We might have been dragged kicking and screaming into the real susbisdy-free world in the 1980s but New Zealand farmers are much the stronger for it now.

Protectionism increases the power of politicians and bureaucrats which adds costs and uncertainties.

It also upsets the law of supply and demand, creating unwanted surpluses or unnecessary shortages.

Aid might be needed in the short-term but the best way to tackle famine is to open borders and ditch subsidies.

Fair Trade is a compelling slogan but the only really fair trade is free trade.


Free trade with the land of the not so free – corrected

April 13, 2010

A free trade deal with the USA is one of the government’s goals – as it has been for previous administrations.

John Key pushed the free trade message during his meeting with Vice President Joe Biden.

No-one should be holding their breath while waiting for a positive result though.

To understand just how difficult achieving free trade with the USA will be you only have to look at the strength of  protection in its domestic economy.

The impact of  restrictions on potato growers in Manitoba is a good example:

ALL MANITOBANS:

  • With the new regulations introduced on March 31, 2010, you now have less choice when it comes to picking locally grown potatoes
  • When you buy Manitoba grown red potatoes from a major retailer, you are only supporting Peak of the Market’s 13 member potato growers because of their monopoly control within Manitoba

Small Potato Growers:

  • If you grow even as little as one acre of potatoes, you must apply to Peak of the Market for a permit
  • You are permitted to sell only ‘freshly dug’ potatoes
  • Your potatoes can only be sold in bulk (no pre-packaged bags)
  • Any potatoes unsold by November 1 every year ‘must be given to a food bank’

Farmers’ Markets and Seasonal Vegetable Stands:

  • Farmers wishing to sell potatoes must obtain a permit
  • Potatoes can no longer be sold at any market after November 1 of each year
  • Potatoes can now only be sold in ‘bulk’ (ie. no pre-packaged bags)

Year-Round Vegetable Stands:

  • Under these new regulations, small potato producers are no longer allowed to sell to you

Restaurant Owners:

  • If you wish to feature locally grown potatoes on your menu, they must now be purchased exclusively through Peak of the Market

Vegetable Wholesalers:

  • If you want to sell Manitoba grown potatoes, they must now come exclusively from Peak of the Market

One of the comments left on the blog show what the regulations mean to a single grower:

I am a farm woman and I earn a living growing food especially vegetables. I love farming with a passion , and I’m enthusiastic about planning my garden months ahead. This new regulation will put an almost complete halt to my operation. My seeds are ordered and I have already purchased my potato seeds. I am in disbelief that they some 13 farmers can be so powerful and disregard their fellow Man. farmers. I will also be disappointing my 7 to 10 part-time employees like me enjoy and find great satisfaction in this line of work. I’am creating my own employment and giving someone else a chance at a job in the emplyment section. With ll the talk of supporting small manitoba local farmers, now is the time to speak up because as a grower, it will be a challenge to be able to keep operating as we were in the past. I SINCERELY AM SO VERY HOPEFUL THAT I WILL HAVE FREEDOM TO GROW FOR YOU my vegetables this summer. Jeanne Berard Garden

This is the power 13 potato growers can wield against their immediate neighbours. The combined power of the country’s producers and manufacturers against the perceived threat from New Zealand if protective barriers are lowered will be far worse.

The USA is supposed to be the land of the free but when it comes to trade it’s the land of the not so free.

Hat Tip: Offsetting Behaviour.

CORRECTION:

Julie has pointed out my geogrpahical error – Manitoba is of course in Canada, not the USA.

Producers in the USA are protective about imports but I don’t know any examples, like the Candaian potato one, of protection on their domestic market.


Key invited to Washington

November 17, 2009

The NBR reports that Barack Obama has invited John Key to Washington.

Could this be another tiny step on the long path towards a free trade deal with the USA?


Free trade with US tiny step closer

November 16, 2009

It might be only a tiny step with many giant steps needed before anything actually happens, but President Obama’s support for a Trans-Pacific Partnership is a welcome move towards a free trade agreement.

It follows last week’s the announcement of a New Zealand, China, Hong Kong, closer economic partnership (CEP).

It’s frustrating that so much time and energy goes into these country by country negotiations when it would be so much better to have a global agreement.

But bit by bit is better than nothing at all.

 


Tell your president to play by the rules too

May 25, 2009

This could have been a New Zealander talking:

One of the best ways we can grow market access . . . is by enforcement. In this challenging economic climate, trading partners must play by the rules if we are going to revive our economy as a global community.

But it wasn’t. It was former Dallas Mayor, US Trade Representative Ron Kirk .

He was talking about US meat exports and is very keen on free trade if his first major policy speech, delivered last month, is anything to go by:

“Now is the time to revive global trade and to lay the groundwork for an even more robust, more open trading system in future decades,”

. . .  While some may doubt the virtue of free trade, Kirk said that more rigorous U.S. trade enforcement will ensure that other nations honor their commitments. “We will use all the tools in USTR’s toolbox to go after those trade barriers,” he said. “Stepping up trade enforcement is about opening up markets, not closing them down.”

He needs to talk to President Obama because free trade is a two way street.

It’s no use having the Trade Representative talking about how important it is for other countries to play by the free trade rules for its meat when the USA has just broken those rules by subsidising its dairy exports.


P.J. O’Rourke on capitalism and free trade

April 19, 2009

The Business Herald interviewed USA satirist P.J. O’Rourke who said on capitalism:

The free market is simply a measurement. It’s a yardstick; a bathroom scale. You may hate what you see when you step on a bathroom scale, but you can’t pass a law making yourself thin. And I feel there are a lot of politicians out there who think that you can, or want to tell the public that the public can.

On China:

Two years ago, I spent quite a long time there. And I was there a year ago too, although that was more Hong Kong. But it’s an amazing place. The changes are great. People who say the Chinese economic boom has not come with greater freedoms are only talking about a limited range of freedoms. When people are able to feed themselves, as opposed to unable to feed themselves, that makes them a lot freer. Economic freedoms are a big part of the freedom we use every day. They’re easy to mock, but the freedom we use most often, and to the greatest extent, is economic freedom. And so the Chinese all of a sudden have that, and it’s extraordinary to see. But it also is an important lesson that economic freedom is a necessary, but not sufficient, part of complete freedom.

And On free trade:

People will lie about this. Even if they don’t always understand the free market is to their advantage, they do understand that free trade is to their advantage, in a macro sense over a long period of time. But nobody seems to understand yet that when you restrict your imports you are restricting the actions of your own people and you are hampering the freedoms of other people around the world to indulge in the harmless exchange of goods. People say free trade causes dislocation. In actual fact, it’s the lowering of trade barriers that causes the dislocation. It’s not the natural state of things that causes dislocation, so much as it is the changing from the previously unnatural state of things.

The full interview is here. 

He doesn’t know how to use a computer and writes with a typewriter. As a specialist in work avoidance I concur with his view on the danger of distraction with computers, but there is no way I’d choose a typewriter over a word processor and not just because it’s easier to make corrections when I type faster than I spell.

There’s a link at the bottom of the interview for information on O’Rourk’s John Bonython lecture in Auckland on April 30th. It didn’t work but I found if on the Centre for Independent Studies’ website.

Hat Tip: goNZo Freakpower


FTA has fishhooks

September 30, 2008

The announcement that the United States has signed up for preliminary talks to negotiate a multi-lateral free trade agreement has been greeted with some caution.

Bernard Hickey points out the fish hooks:

A free trade deal with America will never be a deal to make trade free with America. It is a chance for lobbyists in Washington to make money by blocking our dairy, beef and sheep exports, and for America’s most powerful pharmaceutical companies to kill off Pharmac.

And in a later post shows the response from Jerry Kozak, President and CEO of the National Milk Producers Federation:

“The heightened prospect of greater manipulation by New Zealand of not only global markets, but also our domestic industry and policy, would make an already uneven playing field in the global markets even worse,” Kozak said. “This manipulation of our markets will drive down dairy farmer income in America, force farms out of business, and create a ripple effect swamping dairy plants and other rural businesses – all at a time when our economy is slowing and unemployment is rising.”

If I was a conspiracy theorist I might see a link between this and the survey over how much Chinese people trust food in the wake of the melamine poisoning scandal.

The survey was carried out by Sinogie Consulting whose chief executive Bruce McLaughlin said 

There was not much damage to Fonterra at present but that could change in the long term.

“I would say that Fonterra has to keep its head very low in China at the moment. I think if they start shouting too loudly about the Chinese authorities being to blame, then the Chinese authorities will react and it won’t be pretty.”

He’s right that it wouldn’t be pretty, but he doesn’t admit he could be a wee bit biased because as Roarprawn found with a couple of clicks   his company does a lot of work for a big US dairy exporter.


Free Trade deal with US closer

September 23, 2008

Great news – the United States is going to join New Zealand, Singapore, China and Brunei in multi lateral free trade negotiations as part of the Comprehensive Trans-Pacific Strategic Economic Partnership Agreement.

The agreement, commonly known as the “P4”, was signed between Singapore, Chile and New Zealand in 2005. Brunei joined it a year later.

It aims to tear down trade barriers among participants within a decade.

World wide free trade is best, but until we get there, free trade deals with inidividual countries or groups is a lot better than trade restrictions and Phil Goff deserves our gratitude for achieving this progress with the USA.

If this free trade deal goes ahead it will be especially good news for sheep and beef exporters who currently disadvantaged by taxes put in place to protect U.S. meat producers in their local markets.


Fairtrade is unfair

September 7, 2008

The only really fair trade is free trade and some Fairtrade is actually anything but, as Dr Marsden Pririe writes at the Adam Smith Institue:

. . . the Fairtrade movement selects some producers to favour over others, insisting on cooperatives at the expense of family farms. By paying higher than market prices, it ensures that its favoured farmers do not have to respect market conditions which might tell others to cut back production in the event of a world surplus. They continue to plant and expand production, adding to the surplus and depressing prices for millions of poor farmers. As Griffiths says,

This is not just a matter of one lot of farmers receiving a little more and another lot a little less. It means subsidizing 1.5m coffee workers while paying 25m farm families – the coffee growers who are not part of Fairtrade – a lot less. Most of these are subsistence producers, whose income from coffee is tiny. Any fall in income will mean children dying from malnutrition or malaria.

This is one of those cases in which what were probably good intentions have ended up doing far more harm than good. Indeed, Griffiths closes by describing Fairtrade in uncompromising terms as “a scheme which threatens the impoverishment of millions.”

Hat tip: Anti Dismal


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