Groser speech on Trade

May 21st, 2009 at 3:50 pm by David Farrar

Last week gave a very good speech on trade to the US Chamber of Commerce in Washington DC. Worth reading the whole thing, but some extracts:

Clearly there has been erosion in the confidence of the American people in trade policy. It is more serious than it has been for some years but at base, it is not a new phenomenon. People tend to forget that the NAFTA squeezed through the US Congress by a narrow margin back in 1993.  President Clinton, during his first term, tried and failed to get what was then ‘Fast Track’ negotiating authority.

Let us see if we can agree on a more general point. Around the world, not just in Washington, trade is a hard sell politically. Like many trade negotiators I have been dodging protestors – frequently violent protestors – everywhere from New Delhi, Sao Paulo, Brussels, Geneva and let’s not forget the Battle in Seattle.

Unlike NZ, where there is a fairly strong pro-trade consensus, trade liberalisation is very unpopular in many places.

What is the problem here? Have we trade negotiators brought nothing but misery to the world? No, quite the contrary. There is overwhelming evidence that steady, incremental trade liberalisation, widening from its initial narrow focus on industrial tariffs, has underwritten a huge growth in trade, which has in turn been central to higher productivity, higher growth and the spread of technology to improve peoples’ lives.

Developing countries that have picked up on the message and developed strategies of export led growth have transformed their economies. We don’t need to imagine what Korea would be like today if South Korea had not embraced a market-led, export-led strategy. We don’t need to imagine it because we only need to look to their North to see it. I am sure you have all seen those satellite photos that, taken at night, show a dark patch on the Asian continent as the satellite moves across the DMZ from South to a North Korea, substantially without electricity, food or anything much of use to their people’s daily lives.

The same with West and East Germany.

Nor is this expansion of the trading system without highly favourable political and strategic consequences. This is far broader than merely commercial matters. There is an equation between open economic and open political markets. That is an equation that certain leaders in this great town – justifiably called the world’s capital – have always understood over the past 50 years. …

As the US works through the issues, I hope those responsible will not make light of this broader strategic point. That equation between open economic and open political markets has not gone away. If the trade issue is seen simply as some type of mercantilist score card, with pro-trade lobbies on one side and anti-trade lobbies on the other, you will not get the right result.

leads to freer countries. China still has a massively long way to go, but is far less repressive than decades ago.

Now I do not want to insult any merchants in the audience, but it is worth recalling that the intellectual father of the market economy famously said: “When two or more merchants are gathered in the same room, it is usually for the purpose of deceiving the public”.

The market economy must have appropriate regulatory frameworks around it to meet Adam Smith’s point and to be sustainable politically. The market economy has not failed by any rational historical measure – it has been an astonishing success compared with command or feudal economies. It has created vast wealth, a massive increase in life expectancy everywhere, mass literacy, a huge decline in hunger, malnutrition and disease, the spread of economic freedom and ultimately has underpinned the recent remorseless growth towards improved human rights and diverse forms of democratic government.

But completely unregulated capitalism does not make any sense, politically or economically. The problem with the current financial implosion is clearly that the regulatory frameworks had not kept up to the speed of financial innovation. In my view, it is not a failure of the market economy we are witnessing – it is a serious failure of the regulatory frameworks around the market economy.

What an excellent way to put it.

Robert Zoellick, now President of the World Bank and of course a former USTR of great distinction, pointed out recently that the World Bank has shown that 17 of the G20 countries that made a public promise to resist protectionism have implemented trade-restricting measures. Lowering the bar on legal protectionism is no small achievement.

Bastards.

I give you another example. Within the last few months New Zealand and Australia signed a deal with the ten countries of ASEAN whose quality likewise surprised onlookers. Again, within about a decade, we will have one large and fully integrated free trade zone involving the economies of Australia, NZ, Indonesia, Malaysia, Singapore, Vietnam, the Philippines, Thailand and all the other countries of South East Asia. The rest of the world may be having a long reflective conversation with itself on trade, but the countries at the core of the Asia Pacific region are not. We are doing business.

And long may it continue.

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19 Responses to “Groser speech on Trade”

  1. Captain Crab (351 comments) says:

    Brilliant

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  2. garethw (205 comments) says:

    “In my view, it is not a failure of the market economy we are witnessing – it is a serious failure of the regulatory frameworks around the market economy.
    What an excellent way to put it.”

    Great stuff – now someone tell Don Brash: http://www.kiwiblog.co.nz/2009/02/brash_vs_gould.html

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  3. Swiftman the infidel (329 comments) says:

    ‘frequently violent protestors’

    The protesters do not care about trade – free or otherwise – it is just an excuse to be violent.

    Sad.

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  4. paradigm (452 comments) says:

    garethw:
    I agree its probably not correct to state the regulation didn’t keep up – Don Brash is more accurate in noting that the regulation of banks drove them to give away loans to high credit risk people. However Goser is not there to promote unregulated banking within the US, he is there to promote free trade. Agreeing with the predominant mood in the US of regulating the banks will get him in the good books of the audience, and further using the banks as a bit of a scapegoat will leave trade liberialisation looking cleaner.

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  5. Grant Michael McKenna (1,159 comments) says:

    History will probably judge the greatest service “Fill-in” Goff to have done for New Zealand to be his work on the China Free Trade agreement, although the manner in which he handles his party may mean that he will be hailed for his role in keeping socialists out of power for the next twelve years.

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  6. toad (3,674 comments) says:

    Problem is, DPF, that totally free trade leads to this sort of problem re animal welfare and environmental sustainability.

    There needs to be a balance – freedom of trading should not supersede all other considerations, as it does now.

    Well, actually it doesn’t, at least in some regards. We don’t have freedom of trade in coccaine!

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  7. stephen (4,063 comments) says:

    Who said anything about “totally free trade” toad?

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  8. Sushi Goblin (419 comments) says:

    Toad, when you or your Green mates talk about promoting organic food, are you advocating the complete banning of all pesticides?

    Maybe Toad has unwittingly revealed that they, like their GReen party supporters, only see things in black and white, pure and unpure, clean and unclean extremes.

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  9. toad (3,674 comments) says:

    Sushi Goblin, I’m not advocating the complete banning of pesticides. But banning the ones that cause serious environmental harm wouldbe a good look.

    I have no problem with sprinkling a bit of derris dust around – it is an organic pesicide. I d it myself in my hime garden, as I do with metaldehyde to kill snails.

    What I do have a problem with is organophosphates and other bio-accumulative poisons that hang around and become a part of what we eat.

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  10. toad (3,674 comments) says:

    stephen said:Who said anything about “totally free trade” toad?

    Um, National, Labour & ACT. Shit, the Maori Party and Greens alone can’t defeat that cabal. So need to get the supporters of other parties on board to pressure their Parliamentary representatives to support fair trade.

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  11. Kimble (4,438 comments) says:

    “… to pressure their Parliamentary representatives to support fair trade.”

    And the arbiter of what is fair and not? Well, that would have to be the Greens as well. And if it isnt, then you can rest assured they will be just as shrill about that too.

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  12. Kimble (4,438 comments) says:

    What it comes down to for the Greens, is that they are the only enlightened ones who know, just know in their hearts, the value of everything and what the price should be.

    They know if someone is getting paid too little, and they know if someone is being forced to pay too much.

    They will KNOW if trade is fair or not, and if you disagree with them, well… you must be being unfair to the person they are looking to advantage. You must hate that person, or you are just greedy.

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  13. BR (81 comments) says:

    “But completely unregulated capitalism does not make any sense, politically or economically.”

    I can understand that when the media are well and truly in the pockets of the left, unregulated capitalism does not make any sense politically, but why would it not make sense economically?

    Other than criminal activity such as theft, fraud and drug dealing, why does the freedom of exchange between consenting adults need to be interfered with by a government?

    Bill

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  14. Kimble (4,438 comments) says:

    Because not all consenting adults play nice.

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  15. James (1,338 comments) says:

    “But completely unregulated capitalism does not make any sense, politically or economically. The problem with the current financial implosion is clearly that the regulatory frameworks had not kept up to the speed of financial innovation. In my view, it is not a failure of the market economy we are witnessing – it is a serious failure of the regulatory frameworks around the market economy. ”

    Hes an idiot making the same mistake as the lefties do.The free market is never “unregulated”…indeed its regulated to a far higher,more responsive degree by the free choice of all its participants than State regulation can ever hope to achieve.

    “Completely unregulated capitalism” is the only economic system that makes sense…because its the morally superior,and therefore the most practicle system availible to man with which to interact with his fellows.

    No….Grosers fails basic freedom 101….like the National party in general.

    “Because not all consenting adults play nice.”

    Doesn’t matter….as long as the interactions consentual its no business of the state.

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  16. Ferdinand (93 comments) says:

    Is this a National Party press release?

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  17. expat (4,050 comments) says:

    Ferdinand=labore hack. fact.

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  18. stephen (4,063 comments) says:

    As Groser is no fan of unregulated capitalism, I can’t see him being a fan of totally free trade.

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  19. He-Man (270 comments) says:

    Free Trade is not equal to Fair Trade

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