Kiwiblog

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.

Phil Goff makes short shift of Russel Norman’s scare mongering over the free trade agreement with China:

Comments by Greens co-leader Russel Norman that: “Parliament has no say over this (China Trade) agreement”, is absolutely incorrect, says Trade Minister Phil Goff.

“The China trade agreement cannot come into effect without parliamentary scrutiny and support. Dr Norman should acquaint himself better with New Zealand’s parliamentary system,” Mr Goff said.

“The full agreement and a National Impact Analysis will be tabled in Parliament at the time the Agreement is signed, and will be posted on the Web.

“This process will allow parliamentary and public scrutiny of the agreement, with the Foreign Affairs, Trade and Defence Committee likely to call for public submissions on it.

“Legislation then has to be introduced for the agreement to be given effect in domestic law, and must be passed by Parliament for that to happen.

That’s a great serving by Goff. Especially where he suggests that Norman, not yet an MP, doesn’t even know how Parliament works.

“It is likely that this legislation will receive overwhelming support in the House, though of course this remains to be tested.

I’d be appalled if National doesn’t support it. The Greens will of course be against – as they seem to be against all trade agreements. What will be very interesting is how NZ First votes. Their previous voting record and rhetoric means they should vote against. But Winston will be aware of how bad it will look for the Foreign Minister to vote against a trade agreement. As his party has no decision making capability excluding him, I suspect he will make them vote for it.

“While I cannot comment on the detail of the agreement while it is still going through final technical discussions and has yet to be submitted to Cabinet for final approval, I can say that the sort of suggestions made by Dr Norman are nonsense.

“Free movement of labour, for example, has never been considered by anyone as part of the negotiation. To even make that suggestion is absurd.

Sounds like a scare-mongering tactic worthy of Winston – beware the hoards moving here to take your job!

“The Greens appear to have already made up their minds to oppose a trade agreement with China, New Zealand’s third largest trading partner and fastest growing export market.

“However, it would be more sensible for them to first examine what the agreement actually involved, which all parties in parliament will soon have the opportunity to do,” Mr Goff said.

I’m going to take a punt and predict that no matter what the details are of it, the Greens will be against it.

This is one area where I am very supportive of the Government – depending of course on the final details.

Russel Norman has responded on Frog Blog.

Back on the 14th, I linked to a post on the Hive. about how a Chinese newspaper reported the Chinese Government reported the the China-NZ Free Trade Agreement

Somewhat unkindly (and not entirely seriously) I suggested that NZers are getting better news from China than NZ on the Free Trade Agreement.

An alert journo has pointed out that in fact NZPA had a story in January on the China FTA, and that it would be signed in April.

So let the record be corrected.  The NZ Govt is officially still more open than China’s, and the gallery did not get scooped by the Chinese!