Trade creation and trade diversion for NZ lamb imports into the UK
14 Mar 2022 Leave a comment
in applied price theory, applied welfare economics, income redistribution, industrial organisation, international economic law, international economics, International law, Public Choice, rentseeking Tags: free trade agreements, preferential trade agreements, trade creation, trade diversion
Submission on international treaty select committee examination of the UK trade agreement
13 Mar 2022 Leave a comment
I am submitting in my personal capacity opposing the agreement. To quote John Cochrane on how long free trade agreements should be:
Nafta and the like are often called “free trade agreements.” Economists like me wonder, why does that take tens of thousands of pages? “We do not charge border taxes (tariffs), nor restrict quantities, nor will government purchases favor American companies.” “We do the same.” Done. That’s free trade. This little snippet reminds us what trade pacts really are.
Free trade agreements (longer than a few sentences) are at best suspect. That is not me saying this. That is Paul Krugman, his generation’s leading trade theorist. Krugman argues that you should start as a mild opponent of any free trade agreement. Closely inspect the baggage they carry; environment and labour chapters, intellectual property, investor state dispute settlement (ISDS) and government procurement such as Pharmac. Start with a sceptical eye.
These add-on chapters are the costs of free trade agreements that are relatively obvious to the untrained eye. No technical economics is yet required to suspect that any trade agreement will be an opportunity for special interests on the right and the left, both unions and big corporations, to feather their own nest. Longer patent lives, more stringent enforcement of overseas copyrights, Pharmac buying more expensive drugs, and so on in return for tariff cuts in export markets.
But let us start with what is claimed as the benefits by the government. In about 20-years’ time, the agreement will boost New Zealand’s annual real GDP by between NZ$710 million and NZ$811 million (0.10% – 0.12%) relative to the 2040 modelled baseline. A tiny amount.
The gains from behind the border changes are never easy to quantify because even the most impartial spectators can disagree amongst themselves on whether these regulations are a plus or minus to begin with, so they cannot agree on whether reducing or increasing them are a plus or not.
The only time tariff cuts are suspect is when they are part of a free trade agreement. The reason is trade diversion. A technical concept which MFAT does not know about because I received a nil response to an Official Information Act request about their TPPA advice to ministers about the costs and benefits including any reference to trade diversion. Trade diversion in not mentioned in the national interests analysis of the UK agreement.
We have been of the rough end of trade diversion in the two biggest trade agreements to affect us. When Britain entered the Common Market in 1973, they stop buying cheap New Zealand lamb in favour of expensive French lamb. The tariff revenue collected by the British on our lamb exports was converted into payments to prop up hopelessly inefficient French farmers. British consumers paid the same or more for lamb and there was no tariff revenue to collect.
New Zealand car buyers then got screwed by Closer Economic Relations. Instead of buying cheap Japanese imports and collecting a tariff, Holdens and Fords became cheap because they did not pay this tariff. Cars were not cheaper for New Zealand buyers; the tariff revenue went off to Australian car manufacturers as higher import prices to keep their hopelessly inefficient car plants open.
Thankfully, there is no investor-state dispute settlement chapter in the agreement. Investor-state dispute settlement has no place in trade agreements between democracies. They have the rule of law where investors can take their chances in domestic politics just like the rest of us. Yes, there will be breathless populism from the left or right from time to time, such as recently over foreign land sales, but by and large foreign investment is welcome and gets a fair deal.
Developing countries offered to sign on to investor state dispute settlement because their own courts are corrupt. Maybe investor state dispute settlement worked 50 years ago when investment in developing countries was tiny and handled by a few big players who might get picked on by politicians looking for a few cheap votes or more likely, a backhander to the Swiss bank account.
Now there is broad-based trade and investment in developing countries despite their corrupt courts and dodgy politicians. Many exporters and investors are willing to take their chances. When the local politicians and bureaucrats get rough, investors have already factored that in by backing investments with high enough returns to compensate for these risks. Tourists buy travel insurance and keep their eyes open; investors know the rules abroad are different and must be just as watchful.
Japan, Singapore, South Korea, Hong Kong, Taiwan and the other Asian Tigers and now India too managed to have development miracles without investor state dispute settlement. Extreme poverty dropped by about 1/3rd around the globe over the decade or so course of the TPPA negotiations and far more than that in China so I think they are getting on pretty well without it.
Most of these points are lost in the debate on the TPPA because too many of its opponents are motivated by anti-capitalist or anti-foreign sentiments rather than cost benefit analysis. They would oppose a trade agreement solely about tariffs that lowered prices to New Zealand consumers.
Not every trade negotiation is successful. For some, you reach the point where you must walk away. More so because of all the baggage loaded up into trade agreements in the last few decades.
The Original Climate Crisis: How the Little Ice Age Devastated Early Modern Europe
13 Mar 2022 Leave a comment
Frost fair
The key phrases in this article could be: ‘Whatever its causes’ and ‘Average temperatures in the British Isles cooled by 2°C’. Climate science is unable to offer a specific explanation, although theories abound, but natural variation for whatever reasons is built-in and always will be. Quantifying it remains out of reach, but computer models are still supposed to be the answer to everything climate.
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Just as the UK was recovering from storms Eunice and Franklin, scientists of UN’s Intergovernmental Panel on Climate Change (IPCC) released a landmark report warning of a future with spiraling weather extremes, fiercer storms, flash flooding, and wildfires, says The Conversation (via Singularity Hub).
This isn’t the first time that Britain has experienced drastic climate change, however. By the 16th and 17th centuries, northern Europe had left its medieval warm period and was languishing in what is sometimes called the…
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The Economics of War, Part II: Trade Restrictions Make a Nation Weaker
12 Mar 2022 Leave a comment
Way back in 2010, I explained that Paul Krugman was wrong to think that wars were good for the economy.
Indeed, he was more wrong than usual. The additional spending for the military isn’t “stimulus,” so his usual Keynesian argument was misguided.
Moreover, he didn’t seem to understand that wars also destroy existing wealth.
Today we are going to look at how war can teach us another economic lesson.
The United States and other major nations have responded to Russia’s assault on Ukraine by imposing trade restrictions with Russia.
If protectionists are correct, these steps (effectively imposing an extreme Russian version of Biden’s “buy America” policy) should strengthen Putin.
Yet that’s obviously not the purpose of the sanctions.
Instead, officials from western nations understand that these trade barriers will weaken Russia’s economy.
By the way, this isn’t the only example of nations using trade restrictions to hurt their enemies.
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No End Date For Coal & Nuclear: Gas Crunch Drives Germany’s Grand Renewables Backflip
12 Mar 2022 Leave a comment
A month or so back, Germany’s green-infested government was talking up the end of coal and nuclear power plants; the last phase in its ‘inevitable’ transition to an all wind and sun-powered future, as the wind and sun cult would have it.
Well. That was then, this is now.
With the squeeze on Russian gas and oil supplies, Germany (among others) has been forced to meet reality, head-on.
All of a sudden, even its rabid the anti-fossil fuel Greens have backflipped on plans to kill off Germany’s nuclear and coal-fired plants. Necessity being, in this case, the mother of ideological reinvention.
Tsvetana Paraskova tells the tale of how reality is driving Germany’s grand renewables reversal.
Germany Goes For Full Energy Policy Overhaul Amid Ukraine Crisis
Oil Price
Tsvetana Paraskova
28 February 2022
The Russian invasion of Ukraine upended the energy policy of Germany. In just a few days since Putin…
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Still No Global Warming, Cool February Land and Sea
12 Mar 2022 Leave a comment
The post below updates the UAH record of air temperatures over land and ocean. But as an overview consider how recent rapid cooling has now completely overcome the warming from the last 3 El Ninos (1998, 2010 and 2016). The UAH record shows that the effects of the last one were gone as of April 2021, again in November, 2021 and now in January and February 2022. (UAH baseline is now 1991-2020).
For reference I added an overlay of CO2 annual concentrations as measured at Mauna Loa. While temperatures fluctuated up and down ending flat, CO2 went up steadily by ~55 ppm, a 15% increase.
Furthermore, going back to previous warmings prior to the satellite record shows that the entire rise of 0.8C since 1947 is due to oceanic, not human activity.
The animation is an update of a previous analysis from Dr. Murry Salby. These graphs use Hadcrut4 and…
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Accession of Queen Anne of England, Scotland and Ireland. Part IV.
12 Mar 2022 Leave a comment
William of Orange invaded England on November 5, 1688 in an action known as the Glorious Revolution, which ultimately deposed King James II-VII of England, Scotland and Ireland. Forbidden by James to pay Mary a projected visit in the spring of 1687, Anne corresponded with her and was aware of the plans to invade.
On the advice of the Churchills, Anne refused to side with James after William landed and instead wrote to William on November 18, declaring her approval of his action. Churchill abandoned the unpopular King James on the 24th. Prince George followed suit that night, and in the evening of the following day James issued orders to place Sarah Churchill under house arrest at St James’s Palace.
Anne and Sarah fled from Whitehall by a back staircase, putting themselves under the care of Bishop Compton. They spent one night in his house, and subsequently arrived at Nottingham…
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March 11, 1708: Queen Anne becomes last British monarch to veto legislation.
12 Mar 2022 Leave a comment
The Scottish Militia Bill 1708 (known formerly as the Scotch Militia Bill) was a bill that was passed by the House of Commons and House of Lords of the Parliament of Great Britain in early 1708.
However, on March 11, 1708, Queen Anne of Great Britain and Ireland, withheld Royal Assent on the advice of her ministers for fear that the proposed militia would be disloyal. This was due to the sudden appearance of a Franco-Jacobite invasion fleet en route to Scotland which gave ministers second thoughts, at the last minute, about allowing it to reach the statute books. It was the last occasion on which the Royal Veto was used.
Content
The bill’s long title was “An Act for settling the Militia of that Part of Great Britain called Scotland”. Its object was to arm the Scottish militia, which had not been recreated at the Restoration. This happened…
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Russia, The US, and Crude Data
11 Mar 2022 Leave a comment
Overall, I’ve been disappointed with the reporting on the US embargo against Russian oil. The AP reported that the US imports 8% of Russia’s crude oil exports. But then they and other outlets list a litany of other figures without any context for relative magnitudes. Let’s shine some more light on the crude oil data.*
First, the 8% figure is correct – or, at least it was correct as of December of 2021. The below figure charts the last 7 years of total Russian crude oil exports, US imports of Russian crude oil, and the proportion that US imports compose. That 8% figure is by no means representative of recent history. The average US proportion in 2015-2018 was 7.8%. But the US share as since risen in level and volatility. Since 2019, the US imports compose an average of 11.9% of all Russian crude oil exports.
As an exogenous shock…
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Crash (2004) Review
11 Mar 2022 Leave a comment
Crash (2004) Director: Paul Haggis
Crash is a bleak, depressing, sappy socio-political “message” movie. At the time of its release it was widely praised, even winning Best Picture at the Oscars in 2005. While I can appreciate a film with an anti-bigotry message, Crash just gets more ridiculous and overtly sentimental with time. It does not rank among the greatest of the Best Picture winners in my view.
Crash is a panorama-film. It tells the story a variety of parallel lives, people living empty, broken lives in Los Angeles, people filled with prejudice and hatred and, above all, distance from one another. So they come violently crashing into one another in a string of car accidents, robberies, and gun violence. The plot concerns a struggling Iranian family who runs a shop with a broken door, so they call a Latino locksmith who has already been accused of being…
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Accession of Queen Anne of England, Scotland and Ireland. Part III.
11 Mar 2022 Leave a comment
When Charles II died in 1685, Anne’s father became King James II of England and Ireland and also King James VII of Scotland. To the consternation of the English people, James began to give Catholics military and administrative offices, in contravention of the Test Acts that were designed to prevent such appointments.
Anne shared the general concern, and continued to attend Anglican services. As her sister Mary lived in the Netherlands, Anne and her family were the only members of the royal family attending Protestant religious services in England. When her father tried to get Anne to baptise her youngest daughter into the Catholic faith, Anne burst into tears. “The Church of Rome is wicked and dangerous”, she wrote to her sister, “their ceremonies—most of them—plain downright idolatry.” Anne became estranged from her father and stepmother, as James moved to weaken the Church of England’s power.
In early 1687, within…
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Power Price Punishment: Cost of Subsidised Wind & Solar Killing Productive Industry & Enterprise
10 Mar 2022 Leave a comment
Reliance on intermittent wind and solar guarantees rocketing power prices and chaotic supply. Price spikes and/or power rationing when the sun sets or calm weather sets in are the death knell for a range of energy-hungry businesses and industries. Manufacturing and mineral processing are usually the first to disappear, when the true costs of running with the unreliables start to bite.
The State of Virginia provides the perfect example, with a push for an all wind and sun powered future in the not-too-distant future.
David Stevenson adds up the whopping costs and the non-existent benefits of Virginia’s plans to run on sunshine and breezes below.
Cost and Reliability Implications of the Virginia Clean Economy Act
Caesar Rodney Institute
David T Stevenson
10 January 2022
Virginia legislation requires electric power to come 100% from renewable sources by 2045. Specific targets are set for the amount of solar and onshore wind, offshore…
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The Failure of Bidenomics, Part VI
10 Mar 2022 Leave a comment
Having addressed Biden’s track record on subsidies, inflation, protectionism, household income, and fiscal policy, let’s finish our series by reviewing the president’s record on regulatory issues.
The first place to start is the Federal Register, which is Uncle Sam’s official site for new rules.
Though it gives us conflicting information. The number of pages (a crude measure of regulatory zeal, as I noted a few years ago) actually decreased during Biden’s first year. But only compared to Trump’s last year.
To understand what’s really going on, let’s look at the Forbesarticle from which the above table was taken.
Clyde Wayne Crews of the Competitive Enterprise Institute sifts through the data and concludes that Biden is a fan of expanded red tape.
The Federal Register is the daily depository of rules and regulations produced by hundreds of federal departments and agencies. …Under Biden, the regulatory…
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Accession of Queen Anne of England, Scotland and Ireland: Part II.
10 Mar 2022 Leave a comment
In November 1677, Anne’s elder sister, Mary, married their Dutch first cousin Willem III of Orange, at St James’s Palace, but Anne could not attend the wedding because she was confined to her room with smallpox. By the time she recovered, Mary had already left for her new life in the Netherlands. Lady Frances Villiers contracted the disease, and died. Anne’s aunt Lady Henrietta Hyde (the wife of Laurence Hyde) was appointed as her new governess. A year later, Anne and her stepmother visited Mary in Holland for two weeks.
Anne’s father and stepmother retired to Brussels in March 1679 in the wake of anti-Catholic hysteria fed by the Popish Plot, and Anne visited them from the end of August. In October, they returned to Britain, the Duke and Duchess of York to Scotland and Anne to England. She joined her father and stepmother at Holyrood Palace in Edinburgh from…
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Utopia, you are standing in it! 
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