Globalisation and free trade creating jobs

In the Daily Telegraph on Saturday was a report that Hornby Group, manufacturer of model trains, Scalextric slot car sets, Corgi model cars and Airfix model planes, has enjoyed substantial growth thanks to outsourcing much production to China.

Yes I can hear the moans from the left "our jobs gone to foreign folk in China". In fact when current CEO Frank Martin joined it employed 120 people in its UK premises in Margate, now it employs 150 - and that is following shifting manufacturing to China. Why?

When he joined it had sales of £24m p.a. with pre-tax profits of an abysmal £1.4m. Now sales are £56m with profits of £8m. Part of it is the combination of Thomas the Tank Engine and Harry Potter reviving interest in model trains, but more importantly outsourcing allowed production costs to be lowered substantially - so more could be invested in new products.

"Before the move to China, there might have been one new model locomotive every three years. We are now introducing to the UK on average four new locos every year and the same applies to Scalextric, where there might have been one new car introduced each year and we are now introducing between 12 and 15 new cars each year."

So you see design staff have trebled, and more products mean more sales. In addition, lower production costs allow for more detailed and authentic designs to be produced at prices consumers are willing to buy.

So better products, jobs in a poor country and more (better paying) jobs in the UK. Isn't the free market oppressive? Read the full story here.

Labour to let Kedgley damage NZ trade policy

Sue Kedgley, hysterical hyperbolist, according to the Greens "is attending the High Level World Food Security Conference in Rome next week, as a member of the New Zealand delegation."

She is paying her own way, but by what measure does she have the right to be a member of the official delegation? Especially since she will be talking in a way that sabotages and undermines New Zealand's long standing (and bipartisan between Labour and National) call for the liberalisation of trade in agricultural commodities. New Zealand has argued for many years at the WTO that trade in food should be free from export subsidies (like manufactured products), free from trade distorting subsidies and free from non-tariff barriers to trade (that are not genuinely about biosecurity), with tariffs on food imports being capped and negotiated downwards.

Now Kedgley is going to mouth off nonsense like "We need to challenge the doctrine of free trade and accept that people's right to food, to be free from hunger, must have priority over an ideological fixation on allowing market forces to prevail at all costs."

For starters, there is no free trade in food, secondly why DO we need to challenge it? How do you guarantee this fictional "right to food", proposing a global social welfare scheme are you? How do you propose food production increase unless prices increase to encourage it? How about the boondoggle of subsidised biofuels, which Labour is continuing with, the Greens are supporting and which is contributing towards higher food costs worldwide? Diddling with the market doing wonders there isn't it? Thought of attacking the EU, USA and Japan for grossly distorting agricultural subsidies and protectionism which has stifled agricultural production in other countries?

No - you're a vapid idiot.

SO why the hell has Labour let this banal control freak loose on the world when she says "I expect there will be intense debate between the free trade marketeers and those who believe the free trade agenda is one of the causes of the present crises"

Yes New Zealand is the free trade promoter, and by no stretch of the imagination can anyone outside the manufactured propaganda laden hysteria of Kedgley can honestly assert free trade is to blame for higher food prices - because it simply doesn't exist in food.

Kedgley is a vapid control freak who has for years sought to ban what she hates, make us do what she likes, make us pay for what she thinks is good for us and tax what she doesn't like. She distorts, peddles hysterical unscientific nonsense again and again, and has been the snake oil merchant for opposing genetic engineering, and concern about "safe food".

This woman shouldn't be let near any conferences claiming to be speaking on behalf of New Zealand. At best her views are economic nonsense, and as shallow as the rhetoric in her press releases, at worst she will provide succuour to the agricultural protectionists in Brussels, Washington, Tokyo and Paris who want to continue undermining world trade in food, world food production and currently strip around 1-2% GDP growth p.a. from the NZ economy.

So why is Labour letting an anti-free trade nutcase argue against government trade policy at an international forum?

Obama and Clinton's pork stinking up world trade

So while the agricultural sector should be raking it in from record commodity prices, CNN reports the US Congress has voted to spend an additional US$40 billion (yes you read right, billion), with another US$30 billion to "allow farmers to idle their land" and offer so-called environmental programmes. Oh and it has been bundled into an increase in food stamps and food aid for the poor, so you can't oppose the whole bill without looking like you're mean to poor people.

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Yes, so those that continue to farm, who benefit from record commodity prices are to get more money from US taxpayers, which of course reduces the ability of efficient farmers elsewhere in the world to compete and produce. Meanwhile, forget the need for more food, they'll pay some farmers to not produce. Imagine if you paid manufacturers to let a factory lie idle, or a bank to not loan money, or airline to not fly. Actually don't because taking taxes to pay for this pork helps do just that indirectly.

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However, before you go "Oh not Bush again", the Bush Administration is opposing this.

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It's the Democrats, the party more people overseas want running the USA. However, there are undoubtedly plenty of Republicans cheering this on too, if they have large rural constituencies. This Bill will help reduce the incomes of farmers in New Zealand, Australia, Africa, Latin America and Asia, it will help keep up the price of food to people worldwide by subsidising poor producers and subsidising non-production.

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In short the US Congress has voted to screw the world over. Bush has threatened to veto it, but there are so many in Congress supporting it the votes are there to override it. You see this is about the 2008 Congressional elections, it is stinking fly infested pork of the worst kind. It doesn't just screw over American taxpayers and consumers, it screws over farmers the world over. It has been done in a way that means that agricultural subsidies can't be opposed without Democrats screaming "you're opposing food stamps for the poor too". It's filthy, unprincipled politics of the worst kind.

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So where do the main Presidential candidates stand on this. Associated Press reports Hillary Clinton castigating John McCain because he opposes it. USA Today reports Barack Obama supports the Bill.

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Hillary Clinton has said "I believe saying no to the farm bill is saying no to rural America", no Hillary it is saying yes to efficient farmers, consumers and taxpayers. It's not your money you thieving harpie.

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Barack Obama has said "I applaud the Senate’s passage today of the Farm Bill, which will provide America’s hard-working farmers and ranchers with more support and more predictability". No it rewards non production you vapid flake, it rewards inefficient farmers and steals from hard-working taxpayers AND consumers by taking from their taxes AND inflating food prices, and it punishes farmers in developing countries. So much for the poor.

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John McCain said "It's a bloated piece of legislation that will do more harm than good for most farmers and consumers". Quite.

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So leftwing activists around the world, who claim to give a damn about farmers in developing countries, who care about the increase in global food prices. Still going to cheer on Barack Obama like sheeple? Which Presidential candidate would be better for New Zealand and world trade in agriculture? It's a no brainer.

Food prices? Blame government

If ever you wanted to witness the catastrophic effects of government intervention in markets you need only see the international crisis around food prices. The primary reason why food prices have been increasing is demand from middle income consumers in India and China. This increase should easily have been accommodated by a free and open global market for food production. Demand increases, prices rise and this should encourage production in the commodities most sought after. Farmers and wholesalers of such goods would make good profits they can reinvest in growing more, and doing so more efficiently. Consumers benefit as this dynamism and entry into the production market helps keep prices from increasing too rapidly.

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Well it would work that way, but for the European Union, US federal government, Japanese government and other agricultural protectionists.

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Many have blamed the new found fetish for biofuels. They are partly right. Now biofuels are meant to be good because their production absorbs the same CO2 produced when they are burnt, and can replace oil. Sadly, whilst biofuels may have a future, governments in many countries have started subsidising them, making it more economic to grow corn and wheat for fuel rather than food. Half of the growth in crop consumption is due to biofuels, and that would not have happened had the US, EU and the like thrown bad money at it. Rather than letting oil companies choose to invest in the best options for more energy, there has been massive diversion to biofuels - the result is higher food prices. If biofuels were not subsidised they would face the same pressure on prices that oil (and food) has, making their economics more questionable and helping ensure that the balance of agricultural production is not leaning towards fuel.

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The biofuel agenda has been promoted by environmentalists such as the Green Party, keen to mandate compulsory targets for biofuel production. As much as they may wish to plead that it should be "sustainable", the vile meaningless buzzword of the 21st century, the truth is simply this - Government incentives for biofuel production increase the price of food. Environmentalists who want the state to encourage biofuels are doing so at the cost of food - simple as that.

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However, the new fad for biofuels may, at least, have a future. If left well alone, biofuels may well become important, but will be competing with hydrogen fuel cells, solar energy, wind energy, nuclear and dare I say it, new sources of oil.

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There are two far bigger concerns around the trade in food that are hindering, enormously, the ability of the food sector to respond to increases in demand.

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The first can be quickly addressed, these are the failures of the developing countries in the form of price controls, import controls, domestic monopolies and the like which have existed in many of the countries most suffering from the increases in prices. The price controls on food have restricted the economics of food production in those countries, and restrictions on imports have also hindered supply. Deregulating the import, export, production and sale of food should be a priority so that the right signals can be sent to increase production, and for food exporting countries to enjoy the windfall to encourage them to invest in producing more. Sadly the socialism of countries like Venezuela, keeping food prices down, has exacerbated the situation.

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However, for all of these failiings (and in many countries these barriers are being dismantled out of necessity), nothing beats the abject catastrophe created by the European Union, USA and Japan with agricultural protectionism.

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Liam Halligan in the Sunday Telegraph attacks, quite rightly, the French Agricultural Minister Michel Barnier who claims, without a hint of irony, that the EU Common Agricultural Policy (CAP) is a "good model". Model of what?

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Millions will happily protest against so called US imperialism, and have no doubt about it - US agricultural policy is only slightly better (and the Democratic Party led Congress is now pushing through another Farm Bill to spread pork to the feather bedded US farming lobby), but who protests the multi billion dollar distortions and disasters that result from the EU's CAP.

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Let's review what the CAP actually does.

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For starters it inflates the price of food in Europe by imposing tariffs, quotas and bans on food imports from countries outside the EU. It does this to protect inefficient European farmers, and so hurts European households by making them pay more than they need for food. The knock on effect is that efficient food producers outside Europe get poor access to that wealthy market, hindering their production in favour of the small, energy intensive subsidised farms of Europe. So the CAP first favours the less productive against the more productive, and European consumers pay more, whilst disadvantaging others.

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Secondly, the £33 billion per annum in subsidies - yes £33 billion - is poured into the farms that already have a protected market, so they can produce. Ah, you cry, but if they didn't produce wouldn't the price of food go up? Um hold on, part of these subsidies is to pay farmers NOT to produce, much like in the US. This trick was to eliminate over production, caused by the protectionism and subsidies in the first place. So yes, the EU pays for farm land to be unproductive, as does the US federal government. Be nice to end that straight away so that farm land might be more profitable used AS farm land than as a source for a welfare cheque - but no the French government says "it is a model". However, what is truly destructive about these subsidies is how they decimate food production elsewhere in the world, you see the CAP subsidises exports of inefficiently produced European food to the rest of the world.

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The result? Agriculture in many developing countries has been stunted by the EU's exports of its highly subsidised produce undercutting efficient production elsewhere, whilst shutting its own doors to imports.

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As Halligan says "the CAP, along with other Western subsidies, has delayed the cultivation of, and investment in, vast swathes of potentially fertile land across Africa, Asia and Latin America. And it's this land which should now be supporting the large-scale commercial production of the food these regions - not to say global markets - so badly need."

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So the EU, followed by the USA (and don't doubt Hillary Clinton and Barack Obama will keep this going, McCain's opposition to "pork" spending may hold some hope) and Japan (on rice predominantly) have stunted and hindered food production elsewhere by propping up their own inefficient agricultural producers. The insanity of the CAP is such that the more efficient dairy farmers in the UK can't benefit from record dairy prices because of quotas of production within the EU - what rational agricultural policy prevents your farmers from making money from high commodity prices, but ensures your consumers pay more than that for what they buy?

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The CAP was originally about two things - ensuring European farmers had adequate incomes and food security. The latter is a nonsense, given the UK used to consume virtually all of NZ's food exports until the 1970s, and international trade in food with record prices will help ensure food security. The former is even more of a nonsense. The CAP stops European farmers from realising the benefits of high commodity prices, whilst simultaneously hindering production elsewhere. If there were ever a time to remove agricultural subsidies and trade protectionism for agriculture it is now.

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The clear message to Brussels, Washington and Tokyo should be plain and clear. It is time to dismantle your pork barrel laden agricultural protectionism. That means abolishing subsidies so that production isn't distorted in favour of inefficiency, and abolishing tariffs, quotas and bans on free trade in agricultural commodities - so that your own consumers aren't paying over the odds.

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Agricultural subsidies are the invention of socialists and economic nationalists, the truly economic braindead. They are immoral, destructive and a cancer upon the world of food production and trade. Nothing would assist in addressing food shortages more than dismantling these abominations, and meanwhile the enormous money saved might just be a boost to the flagging European, US and Japanese economies. Farmers in these countries need to be told - as prices for dairy, meat, wheat and rice are at record levels - you should stand on your own feet. Meanwhile, it would be nice if the EU's budget was halved and taxpayers got their money back.

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As is said by the Economist, ever the friend of free trade:

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"Defenders of the CAP and other rich-country farm policies cannot have it both ways. They cannot demand more money when prices are low, and then ask for extra protection when they rise. High food prices further undermine their already rotten arguments for support, and offer a golden opportunity to dismantle rich-country farm protection"

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The environmentalist new left movement is propagating a new form of snake oil called "food sovereignty". The UN Rapporteur on the "right to food" Jean Ziegler, a supporter of Cuba's agricultural policies, is a cheerleader for this.

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It's about time that these economic fraudsters were exposed for what they are. Their philosophy is literally killing people, and it is impoverishing farmers throughout the developing world. The time is now for all those who give a damn about food to call for a complete liberalisation of agricultural trade. Nonsense like so-called fair trade and the like should be ignored for what it is, a distraction.

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Meanwhile blame the environmentalist movement for biofuels, along with agricultural protectionism (although socialists and economic nationalists are equally to blame here). However there isn't much hope, with Sarkozy's administration talking about "community preference" as a new form of protectionism, and both Clinton and Obama pushing anti-trade agendas. S0 when will those who claim to care about poverty speak up against agricultural corporate welfare?

Gordon Brown to meet Dalai Lama, would Helen now?

Good for him, he has told the Chinese PM Wen Jiabao that he will meet the Dalai Lama when he visits London in May. Not only that the Chinese PM has said he would meet the Dalai Lama as long as he renounces violence (which appears to hardly be an issue) and does not call for Tibetan independence (which he has not lately, simply requesting the same autonomy Hong Kong has). The Chinese reaction to the proposed meeting has not been hostile.

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The British PM's meeting with be a formal one, not the Helen Clark "happen to be at the airport" meeting at Brisbane airport last year which she anxiously said "wasn't planned" and "because one doesn't know whether people are going to be in the lounge, or what time other passengers are boarded". They happened to be on the same flight from Brisbane to Sydney. Clark, understandably was in business class, the Dalai Lama in economy, but Qantas granted him lounge access at Brisbane which allowed the meeting to occur. Remarkable that Qantas could do what Helen Clark wouldn't - because she undoubtedly could have invited him as a guest (I fully expect she is a Qantas Gold frequent flyer).

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This meeting will undoubtedly raise the pressure for the Chinese PM to actually meet the Dalai Lama. Helen Clark on the other hand has no backbone at all on this.

Unfair trade : download the Adam Smith Institute report

It is here

Here are the highlights of the executive summary points, which are even more damning than I expected. 10% of the fairtrade premium goes to the producer, the rest is retail markup:

• Fair trade does not aid economic development. It operates to keep the poor in their place, sustaining uncompetitive farmers on their land and holding back diversification, mechanization, and moves up the value chain. This denies future generations the chance of a better life.
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• Fair trade is targeted to help landowners, and not the agricultural labourers who suffer the severest poverty. Fairtrade rules actually make it more difficult for labourers to gain permanent, full-time employment.
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• Four-fifths of the produce sold by Fairtrade-certified farmers ends up in non-Fairtrade goods. At the same time, it is possible that many goods sold as Fairtrade might not actually be Fairtrade at all.
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• Just 10% of the premium consumers pay for Fairtrade actually goes to the producer. Retailers pocket the rest.

So I challenge the Green Party, and promoters of so called "fair trade", to present the evidence. Show it is more than spreading guilt, feeling good and paying more.

Ask everywhere if your council or employer has hopped onto this bandwagon, why. Send them a copy of the report, and tell them to stop wasting money on this fraud, and instead lobby for free trade, or support a genuine NGO charity in a poorer country.

Fairtrade damned further

Following on from yesterday's reports on Fairtrade, a comment on the Daily Telegraph website makes for sobering reading - about the reality of Fairtrade:

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"I was the acting Chief Exective of the largest independent coffee and tea trader in the world in the early 1990's and found all that you have mentioned and even worse to be true. I want to highlight some of your points toward the end of your article to make clear that the mega-growers also ship and sell their lower quality beans into the Fairtrade markets through brokers and receive the subsidized "charity price" from the "socially responsible" rather unquestioning public. This is exactly what was meant to be avoided, and it is done in huge volumes. This type of illegal activity is almost impossible to police at the level where it occurs, and where supervision has been pursued it has either failed or been simply too expensive to maintain (especially when the bribes at the storage and market delivery locations are factored in). So what happens is that the small farmers end up competing directly with the mega-producers for "shelf-and-mouth" space, which is a losing battle and exactly the opposite of what was intended to occur. Please, everyone, do not buy Fairtrade unless you (or somone you completely trust) can track your purchase back from the cup in front of you to the fields/farmers that the beans (or other produce) came from."

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So there you have it, Fairtrade markets get exploited by the large producers that Fairtrade lovers so abhor, and it is difficult to thwart this.

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One of the most damning criticisms I have of Fairtrade is that it diverts attention from the REAL "fair" trade issue - opening up of markets. Perhaps the most wealth generating and liberating move that could be made for people in developing countries would be for both developed and developing countries to open up their markets.

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Developed countries need to end export subsidies that mean their producers undercut those from competitors, they also need to end prohibitions, quotas and tariffs on imports so that the most efficient producers have a fair shot at the wealthiest markets. Developing countries need to abolish legal monopolies on imports and infrastructure, open up internal markets to competition and remove prohibitions, quotas and tariffs on imports, especially those that can aid in improving productivity.

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Fairtrade diverts attention from the fight to remove these barriers to productivity and wealth, by claiming that fiddling with prices can make people wealthier.

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Of course those in poorer countries should not be maltreated, should not have their property stolen, should not be expected to work in extremely dangerous conditions, but the answers to this are complex, and lie significantly in having governments which apply a rule of law, which protect individual rights and property rights.

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So what is "fair"? Janet Daley in the Daily Telegraph today notes how the word "Fair" has been misused by the left and is now used as a synonym for equality of wealth, yet is highly destructive.

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She said:

... even more dangerous is the peculiarly lethal principle of "fairness" that seems to prevail in the NHS (or at least at the National Institute for Health and Clinical Excellence, which determines what treatments the NHS may use): if everyone can't have it, no one should. On this basis, procedures and medications that could save or transform individual lives must be barred if they cannot be made available to every patient who might conceivably benefit from them.

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Once again, "fair" must mean "the same": so the breast cancer patient who is a young mother may be denied the drug that could lengthen her life because it would not be feasible to provide it for all the breast cancer patients who are over 80, and if she offers to pay for the drug herself she may be barred from receiving any NHS treatment (because it is "unfair" for her to use her own money to buy what others cannot afford).

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How have we come to accept such vindictive uses of the word "fair"?

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Of course it was initially the fault of the Left and its special pleading lobbies, which - like some Fairtrade promoters - had a lot to gain. But the Right has been complicit: it has surrendered words like "fairness" and "opportunity" - and accepted caricatures of other words such as "selfish" and "greedy" - with scarcely a murmur of dissent."

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Indeed. Expect John Key this year, and David Cameron two years from now to talk about fairness a lot - and both will be peddling the status quo.

Fairtrade fails and deceives: Part Two

Like I posted earlier, there are a whole host of reasons why Fairtrade creates perverse incentives and can hurt more than help. However, most of them come down to one major difference between Fairtrade and free trade - Fairtrade corrupts the price mechanism. Prices aren't just about "what it costs to buy something", they are signals about whether to increase or decrease production due to demand, whether to increase or decrease consumption, they inform about quality. They are the culmination of many factors, but ultimately are the culmination of free choices to produce/sell, and to buy. It is the ultimate democracy of the market, more than voting for a politician, it is voting for a product. Sadly too many do not recognise this.

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Price sends the following key signals, Fairtrade grossly distorts these:

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1. Prices for produce are partially a function of quality: The better the produce, the better the price, and vice versa. This rewards good farmers, innovative farmers and producers, and penalises those growing in areas less suitable or those less attentive (who should probably do something else).

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2. Prices are a function of supply and demand: Very low prices for produce reflect over supply relative to demand, which is a signal that some producers should stop producing or shift to other commodities/enhance quality or the like. Paying some regardless of quality and demand, suppresses prices for all others and encourages more to produce, creating a cycle of increased poverty. This particularly hurts those unable to participate in Fairtrade, but even if all were involved in Fairtrade, it would create a glut of unsold produce. Buyers would pay high prices, but would be turning away produce - which wouldn't get paid for, which may end up harming the most productive. Think carefully how much harm this could cause.

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3. Low prices encourage higher productivity: Producers of low priced products can decide to change what they produce or could become more efficient, so that their margins over cost are better at lower prices. This means taking steps to increase productivity, such as in Brazil where in the coffee sector mechanisation can mean five people can have the productivity of 500. The price is then shared between less people. What do the others do? Well they can produce goods and services that people will pay more for - perhaps Fairtrade activists could help them out to find what these could be rather than trap them in overproduced commodities?

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4. Paying high prices for Fairtrade products damages sellers of other goods and services: While you’ve been assuaging your conscience buying Fairtrade bananas or coffee, you’ve spent money on those goods that you might have spent on other items. Not only have you lost out on not having those, so has the producer of those missed out on you not buying them. Given the amount of the Fairtrade premium milked by others along the way, you might also question whether the high price didn’t largely benefit your local supermarket as much as the farmer. You might have bought more fruit and vegetables, you might have bought more meat, you could have spent more on clothes, holidays, or paid off your mortgage. In other words, a whole chain of people could benefit from what you save paying market prices.

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So how long will this Fairtrade charade persist? As long as you keep supporting it and not asking questions. Ask those supporting this why they encourage overproduction of poor quality produce in poor countries. Ask them why they encourage old fashioned means of production that keep people stuck in labour intensive jobs. Ask them how much of the Fairtrade premium goes to retailers and wholesalers, and don't take "not a lot" as an answer, ask for number. Ask why you should pay more to buy one product and then not buy another product, which also helps people making it?

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Make THEM think too!

Fairtrade fails and deceives: Part One

"Fairtrade is about better prices, decent working conditions, local sustainability, and fair terms of trade for farmers and workers in the developing world. By requiring companies to pay sustainable prices (which must never fall lower than the market price), Fairtrade addresses the injustices of conventional trade, which traditionally discriminates against the poorest, weakest producers. It enables them to improve their position and have more control over their lives"

That’s the legend sold with Fairtrade, on the Fairtrade Foundation website. It is about to be heavily promoted big time in the UK through Fairtrade Fortnight. However, Fairtrade isn't fair, or good, it is ignoring basic economics and is highly deceptive. It is hindering development far more than it helps.

It is often treated by the likes of the Green Party as an alternative to free trade, so it excuses protectionism (bans and tariffs on imports). You see they are ignorant of economics too.

What Fairtrade actually is about is an ideology of guilt-mongering to brand products on the basis of being “ethical” which are marked up for the “good” of all those involved, grossly distorting price signals and producing perverse results. In the Sunday Telegraph today, the Adam Smith Institute has announced the release of a damning report about “Fairtrade” called, aptly, “Unfair trade”. The Institute states “At best, Fairtrade is a marketing device that does the poor little good. At worst, it may inadvertently be harming some of the planet’s most vulnerable people”.

How so, you say? How can it be unfair to pay producers more for making what they do, in such poor countries? Well the report points to a number of major issues:

• Fairtrade pays farmers to maintain uncompetitive farming methods rather than using modern techniques that can enhance production. Environmentalists might argue that those techniques are more environmentally sustainable, but the Fairtrade Foundation admits it has no programmes to encourage the use of technology in farming, of any kind. It even gives counterproductive advice, encouraging crop mixing, which hinders mechanisation.
• A fraction of the Fairtrade premium charged to consumers reaches the producer, retailers pocket the rest as Fairtrade products are perceived as high yield and less price sensitive. In short, customers are more willing to pay for the “Fairtrade” label, oblivious as to whether the premium reaches the producer. The Fairtrade Foundation insists it ensures farmers are paid more than they would otherwise (no doubt retailers are too!), but do consumers accept the premium paid to everyone is fair?
• Fairtrade only accredits farmers if they join together as co-operatives. Farmers working for Café Britt in Costa Rica are self-employed small business people who own the land they farm, but this is “unacceptable to ideologues at FLO international” Fairtrade’s certifiers. Café Britt has been refused Fairtrade status, even though its Costa Rican farmers have increased incomes by processing, roasting, packaging and branding locally as well. Fairtrade coffee, by contrast, is roasted and packaged in the EU.
• The Fairtrade Foundation is seeking to dominate the trade, by seeking to monopolise the concept of “ethically branded” produce by persuading local authorities, companies, schools and the like to declare themselves “pro Fairtrade” at the expense of other brands claiming the same thing (like Café Britt). This has effectively limited the range of "pro producer" activities as the brand itself limits innovation to that approved by the brand. It also inflates the price by not having competing "fairtrade" brands.
• Fairtrade supporters ignore the real causes of poverty amongst many growers by pursuing an ideological crusade against world market prices and multinational corporations. According to the Sunday Telegraph, coffee growers in Kenya interviewed by Alex Singleton of the Globalisation Institute told of being forced to used the monopoly milling and fertilizer companies, imposed by the state, and the high tariffs on imported tools that could assist production. Of course this could be addressed by free trade, but Fairtrade supporters are not interested in confronting poor country governments.
• Fairtrade encourages poorer quality produce. As many farmers sell produce in both Fairtrade and open markets, farmers will often sell their best produce on the open market to secure the best price (as the open market is quality driven), and sell poorer quality produce on the Fairtrade market, as the price is guaranteed. The effect this has on quality for those selling entirely on the Fairtrade market is questionable at best.

Fairtrade is another example of good intentions paving a road to hell, as it is driven by an ideology distant from reality. It is driven by faith that the world would be a far better place if only those mean old markets paid people more for what they produce (low prices are unfair!!), with even more ideological baggage along with that. Part of it is environmental – the old adage that organic is better than mechanisation, and fertilisers are “bad”. Part of it is simply socialism – companies are bad, so farmers should all be in co-operatives. Beyond that is the basic rejection of the price mechanism.

Ah, you say, but if I want to pay more so that a farmer gets more, shouldn't I be allowed to? Of course you should. I'd let you set fire to your money if you wanted to (you're not allowed), but that doesn't mean you should necessarily feel better, or those that don't buy fairtrade are immoral - the truth may be quite the opposite.

So what does ignoring the price mechanism do?

Chavez threatens to not sell oil to the USA

Go on you Marxist thug.

Given CNN reports "United States is Venezuela's biggest oil customer and one of the few countries that can refine its low-quality crude. Venezuela accounts for up to 15 percent of U.S. crude imports". I think it's fine for a socialist to say he's not going to sell to his biggest customer, especially since his product is hardly that well sought after.

He's looking to remove term limits and put the Central Bank under his control, as well as reduce working weeks (given that the work ethic there isn't high according to some reports that wont help). Nice little recipe for more authoritarianism, and more wasting of money following a grand vision for "the people".

Keep watching political science students and economic students - learn how a country can be wrecked by socialism, and pity the average Venezuelan, the welfare state that has been built is unsustainable.

Finally, food miles under attack

Front page of the Sunday Telegraph and a large feature inside it raises the point that has been made all along on this blog and elsewhere, that food miles are an inaccurate measure of the environment impact of food production and distribution - but one that the inefficient European farming sector (propped up as it is by tens of billions of pounds of taxpayers' funds) milks. I shouldn't put all European farms on the same level, it is fairly clear those in the east are more efficient, since they get a fraction of the subsidies of French farms.

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The point is made that:

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British lamb takes, on average, 2849kg of C02 for every tonne raised

New Zealand lamb takes, on average, 688kg of C02 for every tonne raised including shipping it to the UK

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British apples are "greener" in autumn and winter, but not in spring and summer when importing them from New Zealand is better than keeping stock in storage.

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A similar story applies to lettuces, tomatoes and strawberries, as the growing season for such veges and fruit is short in Britain, requiring heated greenhouses. It is better to import them from Spain.

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Even importing beans by air from Kenya or Uganda is more environmentally friendly than growing locally.

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However, onions can be grown in the UK for 14kg less C02 per tonne than importing from NZ.

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Still, it's a start in breaking down this nonsense about food miles. Some of the details are listed here. The Guardian reports the same point, with no figures or mention of NZ.

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The solution is cold turkey on the CAP step by step:

1. Eliminate all export subsidies by the EU (stop distorting foreign markets by your protected grub);

2. Eliminate all non-tariff barriers to agricultural imports in the EU (quotas and specific bans);

3. Put a ceiling of 100% on all agricultural tariffs ratcheting down to 75%, 50% and 25% each year, do the same to subsidies capping them in nominal terms and reducing them annually to zero.

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Meanwhile Sarkozy threatens to veto WTO talks over agriculture - see he isn't Thatcher after all.

Anti-globalisation protesters are communists

The usual travelling roadshow of naive young dreamers and old-fashioned hate filled socialists are causing trouble in Rostock, Germany, protesting the G8 summit. It should be noted Rostock is in the former GDR, which had the Stalinist regime of Erich Honecker until 1989. The flying of the hammer and sickle flags there, when millions were watched and thousands imprisoned, tortured and murdered for questioning the GDR regime is disgusting.

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The rather inane BBC is talking about far left groups as if they are benign compared to far right groups. The communists protesting at the G8 are no better than neo-nazis, both back the oppressive use of state violence to tell people what to do and what not to do.

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There are reasons to protest at the G8. You could protest:

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1. Russia's continued slide towards authoritarianism.

2. The impoverishment of primary producers throughout the world due to heavy protectionism for agriculture by Japan, the EU and the USA, and the negative environmental impacts of that protectionism.

3. The unwillingness of the G8 to get the Doha round to make much progress in liberalising world trade (a major step towards lifting standards of living).

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The protestors are intellectually vapid. Poverty in African is largely due to governments in Africa being corrupt kleptocracies in many cases, more than happy to use aid to pay for their families to go on shopping trips in Knightsbridge, London. These countries do little to protect property rights (necessary for people to protect what they produce and own, and without that poverty exists) or have independent judiciaries and police. It also isn't helped by the lack of free trade in primary products, as the EU and USA subsidise exports of agriculture undermining the export competitiveness of many other countries, and block or highly tax imports from those countries.

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The protestors current pinup boy Hugo Chavez is now into shutting down broadcasters that disagree with him - the lack of interest in this by many on the left speaks volumes.

EU birthday

Reasons to celebrate the birthday of the European Union
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1. Peace among all of its members (no small achievement).
2. Free trade in goods and (largely) free movement of labour among all of its members (again no small achievement).
3. A mechanism to expose and confront corruption when it affects other member states – particularly helpful in the Mediterranean and ex.socialist bloc states, with much needing to be done (still relatively new)
4. The most recent sets of new members are very sceptical of big statist visions for Europe, having lost two generations of their population to the stagnation of the last great vision – imposed by Stalin and his sycophantic lackies. In other words, the weakening of the dominance of France and Germany (very welcome!).
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Reasons to mourn the birthday of the European Union

1. The world’s most highly subsidised and protectionist agricultural and food market, with little sign that it will do anything more than stand still (the biggest travesty in international trade, particularly for NZ).
2. Bureaucratic directives en masse that add compliance costs to EU business (and a reason for higher unemployment on average).
3. Neo-mercantilist style industry support and protectionism that costs Europeans a fortune – witness endless projects that are expensive and uneconomic (e.g. Euronews, Galileo).
4. Desire by the backwards looking protectionists to have a European superstate that denies diversity on many areas of public policy (because the less competitive countries don’t want to admit the failure of their policies – e.g. France, Germany and Italy vs. Poland, UK and the Netherlands) which have nothing to do with trade. This desire is in spite of the democratic desire of citizens of several European states to have nothing to do with the proposed EU constitution.
5. Enormous numbers of well paid jobs for European bureaurats in Brussels who contribute next to nothing.
6. A European Parliament elected by a minority of European voters and barely accountable for its actions because it is remote and unknown – and it knows it.
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I agree with No Right Turn that it brought freedom of travel and trade (within Europe, while raising barriers to trade from outside), but it did NOT bring democracy or human rights to Europe. Besides the UK (lets not mention the countries too gutless to be anything but neutral in one of the decisive wars between good and evil in world history), democracy and human rights were brought by the United States, and indeed the UK in defeating Nazi Germany. Remember democracy and human rights did not exist in some states (Greece, Spain and Portugal) until well into the 1970s, and that came from within, with more pressure from the UK and USA, than from the then far smaller EEC. Furthermore, it was NATO that defended Western European democracy and human rights against forty four years of threatened Soviet imperialist aggression.
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It is far from politically correct to admit it, and I doubt the European Union will mention it, but European democracy and human rights have everything to do with the UK/USA winning World War 2 (the Soviet Union winning enslaved the other half of Europe), and NATO (and France) deterring Soviet aggression. In the east, that deterrent and the Helsinki Agreement planted seeds that saw the downfall of (almost all) Soviet backed tyranny.
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Finally, it is woefully incorrect to say that the European Union ended war in Europe. I think there are hundreds of thousands in the Balkans who would disagree. The European Union and its predecessors were about peace among themselves, but Europe is far from a peaceful continent – and frankly the European Union disgraced itself over the Balkan situation. However, that is a story for another day.

Helen Clark confronts food miles

It's about time and I'm very pleased, but more needs to be done. Publicity is needed in the UK on this, it is still almost invisible that there is more to carbon emissions than how far food has travelled. For every day you delay, is another day when UK media bleets on this lie, like it has today here, here, here and here.
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Amazingly, a green oriented site has actually started to talk a bit more sensibly about this quoting the Lincoln University study.
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How about the Nats having a policy?

Eco-labelling - our saviour or our undoing.

According to the Daily Telegraph, UK Environment Minister David Milliband is to announce today that he is considering eco-labelling for food that will outline the amount of greenhouse gases used in production and transport of food. This will be greeted with cheers from European farmers, even keen to suckle the Brussels tit and ever keen to block out food imported from more efficient food producers. However, as has already been explained it should not be a matter of simple reporting “food miles” – one of the greatest green crocks of our time, but the total cost of production.
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Now I oppose compulsory labelling. If the producer doesn’t want you to know something about the food then you have the choice of buying it or not. However, New Zealand should agree to provide input into this analysis, which will surely be impossible for all food imports, but also provides an opportunity to do two things:

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First, is to transparently and objectively determine the entire carbon impact, which in many cases benefits New Zealand farmers. However this wont happen without a fight. British farmers will baulk when NZ cheese appears in supermarket coolers with a lower greenhouse rating. However, lest Britain be hauled up in front of the WTO, it must not be a barrier to free trade.
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Secondly, how about identifying food by subsidy levels, e.g. 25% of the cost of producing this block of cheese was paid for by EU subsidies, or US subsidies etc etc. Now that wont happen, but the first could be pushed for. We can’t sit back and let this be defined by those with the loudest voices, as the “Department for the Environment, Food and Rural Affairs will work with producers and retailers” according to the Daily Telegraph. This doesn’t mean our producers or importers. Stop sitting back New Zealand, bloody well do something!

The WTO is good!

The WTO is the one intergovernmental organisation that I hold in high regard. It advocates consistent, non-discriminatory rules on trade, has a dispute settlement mechanism for it and is pro free-trade.

There are umpteen protestors now in Hong Kong claiming that the WTO is unfair. Mostly these are South Korean farmers who can afford to fly to Hong Kong protesting against the looming opening up of the South Korean rice market to cheaper foreign rice from the likes of Thailand (which is far poorer and a far more efficient rice producer). South Korea is a very small country with a high population, so in all likelihood there will be less rice producers in South Korea over the longer term, as the pressure for land shifts the country further from agriculture to manufacturing and services (which it is very good at).

The WTO puts pressure through its members for global liberalisation in trade of all goods and services. It puts the same pressure on the EU to abolish its export subsidies for agriculture as it does to India to abolish tariffs on car imports. All countries should liberalise – but what is happening is that the two largest blocs at the WTO are saying “you first”.

The US is willing to abandon agricultural export subsidies if the EU does so, and developing countries also abandon protectionist policies for agriculture.

The EU is willing to provide special access to products from least developed countries, thwarted the MFN principle which states that all WTO member states should be treated equally (though the EU itself is a great example of thwarting MFN!).

Both the EU and the US want liberalisation in manufactured goods and services in developing countries. Developing countries want an end to export subsidies and protectionism for agriculture and textiles in developed countries.

Most of them are right! However, no deal can be struck without agreement between member states - which is more fair than any United Nations organisation (the WTO is not part of the UN) which works on majority most of the time (and since the majority of countries are corrupt and often despotic, the result is clear).

New Zealand fortunately can step to one side given that it has almost totally liberalised trade (tariffs remain thanks to Jim Anderton’s deal with Labour when the Clark government was first formed), and can argue philosophically for free trade in agriculture, goods and services.

Even this French dairy farmer admits that New Zealand dairy farmers can produce milk at half the cost French ones can. If the Greens were in France, they would argue that New Zealand (foreign) milk cannot be allowed to undercut local producers- in short, the Greens would argue to render New Zealand a small country backwater unable to earn foreign exchange from agricultural products, and unable to afford the capital goods produced in other countries.

Interesting the steel worker in this BBC interview in Brazil understands things a lot better than his US counterpart – arguing that US car manufacturers would be more competitive if the cost of steel were lower for them (which means importing steel from more efficient producers), and that Brazilian steel mills are more up to date and competitive than US ones. Remember Bush agreed to reintroduce tariffs to protect the US steel industry.

Free trade is a no brainer. Professor Jagdish Bhagwati is a world renowned author on free trade. His website contains copies of many papers and articles he has written on trade and related issues. His latest book is In Defence of Globalization which I am currently reading.

If you think that the government should limit imports from other countries or tax them, then explain why you need to be forced to buy local, or penalised if you don’t. Also explain why the arbitrary national boundaries that exist are so precious to anti-free traders? Why not impose tariffs on products moved from the South to the North Island (that damned Mainland cheese!) and vice versa, why not impose tariffs on products coming from Northland or the Bay of Plenty into Auckland, or vice versa? Silly? Well imagine the USA did this, with 50 states – looks a bit like Europe then. Consider Africa, which is covered in protectionist states, most of which have GDP levels a fraction of New Zealand, with many times the population – see what a lack of free trade does for them.

If you are still not convinced, what if we extended the protectionist principle to its logical conclusion. You are now heavily taxed if you buy anything from outside your own home, but not on anything you grow or make yourself – see how wealthy you are now? Free trade is what happens everyday between you and your community, town and country – if it works within your country, where councils have differing levels of taxes and laws, it will work between countries.