Winston backing Brexit

May 15th, 2016 at 12:00 pm by David Farrar

Breitbart reports:

The Remain campaign is “contaminating” Britain’s democratic process by relying on “outside money” and foreign interests to tell Brits how to vote, the former Deputy Prime Minister of New Zealand has said.

Speaking at Westminster, Winston Peters, who also served as his country’s Foreign Minister and Treasurer, mocked suggestions Britain would suffer outside the European Union (EU) and said the UK would be welcomed by the Commonwealth.

“The British people are standing on the cusp of a truly exciting future,” he said. “It will not be easy to achieve that future but if there’s one nation that can do it, it is the British.”

Good God. I may be on the same side as Winston on an issue.

Not that I’m totally decided (and of course I don’t vote) but the campaign for Bremain has been pretty awful and failed to portray any positives from membership – just a scare campaign against leaving.

However there is no doubt a Brexit would have significant negative consequences for the UK in the short term. It would hit the economy as there would be two years of uncertainty and businesses won’t invest when the environment is uncertain.

But in the medium to long term those consequences would fade, and there will be advantages of independence.

If the EU was more democratic, I’d be more keen to see the UK remain. But the EU structure is fundamentally flawed and I am not sure if it fixable.

The cost of Brexit

April 20th, 2016 at 12:00 pm by David Farrar

The Guardian reports:

George Osborne has said the British government would lose £36bn in net tax receipts, equivalent to 8p on the basic rate of income tax or 7p on VAT, if the UK leaves the EU and negotiates a bilateral trade agreement with the bloc.

The chancellor said a 200-page Treasury analysis of the impact of Brexit showed it would make British families poorer, and he accused leave campaigners of believing that was a price worth paying. But out campaigners said that the chancellor was talking down the British economy in an unpatriotic way.

The study concluded that a Canadian-style model, in which the UK negotiated a new trade deal with the EU that did not require freedom of movement, would reduce Britain’s GDP by 6.2%.

The Bremain campaign seems to be campaigning entirely on scaring people from Brexit, rather than the positive benefits of the EU. I’m not sure it is a good strategy.

Another group, Grassroots Out, argued that the £4,300 figure amounted to 21p a person a day in return for national sovereignty.

A good line.

Would NZ do better if UK was not in the EU?

April 5th, 2016 at 4:00 pm by David Farrar

The Herald reports:

Europe is stronger with Britain in it and if New Zealand wasn’t so far away it would want to join such a union, Prime Minister John Key says.

Both those statements are true.

However the question for the UK is not whether the EU is stronger by having Britain in it, but whether Britain is stronger being in the EU.

Likewise the issue for NZ isn’t what is better for the EU, but what is better for NZ.

I think you could argue that if the UK was not in the EU, it would be better for New Zealand.

Some of the recent restrictions on Kiwis working in the UK are because the UK is trying to limit immigration from the EU. If they were not in the EU, then those restrictions on Kiwis would probably not have been put in place.

Europe adopts the Australian system

March 23rd, 2016 at 11:00 am by David Farrar

The Guardian reports:

Migrants were given a one-day deadline to reach Europe as leaders announced anyone landing in Greece after midnight on Saturday would be swiftly deported.

A deadly scramble for the last boats over the Aegean to the Greek islands began after a €6 billion (£2.3 billion) aid-for-deportations deal with Turkey was agreed in Brussels.

Turkish police on Friday intercepted 3,000 migrants attempting to cross on land and sea in a major operation involving coast guard and helicopters, as Ankara at last showed a willingness to halt the human tide.

From Sunday morning, any asylum seeker who lands on the holiday islands including Kos, Lesbos and Chios with no longer be able to catch ferries to Athens, but will be swiftly interviewed by asylum officials or judges at new detention camps.

From April 4, once Greek law has begun, deportations to Turkey will begin with leaders hoping within weeks that the process will take no more than days.

Effectively Europe has gone for the Australian system – removing the incentive for people to cross by sea and down themselves.

One of the most basic responsibilities of a government is security, and that includes secure borders. People want to be able to determine their country’s destiny through the ballot box, not through having millions of people come across their borders.

Boris backs Brexit

February 22nd, 2016 at 4:00 pm by David Farrar

Stuff reports:

A new battle for Britain has erupted with London Mayor Boris Johnson saying he would join the campaign to encourage Britain to leave the European Union.

The move on Sunday (Monday, NZT) posed a direct challenge to Prime Minister David Cameron, who has launched a major push to keep his country within the 28-nation bloc.

The popular, raffish Johnson immediately becomes the most prominent Conservative Party politician to break ranks with fellow Conservative Cameron’s vision of the best course for Britain in a June 23 referendum on continued EU membership.

This is significant. However the remain camp has a good lead in the polls for now. The last two had remain 15% to 18% ahead. However the leave camp have some excellent campaigners.

Most Conservative Party members back a Brexit and they will vote for the next leader. Boris will lose institutional support for his stance, but may gain member support – and they will elect the next Leader and PM.

The final UK-EU deal

February 21st, 2016 at 7:00 am by David Farrar

The final deal has been struck and the UK goes to the polls on 23 June to vote on whether to remain in the EU or leave it.

Details are:

  • An emergency brake on EU migrants claiming in-work benefits. This was to be for four years but now is for seven years. However a maximum of four years for an individual.
  • Restrictions on child benefit for EU migrants will kick in at a reduced rate – indexed to the rate of a migrant’s home country
  • An opt-out from the EU’s historic commitment to forge an “ever closer union among the peoples of Europe
  • UK will have the right to impose a handbrake to refer contentious financial regulation to a meeting of EU leaders in the European council

It will be interesting to see which Ministers are for or against Brexit. Michael Gove is going to campaign to leave and he is popular and respected. This is no surprise though.

The real interest will be on what Boris does?

If the public vote to leave the EU, it is hard to see Cameron being able to remain as PM for long. This is good for those who want his job.

However if you campaign for Brexit and force the PM out, the party may blame you for the result.

Normally a party will be highly focused on unity but with UK Labour so divided and unelectable, the Conservatives can take more risks than normal.

The UK EU deal

February 11th, 2016 at 8:41 am by David Farrar

The Telegraph reports:

Cabinet ministers are threatening to defy David Cameron by publicly speaking out against his deal with the European Union, which they are warning will fail to cut migration.

The Prime Minister was handed an offer on Tuesday by Brussels which critics said contained only “watered-down” pledges. The deal will give EU migrants “gradually increasing access” to benefits after they come to the UK – as opposed to the outright ban Mr Cameron had previously demanded.

Despite critics describing the deal as “pathetic” and “insubstantial”, Mr Cameron welcomed the offer by Donald Tusk, the president of the European Council, and said he “sure would” take the deal being offered.

Last night Cabinet sources accused Mr Cameron of effectively beginning the campaign for Britain to stay in the EU and warned that they will now start speaking out in favour of a “Brexit”.

Cameron has in fact managed to get some reasonable concessions. It remains to be seen whether the electorate judge them to be enough.
But in a boost to him, Theresa May has said she will now campaign to remain in. She was seen as a potential leader for an out campaign.
The main points of the deal are:
  • An emergency brake will limit migrants’ access to benefits for four years
  • New powers to stop suspected terrorists and criminals coming to the UK, not only if a threat is “imminent”
  • New rules will stop people coming to the UK via “sham marriages”
  • Recognises that the UK “is not committed to further political integration into the European Union”
  • A “red card” system will allow the House of Commons to band together with like-minded EU parliaments and block unwanted Brussels legislation

An FTA with the EU

October 19th, 2015 at 9:00 am by David Farrar

The Herald reports:

The ink is barely dry on the TPP and New Zealand has the prospect of another giant free trade deal in the offing with the European Union taking the first steps towards an FTA with New Zealand.

It was announced early this morning that the EU Commission will seek to negotiate separate FTAs with both New Zealand and Australia as part of its trade strategy for the next four years.

The caveat is that talks will take in account “EU agricultural sensitivities.”

That’s great news.

It won’t be a gold standard one as the EU Common Agricultural Policy is too entrenched. But if we can make progress towards liberalisation, that would be excellent.

EU Trade Commissioner Cecilia Malmstrom told the New Zealand Herald after the release of the strategy that it made political and economic sense to hold talks with New Zealand.

“When I started this job [a year ago] I was a bit surprised that we have free trade agreements either concluded or ongoing with so many part of the world but not with New Zealand and Australia who are national allies, friends, partners in so many other issues.”

Talks were happening already to establish the level of ambition which would be announced soon.

Yep long overdue.

Agriculture in the EU is still heavily subsidised, with payments under the Common Agriculture Policy accounting for 40 per cent of the EU budget but the levels of subsidy are reducing over time.

Ridiculous. NZ is proof that the agricultural sector actually does better without subsidies.

Can the EU force countries to take refugees?

September 24th, 2015 at 11:21 am by David Farrar

Stuff reports:

The European Union approved a plan on Tuesday (Wednesday NZ Time) to share out 120,000 refugees across its 28 states, overriding vehement opposition from four ex-communist eastern nations.

Diplomats said interior ministers meeting in Brussels had voted to launch the scheme, backed by Germany and other big powers, in order to tackle the continent’s worst refugee crisis since World War Two.

The Czech minister tweeted that he had voted against, along with colleagues from Slovakia, Romania and Hungary, with Finland abstaining.

So being a member of the EU now means other countries decide your refugee quota for you.  What will they do if countries refuse?

At present most in the UK want to remain in the EU, but how the EU deals with this issue may change that.

Prague had earlier warned that any attempt to impose such a scheme would be unworkable and could end in “big ridicule” for governments and EU authorities.

“We will soon realise that the emperor has no clothes. Common sense lost today,” Czech Interior Minister Milan Chovanec tweeted after the vote.

Slovak Prime Minister Robert Fico said pushing through the quota system had “nonsensically” caused a deep rift over a highly sensitive issue and that, “as long as I am prime minister”, Slovakia would not implement a quota.

And worse:

“If we fail to find the right solution in the long term, the migrant crisis could truly threaten the existence of the European Union. But I am not a pessimist, I believe that we will find joint measures,” Slovenian Prime Minister Miro Cerar told Reuters in an interview.

The reason for the opposition:

Eastern states with no tradition of integrating large numbers of Muslims are anxious about the impact on their societies and keen to avoid any signal that might encourage even more desperate people to set sail across the Mediterranean for Europe.

This is the same issue Australia has had. If you don’t take a hard line, then you encourage hundreds of thousands more to set sail.

Countries should take refugees – but from the refugee camps through the UNHCR system. Encouraging people to set sail to Europe will only end badly.

Why Europe Failed

August 31st, 2015 at 7:00 am by David Farrar

Oliver Hartwich at the NZ Initiative has had an essay published on Why Europe Failed. The forward is by former Australian PM John Howard who notes:

Oliver Hartwich has written a compelling essay, Why Europe Failed. He lucidly identifies the essentially undemocratic character of much of the European project. Political elites, unaccountable to national electorates, impose decisions on tens of millions of people without any real fear of rebuke. Hartwich provides a sobering analysis of an ageing Europe, overburdened by the size of its welfare state.

Some quotes from the essay:

Contrast this with the only one statistic in which Europe leads the world by a mile: The EU’s 28 member states account for 54% of global spending on social welfare.

But that is almost a by the way. The key thing:

Europe’s problems are more fundamental. Its elitist structure of governance has locked its political institutions into paralysis. Its economic model of a mixed market economy is unable to keep up pace with more dynamic world regions. Its demographic changes will test the limits of its expanding welfare state. And all of this is happening against a background of increased security concerns on Europe’s borders with Africa, the Arab world, and Russia. Europe is being challenged on many fronts at once, and even this is an understatement. 

He looks at the European Parliament:

The first problem is the most basic one: Unlike national parliaments, the European Parliament does not have the right to initiate lawmaking procedures. This is not a triviality. Parliaments are often called legislatures because that is what they are there for: to legislate. The European Parliament can neither make laws on its own (it needs the European Commission, i.e. the executive branch of the EU, to do that), nor easily remove the executive (it needs a two-thirds majority). In effect, the European Parliament hardly deserves its name. It is a toothless parliament by the standards of most democratic nations. 

If you abolished it, would anyone notice?

Europe’s political and economic problems will soon be exacerbated by its ageing society. In a number of European countries, birth rates have been very low for several decades. The replacement fertility rate, that is, the fertility rate at which populations would remain constant over time, is 2.1. That means if women have, on average, 2.1 children over their lifetime, then every generation would be replaced by a new generation of the same size. The current average fertility rate for the EU, however, stands at just 1.58.  This means the next generation will be about a quarter smaller than the current generation. If the trend continues, this new generation will be succeeded by another generation that is another 25% smaller. 

Breeding yourself out of existence.

The consequences of these demographic changes will be severe. It will be difficult for European nations to service their debt, let alone repay it, with both shrinking and ageing populations. There is only so much that increased productivity can do to compensate for a collapsing workforce. 

In other words, more countries may go the way of Greece – welfare commitments that their economy simply can’t provide.

Hartwich’s conclusion:

The standout reasons for Europe’s decline are its elitist political system and its inflated welfare state – and the interrelations between these two. Europe no longer rules the world. Nor can it hope to regain the dominant position it once enjoyed. Europe’s decline is entirely self-inflicted. It is a continent that first destroyed itself in two world wars. It then weakened itself by inflating the activities of the state while creating a bureaucratic, isolated, and elitist superstructure in the form of the EU. It also wrecked its monetary system by introducing a common currency that was never going to work and caused more problems than it ever solved.

In many ways, Europe is a case study in how not to conduct one’s economic and political affairs, which makes it all the more worthwhile to pay attention to European affairs so we do not repeat their mistakes here.

But don’t hold your breath. Short-term political gains through welfare spending is too tempting for politicians anywhere and too beguiling for voters.

Greece is only the first European country to effectively go bankrupt. It is unlikely to be the last.


Fiscal union for the Eurozone?

July 20th, 2015 at 4:00 pm by David Farrar

Stuff reports:

French President Francois Hollande has called for the creation of a eurozone government and for citizens to renew their faith in the European project, which has been weakened by the Greek crisis.

Reviving an idea originally put forward by former European Commission chief Jacques Delors, Mr Hollande proposed “a government of the eurozone [with] a specific budget as well as a parliament to ensure its democratic control”.

If you want to keep the monetary union of the Euro, then you need fiscal union also. Greece has shown you can’t have a country in monetary union that doesn’t follow the same basic fiscal policy as the rest of the union.

But I can’t see national governments giving up fiscal policy control.

EU wants a minimum tax rate!

June 5th, 2015 at 3:00 pm by David Farrar

The Telegraph reports:

It also emerged that they are also pushing plans to introduce a minimum corporation tax rate across the continent in a move that could result in higher taxes on British companies. …

On Wednesday, EU officials will discuss how to tackle tax avoidance and create a system of “fair, transparent and growth friendly” corporation taxation at an orientation debate in the College of Commissioners, a forum used to float ideas, ahead of an announcement in June.

The discussion will include plans to create a basic rate of corporation tax across Europe, reported Handelsblatt, the German business newspaper. The

“Germany and France and demanding a minimum threshold value; we are reacting to that,” one commission source told the newspaper.

A commission spokesman denied the reports. At 20 per cent, Britain has the lowest corporation tax rate in the G7, and among the lowest in western Europe.

How about a maximum tax rate instead of say 25%!

If the EU tries to bring in a minimum corporate tax rate, it would be very good for non EU members!

The EU was made in the UK?

January 30th, 2015 at 12:00 pm by David Farrar

Sir Michael Leigh writes:

Britain is in the grip of a prolonged political crisis concerning its own constitutional order and its membership in the European Union, exacerbated by acrimonious and misleading arguments over immigration. As in other European countries, a demagogic anti-EU, anti-immigration movement has driven the established parties into a defensive posture. The current prime minister, David Cameron, felt compelled to promise an “in/out” referendum on Britain’s EU membership if his Conservative Party returns to power after the May 2015 general election. As a further gesture to the populists, he is now hinting at advancing the date of this referendum.

But such efforts at appeasement have proved futile, provoking ever-increasing demands. At the same time, British leaders have upset natural allies within the EU and missed an opportunity to become the leading European voice advocating forward-looking policies such as completing the single market, strengthening Europe’s global competitiveness, and building an energy union. The government has also failed to explain to voters that the EU today bears strong signs of British design and as such serves Britain’s interests well. …

Margaret Thatcher joined forces with Commission president Jacques Delors in the late 1980s, in order to eliminate restrictions on the free circulation of goods, services, capital, and workers — the original goal of the common market. The Commissioner in charge at the time, Arthur Cockfield, as well as the then-Secretary-General, David Williamson, were both British. For decades, the single EU market has favored British exports of goods and services, especially financial services. Since 2010, the most senior EU official in charge of the single market and services has been British. Jonathan Hill, the Commissioner appointed in 2014 to regulate the single market, is also British. The Danish and Swedish Commissioners for competition policy and trade, who took office last November, support a liberal agenda in line with British thinking. Today, they are engaged in challenging negotiations with the United States for a Transatlantic Trade and Investment Partnership.

The EU is at its best when it liberalises trade and services, and allows Europe to be one economy. It is at its worse when it goes beyond the economic focus and is seen as interfering in domestic affairs of countries.

Germany backs EU and NZ free trade agreement

November 15th, 2014 at 9:00 am by David Farrar

The Herald reports:

German Chancellor Angela Merkel says she will back a New Zealand push for a free trade agreement with the European Union – words that will be music to Prime Minister John Key’s ears.

Speaking to media during her visit to Auckland today, Dr Merkel said Germany would champion New Zealand’s cause.

“I think we should also come out in favour of a free trade agreement between the EU and New Zealand. New Zealand has such agreements with China and other areas of the world.

“As a member of the European Union, Germany is very much championing, despite the great distance that separates us, to foster our trade relationships, to bring forward trade with the European Union.”

She said she was impressed by New Zealand’s growth, saying it was because the country was open minded and encouraged free trade.

Mr Key said Germany was already a critical trade partner and two-trade was now larger than with the United Kingdom. However, there was scope to do more and he had spoken about NZ’s aspirations for a free trade agreement with the EU.

Interesting that Germany is now a bigger trading partner than the UK.

An FTA with the EU would be great as they are highly protectionist. But it would require consent of all EU countries and I can’t see France agreeing.

Two way trade with the EU is around $12 billion a year.

Herald on EU

June 6th, 2014 at 12:00 pm by David Farrar

The Herald editorial from Tuesday:

From time to time, national referendums have thrown a spanner in the European Union’s plans for closer ties between its members. But never has there been such a broad renunciation of that process as that delivered in the recent European Parliament elections. In an alarming number of the EU’s 28 member states, populist parties from the far right and far left triumphed over their mainstream opponents.

The impact was most notable in Britain, where the UK Independence Party topped the poll with 28 per cent of the vote, and France, where the anti-European National Front did likewise with 25 per cent support. Centrist pro-European parties will continue to be the dominant force in Brussels, but this is not an outcome that can be shrugged off.

It is clear that after 60 years, during which the EU and its forebears have, by and large, orchestrated peace and prosperity, many of its 500 million people have fallen out of love with the pan-Europe ideology.

They complain about the arrogance and expense of bureaucrats in Brussels who are intent on reducing the important of their national parliament. They regret replacing their national currencies with the euro, which, rather than making Europe more equal, has created instability. And those in the north decry an expansion that has saddled them with indebted nations in southern Europe. The EU has, says David Cameron, the British Prime Minister, become “too big, too bossy and too interfering”.

Especially the European courts over-riding national legislatures.

Others, however, believe the EU can be saved by reform.

The latter course can prevail if the European Parliament heeds the unmistakable lesson of this election and puts a brake on the drive towards ever closer union. It needs also to be less intrusive in the everyday affairs of its members. Equally, it must convince Europeans that it provides the framework to outperform other developed countries economically. The most convincing answer to the eurosceptics lies, as Germany’s Angela Merkel suggested, in “improving competitiveness on growth and creating jobs”. At some point, those countries using the euro must also embrace a more comprehensive fiscal union. If that is not done, a return to national currencies is the logical step.

You can’t have monetary union without fiscal union. Which is one reason Scotland won’t be able to keep the pound if they vote for independence – which is unlikely on the polls.

The economic tide is swinging in favour of the pro-Europeans. Much of the EU has been late to catch the global upswing, but even the weaker economies are starting to benefit. They will gain also from the tough measures taken over the past few years. Further, the conclusion of a successful free-trade pact with the United States would hammer home the message that union can deliver more wealth than individual endeavour.

A focus on free trade and freer economies is what the EU needs, not more regulations.

Oliver Hartwich also writes on the EU lack of democracy:

What is democracy? Well, usually democracy is when the people vote in an election and the winner then happens to form a government. It is as simple as that. And what is European Union democracy? It is when the people vote in an election and, regardless of the outcome, German chancellor Angela Merkel decides on the next president of the European Commission.

Oliver’s article is a fascinating analysis of the power games currently going on.

UKIP and French National Front storm European elections

May 26th, 2014 at 1:13 pm by David Farrar

The Guardian reports:

Nigel Farage unleashed his much promised political earthquake across British politics as Ukip easily topped the poll in the European elections, marking the first time in modern history that neither Labour nor theConservatives have won a British national election.

The Liberal Democrats have suffered a near total wipeout and are course to lose all but one of their 11 MEPs, placing serious pressure on Nick Clegg to justify his leadership of his party.

In a stunning warning to the established political parties, which lined up over the weekend to say they took the Ukip threat seriously, Farage’s party was expected to win about 28% of the national poll. This was a near doubling of the 16.5% it secured in the last European elections in 2009 when it came second to the Tories and took 13 seats. Just 20 years ago, in its first European parliamentary election, Ukip managed just 1% of the vote.

Labour predicted that, when all the final results were assembled, they would have polled 25.7%, with the Tories on 24.5 % and the Green partyin fourth place.

Farage said the result justified the description of an earthquake because “never before in the history of British politics has a party seen to be an insurgent party ever topped the polls in a national election”.

This makes the 2015 UK election very difficult to predict. UKIP take a lot of votes away from the Conservatives and this hurts them as they have FPP. But if they manage some sort of arrangement, then their combined vote will be higher than Labour, Greens and Lib Dems.

Ironically the UKIP may end up defeating the main thing they want – a referendum on Europe. If there is a change of Government, then there won’t be one.

Meanwhile in France:

France’s Front National won the election there with a projected 25% of the vote, while the governing socialists of President François Hollande collapsed to 14%, according to exit polls.

It is disturbing to see neo-Nazis getting elected in France, Germany, Austria, Greece etc.

Does UKIP doing well mean they will leave the EU?

April 30th, 2014 at 4:00 pm by David Farrar

Iain Martin writes at the Telegraph:

YouGov for The Sunday Times yesterday asked voters how they would vote in the event of a referendum on the UK’s membership of the EU. Despite the country being, according to Ukippers, on the brink of a revolution which will bring down the entire political Establishment and liberate Britain from the LibLabCon tyranny, the numbers suggest that Britain wants to stay in the EU.

Asked how they would vote in an in/out referendum, 40 per cent said they would vote to stay in, 37 per cent said out, 18 per cent don’t know and 5 per cent would stay at home watching Cash in the Attic. Obviously a lot to play for, with as you might expect, a large number of don’t knows. Still, the inners are in front, despite all the recent excitement related to the European elections.

And look at the result when a second question was asked.

“Imagine the British government under David Cameron renegotiated our relationship with Europe and said that Britain’s interests were now protected, and David Cameron recommended that Britain remain a member of the European Union on the new terms. How would you then vote in a referendum on the issue?”

In such circumstances, 50 per cent say they would vote to stay in, 26 per cent to leave, 18 per cent don’t know and 5 per cent would stay at home watching the repeats of Location, Location, Location which (I’m told) follow Cash in the Attic.

So it could go either way if no renegotiation, but will stay in if there is one.

A caveat applies, of course. Perhaps Cameron would not get a renegotiation, with other major EU countries perhaps being incapable of seeing that unless there is a major shift in how the EU is structured one of its key members (the UK) could decide to try something else instead. 

It takes only one other country to block it, but if they do so then they will be responsible for the likely departure of the UK.

What I think we will see is a two-tier EU. One bloc being committed to full integration, and another to a less binding set of rules.

Before the hardliners from among the Ukip hordes – increasingly almost as intolerant of dissent as hardline Scottish nationalists, I note – denounce me as a traitor to my country, I want to make it clear that I am a moderate Eurosceptic who cherishes European culture but thinks the EU as currently constituted is bloated and bossy. In the event of a referendum I am persuadable, based on the arguments laid out by the inners and the outers, although like many people, I particularly hate being shouted at by golf club bar bores. I’m perfectly prepared to accept that the UK could have a successful and bright future trading as either an associate member of the EU or completely outside it with free trade agreements, if the outers explain, calmly, how the numerous obstacles might be overcome.

I have a similar view.

Will NZs boom be affected by the Transatlantic Trade and Investment Partnership?

March 28th, 2014 at 2:00 pm by David Farrar

Sir Michael Leigh blogs at the German Marshall Fund:

New Zealand is enjoying an export-led boom. At 3.1 percent, it boasts the highest GDP growth rate of any developed country. Reconstruction after the devastating 2012 Christchurch earthquake has provided an additional boost. Prime Minister John Key of the National Party is expected to win a third term of office in September, an achievement paralleled only by German Chancellor Angela Merkel in the period following the global financial crisis.

National is at 79% on iPredict to still be in Government after the election. This is exceptionally high. In 2011, I don’t think they were ever above 61%.

Much of New Zealand’s growth is fueled by trade with China, which has displaced Australia as the country’s largest export market. New Zealand’s exports to China rose by a spectacular 45 percent in 2013. Milk powder and other dairy products were by far the largest export items but meat and forest products also made major inroads into the Chinese market. Four factors explain the phenomenal growth figures: the implementation of the 2008 free trade agreement between China and New Zealand, Beijing’s first such agreement with an OECD country; rising demand for quality food products from China’s growing middle class, which is set to double within a decade; the high quality and competitive pricing of New Zealand’s agricultural products; and the proactive export strategy of Fonterra, the dairy giant owned by 13,000 New Zealand dairy farmers.

The FTA was Labour’s greatest gift to NZ. It’s appalling that Greens and NZ First opposed it. But one has to also credit Fonterra for their export strategy. An FTA provided an opportunity only.

Observers here worry about the country drifting into a dairy-fuelled version of the Dutch disease, with insufficient economic diversification, inflation, and a property bubble. To counter this, New Zealand’s agricultural production is moving up the value scale. The country’s eight universities are teaming up with industry to foster innovation. New Zealand increasingly exports know-how, technology, and services, linked to investment projects. Still, agriculture remains the mainstay of the economy.

It is not a choice of high tech or agriculture. We need to do both.

The Transatlantic Trade and Investment Partnership (TTIP), now being negotiated by the United States and the European Union, excites curiosity and concern. New Zealanders share Europe’s apprehensions about its possible implications for food security and about the need to maintain high health, safety, and environmental standards. They are also concerned about the bilateral nature of the agreement and the apparent absence of provisions for accession by third parties.

New Zealand is one of only six WTO members that do not have current or expected preferential trade deals with the EU. The abolition of transatlantic tariffs on food exports could put New Zealand at a further competitive disadvantage. There are high tariff peaks for dairy and meat products in the EU and United States which would still apply to New Zealand exports.

This is why the best outcome would be to conclude the Doha round and have a multilateral agreement to reduce tariffs. Without that we run the risk of bilateral and plurilateral trade agreements disadvantaging New Zealand in a relative sense.

More fundamentally, New Zealanders recognize TTIP’s potential for strengthening the rules-based international trading system, in which they have a strong interest. After the failure of the Doha Development Agenda, there may never again be another comprehensive round of global trade liberalization, despite the modest breakthrough in Bali last year. New Zealand would then have to rely on bilateral agreements such as its FTA with China, or the agreement under negotiation with Russia.

It is hard to see the Doha round ever being completed.

Kiwis are under no illusion concerning these countries’ commitments to intellectual property protection, health and safety standards, or judicial independence. New Zealand suspended trade negotiations with Vladimir Putin’s cherished Customs Union after Russia’s forceful annexation of Crimea. This and tensions in the South China Sea are reminders that Moscow and Beijing may not always be reliable partners. TPP and TTIP would effectively set global standards which could be adopted by countries around the world and codified by the WTO.

Former U.S. Secretary of State Hillary Clinton described TTIP as the economic equivalent of NATO. For all their geographic isolation and growing economic integration with Australia, Asia, and the Pacific, New Zealanders feel they belong to the West and would broadly welcome TTIP as reinforcing values they share with Europe and the United States.

I’ve not paid too much attention to TTIP (as opposed to TPP), but maybe it could be the base for a NZ-EU agreement of our own one day?

A NZ-EU free trade pact?

March 26th, 2014 at 6:10 am by David Farrar

Stuff reports:

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. 

The EU is highly protectionist so a free trade pact would be a very good thing.

However as indicated, not likely to happen anytime soon. However an agreement for one to be considered is a worthwhile start.

EU myth busting

June 30th, 2013 at 10:42 am by David Farrar

The EU has set up a myth busting page, which is a very good idea. While I think the EU has some fundamental flaws (lack of democracy, involved in two many areas) it is fair to say they get blamed for some stuff unfairly. So far they have blogged:

  •  EU laws do not prevent churches from taking steps to deal with bat infestations
  • The EU does not “blacklist” beaches: EU laws do not prevent anyone from swimming anywhere, but who wants to swim in poo?
  • Lack of UK action not EU rules responsible for UK Jam manufacturer being in a sticky situation

European views on Europe

May 16th, 2013 at 9:00 am by David Farrar



This table is from Stats Chat.

So every country thinks Germans are the most trustworthy, except the Greece who think they are!

For least trustworthy, the British choose the French (fair enough), three countries choose Greece, Italy chooses itself (which is hilarious but perceptive) and Greece and Poland choose Germany. Maybe due to invasions but how do Poles say Germany is both most and least?

France and Germany are the only two countries chosen for most arrogant (also fair enough) while interestingly citizens of each country choose themselves as most compassionate – which suggest we see compassion locally.


The Euro killing Europe?

March 27th, 2013 at 2:00 pm by David Farrar

Daniel Altman at Foreign Policy writes:

In 1999, the traditionally hard currencies of Europe’s north merged with the softer currencies of the south to form a new money that was somehow supposed to be stronger than any of the ones it replaced. Under the stewardship of the European Central Bank (ECB) in Frankfurt, the euro was meant to — and did — become a reserve currency to rival the dollar. Though the supposedly prudent northern countries didn’t always keep their budget deficits under control, they still managed to survive the worst of the global economic downturn. By contrast, the profligacy of the south, together with its flawed banking systems, has created a hotbed of crises that stretch 2,300 miles from Lisbon to Nicosia.

These crises would have been a lot shorter if the countries involved — Greece, Portugal, Spain, now Cyprus, soon Slovenia, and perhaps Italy for a second time — had possessed their own currencies. But all of them use the euro, so their monetary policy is set in Frankfurt at the ECB. Instead of devaluing their currencies in order to spur exports and ease the repayment of debts, all of these countries have had to undergo some combination of fiscal austerity, deflation, and, most notably in Cyprus’s case, loss of assets.

The lesson is you can’t have monetary union without fiscal union. Monetary policy and fiscal policy need to work together.

The interesting thing is the impact on political stability as well. They have a table showing how Parliaments in southern Europe have become more fragmented and extreme, which threatens Europe as a whole to a degree. They use the  Herfindahl Index to calculate the fragmentation.

The NZ Parliament Herfindahl Index is currently 0.34.

The Euro problem

March 11th, 2013 at 12:00 pm by David Farrar

Brian Carney at the WSJ reports:

Seventeen years ago, Bernard Connolly foretold the misery that awaited the European Union. Given that he was an instrumental figure in the EU bureaucracy and publicly expressed his doubts in a book called “The Rotten Heart of Europe,” he was promptly fired. Mr. Connolly takes no pleasure now in having seen his prediction come true.

The solutions:

Two immediate solutions present themselves, Mr. Connolly says, neither appetizing. Either Germany pays “something like 10% of German GDP a year, every year, forever” to the crisis-hit countries to keep them in the euro. Or the economy gets so bad in Greece or Spain or elsewhere that voters finally say, ” ‘Well, we’ll chuck the whole lot of you out.’ Now, that’s not a very pleasant prospect.” He’s thinking specifically, in the chuck-’em-out scenario, about the rise of neo-fascists like the Golden Dawn faction in Greece.

The other “solution” is they leave the Eurozone.

Yet unemployment is close to 27% in Spain and Greece. The euro-zone economy shrank ever-faster throughout 2012. And—most important in Mr. Connolly’s view—the economic fundamentals in France are getting worse. This week France announced it would miss its deficit-reduction target for the year because of dimming growth prospects.

It’s one thing to bail out Greece or Ireland, Mr. Connolly says, but “if the Germans at some point think, ‘We’re going to have to bail out France, and on an ongoing, perpetual basis,’ will they do it? I don’t know. But that’s the question that has to be answered.”

Italy isn’t too flash either.

Which brings us back to the politics of the euro crisis. At some point, the people in the affected countries presumably will call a halt to the pain and sweep in a government willing to think the impossible—leaving the euro, for example.

To avoid that, Germany could well agree to pay for a transfer union, either believing that the transfers needn’t be permanent, or hoping they’d be less expensive than a euro break up. But, Mr. Connolly warns, once a mechanism is in place to transfer money from Germany to the current-account deficit countries, it’s only a matter of time before Germany is faced with the question of adding France to its list of dependents—something even Berlin may not be willing or able to afford.

I suspect Germany’s limit may come before even that.

Great Boris quotes

March 6th, 2013 at 4:00 pm by David Farrar

The Telegraph reports:

Rules to limit the rewards would drive well-paid financiers out of the City and harm the economy, Mr Johnson said, insisting that the plans were doomed to failure.

“This is possibly the most deluded measure to come from Europe since Diocletian tried to fix the price of groceries across the Roman Empire,” Mr Johnson said.

The last Roman ruler to persecute Christians, Diocletian brought stability to the empire after the chaotic third century. In 301AD, he passed his edict on prices, an unsuccessful attempt to stop inflation by imposing maximum prices on common goods.

I like a politician that knows his history.

The mayor’s comments put pressure on David Cameron to water down the new EU bonus rules, agreed provisionally in Brussels this week.

Under them, annual bonuses will not be allowed to exceed a banker’s salary, starting next year. Bonuses of twice annual salary will be allowed if shareholders approve them.

Oh, why stop there. Let’s also pass a law saying account executives can’t have commission in excess of their base salary.

Supporters of the cap say it will discourage bankers from pursuing the sort of high-risk deals that helped cause the financial crisis. Opponents point out that hedge funds, private equity companies and other financial firms are unaffected.

Mr Johnson said the rules would only harm Europe.

“Brussels cannot control the global market for banking talent. Brussels cannot set pay for bankers around the world,” he said.

“The most this measure can hope to achieve is a boost for Zurich and Singapore and New York at the expense of a struggling EU.” Mr Johnson added: “People will wonder why we stay in the EU if it persists in such transparently self-defeating policies.”

Well there will be a referendum in 2016, if the Conservatives win re-election.

European Unemployment

March 5th, 2013 at 4:00 pm by David Farrar

The NY Times reports:

Unemployment in the 17-nation euro zone climbed to 11.9 percent in January from 11.8 percent the previous month, according to Eurostat, the statistical office of the European Union.

For the 27 nations of the Union, the jobless rate in January stood at 10.8 percent, up from 10.7 percent in December. All of the figures were seasonally adjusted.

Even though the EU is not that major a trading partner for us anymore, their woes will impact us. If Europeans are unemployed they are not spending money on imported goods from China. If the Chinese economy doesn’t grow as quickly as previously that impacts us both directly and via Australia.

The official stats say:

Compared with a year ago, the unemployment rate increased in nineteen Member States, fell in seven and
remained stable in Denmark. The largest decreases were observed in Estonia (11.1% to 9.9% between
December 2011 and December 2012), Latvia (15.5% to 14.4% between the fourth quarters of 2011 and 2012),
Romania (7.4% to 6.6%) and the United Kingdom (8.3% to 7.7% between November 2011 and November 2012).
The highest increases were registered in Greece (20.8% to 27.0% between November 2011 and November 2012),
Cyprus (9.9% to 14.7%), Portugal (14.7% to 17.6%) and Spain (23.6% to 26.2%).

The NZ unemployment rate is 6.9%. Too high, but better than most of Europe.