Kiwiblog

Did anyone else see the irony that at the recent APEC meeting you had Russia and China urging the United States not to be protectionist?

Hasn’t the world changed!

Vernon Small reports on the conclusion of a free trade agreement with Hong Kong. So it got me thinking what are the countries we have an FTA wth, or are negotiating. The answers are:

1. Australia, since 1983
2. Singapore since 2001
3. Thailand since 2005
4. Trans-Pacific (Brunei/Chile/Singapore) since 2005
5. China since 2008
6. ASEAN (Brunei/Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam)
7. Malaysia
8. Gulf Co-operation Council (Bahrain, Oman, Kuwait, Saudi Arabia, UAE, Qatar)
9. Hong Kong
10. Korea

Now who are our biggest trading partners:

1. Australia $18.7b – in force
2. USA $9.0b – zip
3. China $8.9b – in force
4. Japan $7.6b – some momentum
5. Singapore – $3.1b – in force
6. Germany – $3.0b – zip
7. Malaysia $2.9b – finalised
8. UK $2.8b – zip
9. Korea $2.7b – under negotiation

Also the total value of trade with ASEAN is $12.2b and GCC $4.3b.

So while progress on Doha remains stalled, we’re doing pretty well. The big gaps are USA, Japan and the EU. The EU are hopeless. Japan is showing some signs of life and in a very welcome move, President Obama a few minutes ago said the United States would seek to join the Trans-Pac agreement.

I’m delighted his protectionist election rhetoric, may have been just that – rhetoric. I started writing this blog post unaware of Obama’s announcement – how is that for good timing!

The Herald reports:

New Zealand has successfully concluded negotiations for a free trade agreement with six oil-rich Gulf states, Trade Minister Tim Groser announced yesterday.

The Gulf Co-operation Council (GCC), made up of Saudi Arabia, Kuwait, the United Arab Emirates, Oman, Qatar and Bahrain, is New Zealand’s seventh-largest trading partner with bilateral trade worth $3.85 billion.

Not bad. Mind you I don’t think Groser should be given time off until we have free trade agreements with every country on Earth, bar North Korea.

The Dom Post editorial:

The gloom merchants and flat earthers who dispute the benefits of free trade agreements should examine a set of figures.

They are the figures showing the difference between New Zealand’s trade with China before the FTA between the two came into force in October 2008 and after it came into force. In the year to October 2008, exports to China totalled $2.2 billion. In the next year, they were $3.5b.

At a time when New Zealand is being buffeted by shockwaves from the global economic crisis, the deal has buffered jobs and boosted incomes. The political parties that voted against it – NZ First, the Greens and the Maori Party – should hang their heads in shame.

Can’t say it better than that. They are the enemies of our exporters!

Maryan Street blogs:

Am off right now to Kuala Lumpur to witness the signing of the NZ-Malaysia Free Trade Agreement. This is in keeping with the Labour, and now National, tradition of the Minister of Trade inviting the Opposition Trade Spokesperson along to such events. This isn’t just good politics – it’s good business.

Our business leaders need the security of knowing the policy rug isn’t going to be pulled out from under them at the end of a short electoral cycle. This is about NZ Inc and both Labour and National get that.

Yep. If only someone could convince the Greens and Winston First, and oh yeah the Maori Party also.

Europe and the US are retreating behind protectionist doors, but there are some really encouraging movements in Asia, and we are fortunate to be their neighbours.

The Herald reports on Mike Moore’s new book:

Mr Moore said more wealth had been created in the past 60 years than in all of history. Hundreds of millions of people had been lifted out of extreme poverty through globalisation.

Yet so many have fought against it. An unholy alliance of the hard left and far right.

Mr Moore said globalisation was “not a policy, it’s a process” and while it could be slowed it could not be stopped. Fascist and Marxist states that arose after the Great Depression had been vicious and protectionist.

And one great legacy of Helen Clark (and Moore and Goff) is firmly placing NZ Labour into the mainstream on globalisation and pre free-trade.

Protectionism was the “crack cocaine” of economics. “It does stimulate you for a while but it is addictive and it will eventually kill you.”

Nice analogy.

The cover has endorsements by former US Secretary of State Madeleine Albright, and former Czech President Vaclav Havel. It was launched jointly by Foreign Minister Murray McCully and Labour leader Phil Goff.

Again good to see bipartisan support for globalisation and free trade.

I worry a bit about where Labour may go, after Goff. Either Shane Jones or David Cunliffe will I am sure be pro free trade. But Andrew Little may not be, as unions are often heavily protectionist.

A photo of US Trade Representative Ron Kirk, with Goff and Groser, taken from Kirk’s blog. Fran O’Sullivan writes:

A public show of Kiwi bipartisanship infiltrated Washington yesterday as Trade Minister Tim Groser and his predecessor, Labour’s Phil Goff, paid a joint call on the Obama Administration official who calls the shots in United States trade. …

Kirk would have been left in no doubt after his meeting with the two men over the common commitment the major New Zealand political parties have towards advancing the cause of trade liberalisation in two pivotal areas: completing the World Trade Organisation’s Doha Round, and getting some traction on the proposed Trans-Pacific Partnership (TPP) free trade agreement involving the United States, Australia, New Zealand, Singapore, Vietnam, Brunei, Peru and Chile. …

But Groser, who has met Kirk six or seven times in the past few months, noted that while patience is the name of the game for those wanting to negotiate with the US, it was important that National and Labour demonstrated a united front on trade.

His invitation to Goff to join him at the meeting with the Trade Representative showed all the skills of his pre-politics background as a seasoned trade negotiator.

While neither politician would put it this directly, at least not in public, the political utility from a New Zealand perspective in presenting a united front means the US will not be tempted to play one major party off against the other when it comes to negotiating any bilateral tradeoffs within the prospective TPP.

Always good to see bipartisanship in the trade area. Both major parties have supported the free trade agenda since 1984, and long may it continue.

Phil Twyford blogs on trade:

Green co-leader Metiria Turei struggled to articulate her party’s position on trade in a tough interview with Guyon Espiner on Q&A this morning. She didn’t answer Espiner’s questions on whether or not the Greens supported CER or the China trade agreement.

Labour’s approach to the China agreement is unequivocal:

1. New Zealand’s long term prosperity relies on our firms successfully selling into international markets, particularly in the dynamic East and South Asian economies. We owe it to future generations.

2. China is becoming a super power. Trade (and political, diplomatic, cultural and people-to-people) engagement by NZ and other countries is a necessary part of bringing China into the international community, and fostering its commitment to international law and mulitilateralism.

I’m really pleased to see an unequivocal position on this – especially as it comes from Twyford, who is on the left of the Labour caucus.

Personally I’ve always been of the view that boycotting trade with China because they don’t share our views on labour, human rights and the environment is not tenable. Chinese workers deserve jobs just as much as workers anywhere else.

Yeah, and I have always wondered how anti-trade people who complain about Chinese workers getting $2.50/hour, think that it is better they get $0/hour by being unemployed.

Trade liberalisation can harm (for example by reducing the policy space to protect infant industries, or forcing countries to open up sensitive sectors to foreign competition) but it can also help (for instance by getting rid of rich-country protectionism that damage the livelihoods of farmers in poor countries and New Zealand).

Overall trade liberalisation has been hugely beneficial. Some FTAs are better than others. The US-Australia one was very disappointing and did little. The NZ-China one on the other hand was very good, in my opinion.

Not only is trade the only way that a small isolated country like New Zealand can prosper, it is also one of the most important ways the world’s poorest nations can work their way out of poverty. Trade is not inherently good or bad. It depends how the rules are written, who the winners and losers are, and how trade-offs are managed.

Trade has the potential to list far more people out of poverty than aid.

I don’t quite agree that trade is not inherently good or bad. Trade is inherently good. That is not to say all rules around trade are good, but trade is good and natural and in fact we all trade many times a day.

I also would not frame trade rules as having winners and losers. In most cases you get winners and winners. Lowering tariffs is generally beneficial to a country, regardless of whether other countries do the same. Sure there may be political losers, but in the medium to long term reducing barriers produces economic winners on both sides.

Green co-leader was on Q+A this morning, and it was a pretty lamentable performance. While there were a couple of tough topics, she just didn’t cope with the scrutiny, and appeared very flustered and evasive.

I backed Turei as their best choice for co-leader (not that I get a vote!) as she has generally been a strong MP. But today showed up the gap between her and someone like Fitzsimons, who would have handled things much more calmly.

Of course part of the problem was that on the trade issue, Turei had a nonsensical position to defend. Every country on earth supports the move to freer trade, apart from pretty much just North Korea. The Green view on trade is very much a fringe view, and it got exposed today.

From the transcript (not yet online:

GUYON Okay let’s look at an economic idea that you are opposed to, and that is free trade largely.   In your maiden speech in 2002 you said that, and I quote you, ‘the acceptance of free trade agreements threatens our economy, our environment, our people and our sovereignty.’  Do you not believe in any free trade agreements at all?

METIRIA Well our position is that you need to have systems of fair trade, that make sure that New Zealand can retain its economic sovereignty, and free trade deals tend to undermine the economic sovereignty.

GUYON All the free trade deals, I mean the free trade deal that we have with Australia for example that we’ve had for 20 years, has that undermined our sovereignty?

METIRIA It prevents New Zealand from being able to make the economic decisions around our manufacturing, around job retention, all of those issues that are best for New Zealand, and we want New Zealand to be a prosperous and sustainable economy, that means we have to move … we need to be able to make those decisions for ourselves.

GUYON Does that mean all free trade agreements, for example the CER agreement that we’ve had with Australia since 1982, does that cover that?

METIRIA Look the key issue for us…

GUYON No, can I get a straight answer for our viewers on this question please, because it’s all very well to give a speech about free trade.

Yet she still could not state whether or not the Green Party thought CER was a good or a bad thing.

I wonder why the Greens are so inconsistent on the issues of national sovereignty. They correctly point out climate change affects everyone regardless of national borders. They support surrendering sovereignty to the UN on every treaty there is. Yet on economic issues, they cite national sovereignty as a reason to prevent people freely trading with each other.

GUYON Okay with respect, let’s look at one of those countries, China.  Now on Thursday it was the first anniversary of our Free Trade Agreement with China, our exports have climbed 61% over that year to 3.3 billion.  I mean wouldn’t we all be the poorer if we’d listened to you and not gone ahead with that agreement?

METIRIA Oh look Guyon, I mean you can make that kind of accusation and I think it’s just silly, the truth is that so much of New Zealand’s economy at the moment is under serious threat if  you like from the fact that we’re having to borrow hundreds of millions of dollars every week actually in order to just pay the interest on our current borrowing.  We’re having a housing bubble at the moment which is going to also impact seriously on our economy and there are other kinds of tools that we can use to deal with economic issues that are affecting New Zealand, like increasing the ability for banks for example to lend ….

The stupidity of Metiria’s response is the China FTA means we are borrowing less. Exports rose 60% in the middle of a recession!! That is a huge sucess. She just had no answer at all to this.

GUYON Can we return to this agreement though because there are some real Green issues here in this China Free Trade Agreement and I want to talk to you about one of them, because the New Zealand Trade and Enterprise says areas like the health supplements in Manuka Honey are a great area for expansion of our exports, and in fact your own Super Fund has quite a large shareholding on Konvita New Zealand which has 18 branded stores in China and is actually doing very very well out of this China Free Trade Agreement, would you deny them that opportunity, because you opposed that agreement.

You have to love the irony. Their super fund is personally profiting from the China FTA that they battled against.

In my NBR online column, I praise Phil Goff for the outstanding results from the China Free Trade Agreement and lambast the Government with continuing existing tariffs until 2015. Some extracts:

So in the week we should be celebrating the success of free trade, the National-led Government bizarrely decides to continue with our current tariffs on imports, freezing them in place until 2015.

A 5% tariff on processed foods, machinery, steel and plastic continues on, as does a 10% tariff on clothing, footwear and carpets. …

Tim Groser surely knows that even without a free trade deal, it makes economic sense to reduce tariffs. It incentivizes capital and labour to flow into industries where New Zealand has a competitive advantage. We unilaterally reduced tariffs in the 1980s,1990s and 2000s, and up until the global recession had the lowest unemployment rate in the world.

So why is a National/ACT Government failing to reduce tariffs, when even a Labour/NZ First Government managed to do so? And was this not a missed opportunity for Phil Goff? He could have brilliantly done a Clinton triangulation and claimed credit for the 60% increase in exports to China, and lambasted the Government for being protectionist. That would have caused shockwaves, and forced Tim Groser to front up and explain why he thinks a 10% tariff on footwear should continue until at least 2015.

Comments and feedback can be left at NBR.

Sad to read in the HoS:

President Barack Obama slapped punitive tariffs on all car and light truck tyres entering the United States from China in a decision that could anger the strategically important Asian powerhouse but placate union supporters important to his health-care push at home. …

The federal trade panel recommended a 55 per cent tariff in the first year, decreasing 10 per cent in each of the next two years. Obama settled on an extra 35 per cent in the first year, reducing by 5 per cent for two years. Beijing yesterday sharply condemned the US move: “China strongly opposes this serious act of trade protectionism by the US.

“This act not only violates the rules of the World Trade Organisation but also violates the relevant commitments made by the US Government at the G-20 financial summit.”

Protectionism may sometimes deliver short-term gain, but at the expense of long-term pain. NZ is a sterling example of this as we got rid of almost all tariffs and subsidies, yet up until the global recession had the lowest unemployment rate in the OECD. Protectionism doesn’t save jobs in the long-term, it merely keeps capital locked up in relatively inefficient industries.

To be fair to Obama, Bush was also a protectionist despite his rhetoric. He slapped tariffs on regularly, against WTO rules. They know they will lose at the WTO eventually, but do it to get through the election.

It is a pity, in terms of trade policy, that John McCain did not win. He was a very sincere and dedicated free trade supporter – his policy was to remove barriers to trade with every country on Earth, except those they have security issues with.

UNICEF NZ have announced:

The UN Children’s Fund today released new figures that show the rate of deaths of children under five years of age continued to decline in 2008.

The data shows a 28 per cent decline in the under-five mortality rate, from 90 deaths per 1000 live births in 1990, to 65 deaths per 1000 live births in 2008. According to these estimates, the absolute number of child deaths in 2008 declined to an estimated 8.8 million from 12.5 million in 1990; the base line year for the UN Millennium Development Goals (MDGs).

“Compared to 1990, 10,000 fewer children are dying every day,” says UNICEF’s New York-based Executive Director Ann M. Veneman. “While progress is being made, it is unacceptable that each year 8.8 million children die before their fifth birthday.”

3.7 million less children dying every year is no small thing.

The data shows global under-five mortality has decreased steadily over the past two decades, and that the rate of the decline in the under-five mortality rates has increased since the 1990s. The average rate of decline from 2000 to 2008 is 2.3 percent, compared to a 1.4 percent average decline from 1990 to 2000.

A good trend.

In some countries, progress is slow or non-existent. In South Africa the under-five mortality rate has actually gone up since 1990.

A bad trend.

I was interested in the changes in each country. Not easy to find, but eventually got it on page 118 of this report.

China’s mortality rate has dropped from 45 to 22 deaths per thousand and India from 117 to 72. These two countries are significant for having opened their economies up and enjoying record economic growth. It shows the benefits of a wealthier society due to free trade.

I estimate 1.6 of the 3.7 million fewer under five deaths comes from China and India alone.

Last week Tim Groser 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.

Free trade 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.

I was highly amused to see the headline at the NZ Herald:

Jane Kelsey: Free trade deal may not make sense in these hard times

Why this is so amusing is that Jane Kelsey has spent her life arguing against free trade deals at any time. Kelsey probably protested against CER with Australia.

The reason we will be hit hard by the global recession is our trading partners are going to buy less of our exports.

Hence it is very good news that despite the recession, NZ is making good steps towards reducing trade barriers. Trade Minister Tim Groser is earnign his pay!

The agreement to start FTA negotiations with India is exciting, but of more immediate impact is the signing of an FTA with Asean nations, initiated by the previous Government.

Trade Minister Tim Groser, who was in Thailand to sign the agreement negotiated under the previous government, said 99 per cent of New Zealand’s trade to those countries would be duty-free within 12 years. When fully implemented, it would mean annual duty savings of about $50 million.

The real gain isn’t just the savings, but also that it prevents those countries hiking up tariffs against us, as a protectionist measure. The current tariffs are quite low, but as I understand it could be lifted to up to 50% before this agreement takes force.

Hat Tip: Adam Smith and Daily Telegraph.

The NZ Herald has a nice line in the debate about helping the third world:

It has been estimated that barriers to trade in developed economies cost poor nations more than $100 billion a year, about twice what rich countries give in aid.

I’m not optimistic of progress though with a protectionist President and Congress in the United States, and the loss of Mandelson as Trade Commissioner for the EU.

News that the US is looking to join an existing agreement between New Zealand, Chile, Singapore and Brunei and turn it into a five way free trade pact is excellent news.

Helen Clark and Phil Goff should be thanked by everyone for the work they have done in the free trade area. Their record in this area has been highly admirable.  They have moved Labour away from its protectionist roots, so that the only anti free trade parties in Parliament are New Zealand First and the Greens.

It is important to note this is only a first step. An actual deal is some years away and will have challenges such as a change of President and getting through Congress.

Danyl has suggested that Helen Clark may have sold her vote to George W Bush on letting India legally develop nuclear reactors, in exchange for this free trade deal. If this is true, then again Helen deserves praise for getting such a high price tag for NZ’s pro-nuclear vote.

If John McCain becomes President, then I there is no barrier to the FTA. He is in favour of FTAs with literally everyone but Cuba and North Korea.

Obama’s rhetoric has been strongly against free trade. Will he pressure a Democratic controlled Congress to accept it, even if there is short term pain to some of their constituents?

Anyway this is seriously good news, and let us hope progress towards free trade continues. Oh yes, and will someone ask the former Minister of Foreign Affairs whether he thinks this is good or bad news?

I encourage everyone to go read the blog post by Sue Kedgley on the World Food Conference in Rome. It is a stunning example of madness and extremism.

They argued that the main cause of the crisis was that food production in much of the developing world has been decimated by three decades of globalization and free trade liberalization policies. Previously self sufficient countries had been unable to compete with heavily subsidized, cheap European and American food and so small self sufficient agricultural sectors collapsed in country after country, leaving developing countries dependent on imports and food aid.

Now read this carefully. In the first sentence she blames the food crisis on free trade liberalization policies (never mind even the very lefty UN is blaming it on biofuels and saying free trade is the solution), and then in the second sentence she complains about heavily subsidized cheap food undermining local agricultural sectors.

Earth to Sue – come in Sue. That is protectionism – the very thing you are in favour of. People who support free trade like me want subsidies and tariffs to be abolished. That way those countries which can most efficiently produce food, get to do so. I suspect Africa would boom in terms of food production if indeed one can get Europe and the US to remove their subsidies and tariffs.

It is scary that a long serving MP can not know the difference between free trade and protectionism. I think this shows that the anti globalisation fanatics have just started to use it as a slogan. Anything they are against they label as free trade and globalisation.

I blogged yesterday how the UN has called for a lifting of food tariffs and biofuel subsidies to help alleviate the starvation in the third world from the high cost of food. I also blogged how this seems to be contrary to NZ First and Greens policies.

Now Trans-Tasman has just come out and they note the following:

The global food crisis should produce a unified national response to expand agricultural output. But, curiously, NZ is represented at the FAO Summit by an 11-man delegation led by Agriculture Minister Jim Anderton (who represents the smallest party in Parliament) and the Greens’ Sue Kedgely (paying her own costs), the party which in its Auckland conference at the weekend was calling for tougher conditions for NZ’s dairying industry.

The Greens have not only demanded NZ’s agricultural producers pay immediately for their greenhouse gas emissions as well as a punitive water levy (which would harm irrigators), but have insisted on bio-fuels being included in NZ’s transport fuels, and also have opposed genetic modification. This is a programme of “economic euthanasia” for the dairy industry. It is not surprising the Greens are finding it hard to lift above the modest levels they are currently polling.

I’m not sure whether the euthanasia is referring to the effects on the diary industry or the effects on those in the third world who need cheaper food, not more expensive food.

Some common sense and plain speaking from UN Secretary-General Ban Ki-moon who has called for an end to food tariffs and to subsidies for biofuels as the key way to bring down the price of food and stop millions from starvation.

Sadly this advice will be ignored by the Greens and NZ First who both support protectionist policies such as tariffs.

Also interesting debate on how much biofuels are to blame:

Hunger campaigners single out biofuels – often made by converting food crops into fuel – as a prime culprit for the crisis.

Biofuel supporters say the effect on food prices of diverting crops into ethanol production is small.

US Agriculture Secretary Ed Shafer said before the summit began that biofuels accounted for about 3 per cent of the total food price rise.

But the Oxfam aid organisation says the real effect is about 30 per cent.

It is sort of ironic that us free traders are on the side of the UN and Oxfam while the Greens seem to be in the same camp as the US – supporting tariffs and biofuels.

Mike Moore writes in the Herald on the food crisis:

What has been the most successful 50 years of alleviating poverty in human history is threatened. What’s happening, what’s new?

Nothing is more important than food. In 12 months, corn and rice prices have doubled, wheat price tripled, soy beans up by 87 per cent, and global food reserves are at their lowest levels ever.

They are staggering increases for just one year.

The rush to biofuels is also impacting cruelly in agriculture, where massive subsidies and high oil prices are encouraging agricultural production away from basic foods. Tragically, rich countries are subsidising bio-fuel production, raising prices. Filling a Range Rover with subsidised ethanol takes as much “grain” as would feed an African family for a year. Rich countries’ fuel substitution programmes often consume more energy to produce than they save. It’s a populist Green response to global warming that does the opposite of what was intended.

People should reflect that Federated Farmers have warned that if the price of carbon reaches $50 then the Emissions Trading Scheme would stop basically all food production in NZ – profits are projected to drop 123%. Now before everyone accuses them of scaremongering – what would have been your reaction if say ten years ago someone predicted biofuels would help push 100 million people into poverty and contribute to a doubling of world food prices?

But how can you encourage poor countries to grow food when subsidies from rich countries can drop similar products into their local market, sometimes at a third of local prices?

The medium- and long-term solution is the Doha Development Trade round, which is now at a critical stage. Unless the players at the WTO can get closer in the next few weeks, the deal will not be cut this year.

I could not agree more. Countries at the WTO who do not stop subsidising their food, are a big part of the problem.

If the rich countries cannot find the political courage to front their subsidised farmers when food prices are so high and will remain high, when can they summon up the willpower to save themselves? Subsidies in rich countries are a direct cash transfer from the poorest consumers to the richest of producers.

Indeed. Yet strangely it is so called left wing politicians like Obama and (H) Clinton who rail against free trade,

I missed in all the Peters excitement that John Key gave a foreign policy speech this week. Nor most foreign policy is bipartisan, so no major surprises, but a few things of note:

The past 20 years have seen a plethora of FTAs signed between countries and groups of countries. Their very nature is that they are exclusive. The greatest risk to our economy is that we are excluded.

Indeed. While NZ First and the Greens want us to be excluded!

There is much that New Zealand can do to improve our role in the Pacific, and the first thing is to ensure that our aid programme there is focused and targeted properly. While the National Party acknowledges that the main target of New Zealand’s aid effort is already the Pacific, we have stated that we believe a greater proportion of our budget should be targeted there.

I agree. It is our backyard, and the area in which we can have the most influence.

It is also important that this aid is properly focused. New Zealand’s aid in recent years has been targeted at “poverty elimination” – the focus should be on economic development.

Poverty elimination or reduction is necessary in the short term, but indeed economic development and growth is the only long-term solution to poverty.

Today’s signing of a free trade agreement (at 3.30 pm NZST) with China is a very good day for New Zealand. And while there are many many people who have contributed to its successful conclusion, the two primary ones are Helen Clark and Phil Goff.

Goff deserves our thanks for being the primary negotiating Minister, and never dropping the ball on this. This is a highlight of his nine years as Foreign and Trade Minister.

Clark also should be praised by supporters of free trade. Those on the right instinctively support free trade. On the left it has always been treated with far more scepticism, or often hostility. Clark has led her party away from its protectionism instincts and has embraced globalisation rather than tried to fight it like King Canute. The political risks for her has not been insignificant, especially in terms of doing a deal with China – a country so easy to criticise for so many things. She deserves our thanks for putting NZ’s interests first. Her legacy will be not just the FTA with New Zealand, but a modern Labour Party not stuck in the protectionist past.

Why is this free trade deal a good thing – both economically, and politically? My reasons:

1. It will removes tariffs on 95% of NZ exports to China, saving exporters $115 million a year.
2. The tariff reduction is projected to increase exports to China by $225 to $350 million a year.
3. The vast majority of Chinese imports to NZ already have no tariffs on them.
4.  Consumers will benefit with cheaper prices in those areas where tariffs are to be removed.
5. While employees in some areas which have protection removed can and do experience short-term pain, moving capital and labour into areas where we have a competitive advantage is good for employers and employees in the medium to long term.
6. Industries can become more wealthy with the loss of protection. When we used to have large duties on wine imports, the NZ wine industry produced cheap low quality wine as no imported wine could compete on price. As protectionism was removed, the wine industry generally went from trying to compete on price in the domestic market only to competing on quality globally. From 1987 to 1997 exports as a percentage of production went from 3% to 29%, and both production and staff levels increased. This has continued today with exports of wine in 2007 totalling 84 million litres selling for$760 million.
7. Free Trade lifts people out of poverty. I am amazed that people argue against free trade agreements on the grounds that (for example) it means people in China are working for say NZ$1 an hour. Do they think that if we refuse to trade with them, that that person will be better off on NZ$0 an hour earning nothing? China has reduced the proportion of its population in absolute poverty from 64% in the 70s to 10% in 2004 and India has gone from 51% in 1978 to 28% in 2005. have between them lifted  . Think how many people in Africa could be lifted out of poverty if the EU did not spend 50% of its budget on agricultural subsidies, if Japan did not spend US47 billion on agricultural subsidies (four times its foreign aid) and the US did not spend $4 billion a year subsidising cotton growers.
8. We are first. China is a growing economic super-power and being the first developed country to sign a free trade agreement strengthens economic ties for the future.
9. Dialogue and trade is better than the alternative. Yes the Chinese Government is a repressive regime, and has little regard for fundamental human rights. But a policy of shunning China is not likely to be effective, or help the Chinese people (why punish them for a Government they do not get to choose). And while there are still a million miles to go, China is gradually becoming a more free, not a less free, society. Exposing China to trade, to information, to market economies is more likely (no guarantees) to help bring about gradual improvements than refusing to deal with them, because we disapprove of their human rights record.
10. NZ can criticise as a non threatening friend. I believe that the closer economic ties, will put NZ in a position where we can have some influence, precisely because we are so small and insignificant. When the US or Australia criticise China, they react with hostility as they regard those countries as having ambitions of influence globally or regionally. If a “friend” such as NZ is also there saying “Hey this is not a good idea, and makes it hard for us to deal with you”, I think that voice is listened to as we do have an excellent international reputation.

So I do regard this as a very good day for New Zealand (and China). And while I have many many things I disagree with the Government on, I do praise Clark and Goff especially for their leadership on this issue. As a small trading nation, we need barriers to trade to be lowered, and this is a great step forward.

I’m passionately in favour of a free trade agreement with China.  But I’m even more passionately in favour of free speech and the right to protest.  Now let us look at the different responses from Australia and NZ:

“We urge the Chinese Government to allow peaceful expression of dissent. We call on Chinese authorities to act with restraint and to deal with protesters peacefully.”
- Australian Foreign Minister Stephen Smith

“The Government is concerned at the reports of violence and is trying to obtain more accurate information. It calls on all sides to exercise restraint.”
- Prime Minister Helen Clark

Yeah those damn protesters need to be more restrained as they get shot.

Photo from Al Jazeera.

It would be good to have the NZ Government also stress the right to peaceful protest.