Thursday, 17 October 2013

Are we as committed to free trade as we think?

The latest print edition of the Economist has an article, 'The gated globe', which makes the case for increased globalisation and in particular for renewed liberalisation of international trade. All good.

Along the way the article mentioned an organisation called Global Trade Alert. I looked them up: their mission in life is "Independent monitoring of policies that affect world trade", and they do a fine job of it. It's a very interesting site.

I wondered, as you do, if I could break out how New Zealand was travelling in terms of liberalising or impeding global trade. And I could, using a box on the left of their home page, where you can 'Search [trade policy] measures by...'. I put 'New Zealand' in the 'Implementing jurisdiction' box, left everything else set to 'Any', and hit 'Search'.

I hoped and expected that we'd come out on the side of the angels. The answer is, we kinda did, sorta.

The search returned 12 results. Sadly, only two of them were liberalising. One was an APEC initiative in 2012 to reduce tariffs on a range of environmental goods (wind turbines, solar heaters and the like). The other was a unilateral initiative in 2011 to make business immigration a little easier.

That left 10 on the protectionist side of the ledger.

Six of them were anti-dumping measures, against Chinese preserved peaches, Chinese wire nails, Italian tomatoes, Malaysian galvanised wire (what's with the wire?), Spanish canned peaches (what's with the peaches?), and Thai plasterboard. Incidentally, there seem to be a few more that Global Trade Alert may have missed: on the 'Imported goods subject to duty' page of the MED website I found peaches, yet again, from Greece and South Africa; diaries, of all things, from China and Malaysia; hog bristle paintbrushes from China; and reinforcing steel bar and coil from Thailand.

The other four measures that Global Trade Alert reported were a mixed bag.

Two of them were GFC-response measures to guarantee the deposits and the wholesale funding of New Zealand financial institutions. Global Trade Alert put them in the bad column because they felt they discriminated in favour of New Zealand entities. That might be formally true, and probably undesirable, but I honestly don't believe there was a skerrick of protectionist intent behind either measure in the circumstances of the GFC, so I'm going to put those to one side.

The last two were a 2009 toughening of immigration law, making it harder for seasonal migrants to get in, and a 2012 amendment to the customs and excise legislation, introducing much higher penalties on importers for making "materially incorrect" entries on their import forms, with the maximum penalty going up from $50 to (wait for it) $10,000.

It's regrettable we've done any of this, but it's especially regrettable that we've made use of these anti-dumping measures. The MED's website says all the right things - its FAQ says "Trade remedy investigations ensure fair competition, and should not be seen as trade restrictions", and "There is a difference between imports that are low-cost and those that are dumped or subsidised. Anti-dumping or countervailing action does not remove a foreign producer's competitive advantage, and is not designed to prevent imports from any given country" - but the reality is that anti-dumping provisions have little underlying logic. They're on the same, generally shaky, ground as 'predatory pricing' cases are in a competition law context.

And even if they might be worthwhile in some situations (and I'd emphasise the 'if' and the 'might'), the regularity with which they are abused, as covert protectionism, outweighs any good they might do. And we should know: we've been on the receiving end of the abuse in the past, notably over kiwifruit exports to the US in the 1990s.

So I'm sorry to see us making regular use of them. I know, there aren't pages and pages of them, it's not the end of the world, these are relatively small niches, and you couldn't argue with a straight face that we are erecting Fortress New Zealand behind a barricade of anti-dumping duties. But even a few of them are in my view a few too many.

You might wonder why I summarised our overall position as 'sorta' on the side of the free trade angels, since we haven't done much on the plus side of the ledger and an assortment of (admittedly modest scale) stuff on the wrong side.

That's because you haven't seen the scale of what other countries have been up to. Australia, for example, features 80 times in the Global Trade Alert database. Only 10 of the mentions are in the liberal column. The other 70 were on the protectionist side, including 34 anti-dumping cases.

So we're not perfect. But we're a great deal less imperfect than a lot of places.

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