WTO agreement tentative - no thanks to France

Jacque Chirac is a worm - and the WTO talks have essentially confirmed that.

A deal is imminent at the WTO talks in Hong Kong, but the South Korean farmers (who can afford to fly en masse to Hong Kong, but afraid to compete with rice produced in Thailand) shouldn't fear - Jacque Chirac has saved their bacon, and helped maintain distorted trade in agriculture, with a tiny concession for 2013. In doing that, farmers in Thailand, Bolivia, New Zealand, South Africa, Pakistan, Indonesia, Australia and many other countries have little reason to be grateful.

The European Union looks likely to concede a 2013 threshold for abolishing agricultural export subsidies (but nothing on import quotas, tariffs or domestic subsidies), even though the US was pleading for 2010 and the Cairn’s Group (including New Zealand) were pushing for earlier removal of export subsidies and progress on other restrictions. Export subsidies for cotton will go in 2006, largely affecting the US and benefiting a number of developing countries.

Least developed countries will get quota and tariff free access to developed country markets for most of their exports, not that this will help agriculture much when the EU maintains export subsidies till 2013, and domestic subsidies continue to grossly distort trade.

Developing countries have also agreed to some liberalisation in the access they give to imported manufactured goods and services, particularly telecommunications, banking and transport.

So what does this mean?

Not a lot, it is glacial progress. It wasn’t without a lot of goodwill from developing countries and the US – and of course New Zealand was at the forefront of advocating free trade.

Frankly, it means the French, by and large, have screwed efficient agricultural producers - rich and poor. Why?

Because it was the EU which refused to make further substantive progress – NOT the US (although it is touchy about domestic cotton subsidies) and not developing countries.

At the EU, there are two blocs on agricultural trade - the reformist group (the UK, Scandinavia, Netherlands) and the ostriches (French, Italians, Spanish and Austrians). The French basically said no, and were not even happy with the 2013 deadline to get rid of export subsidies for agriculture. Lets note that export subsidies consist of 2% of the total value of all agricultural subsidies. France would veto any EU offer that went further.

The USA is often painted as the great world villain exploiting the poor and holding them back, but the US had pushed hard to abolish export subsidies no later than 2010 and to make progress on domestic subsidies. The US agreeing to accept abolishing cotton export subsidies next year is a worthwhile step forward, all export subsidies should go then at least.

The Common Agricultural Policy of the European Union is fundamentally immoral – it props up the wealthiest farms in Europe with subsidies, including those owned by the Queen and Prince Charles – it inflates the price of food to European consumers, and because it is a high proportion of EU spending, costs European citizens in tax. It shuts out efficient producers like New Zealand, Thailand, Pakistan, Bolivia and South Africa from the European market. The EU uses export subsidies of around US$3 billion per annum to prop up exports of sugar, dairy products and beef.

My earlier post outlines some of the absurdities of the CAP.

It is unrealistic to expect the European Union – basically a project that unnaturally marries free trade with socialist central planning – to abolish all agricultural protection overnight. However, it should. It uses four types of protectionism to screw up world trade in agricultural products:

- Export subsidies (undercutting efficient producers worldwide);
- Import quotas and bans (shutting out efficient producers from the European market);
- Import tariffs (taxing imports from efficient producers);.
- Domestic subsidies (propping up the wealthiest domestic producers).

These should go in quick succession – by 2010. With export subsidies, which currently cost US$3 billion per annum abolished first. This would match the offer by the Bush Administration to do the same, and challenge it to follow through on its own import restrictions and agricultural subsidies – for now, Chirac the worm has told the developing countries to go fuck themselves if they want to trade on a less tilted level playing field in OTHER countries, because the French want their “right” to use their taxes to undercut them, till 2013.

However, will you see Bono or Bob Geldof going to Paris to protest against this intransigence? Will you see any of the venom directed at Bush for being, well, Bush – directed at Chirac, the French government and the European Union? I doubt it…

Swedish nightclubbing

I've not been to Sweden yet, but hat tip to PC who has a powerpoint presentation of some highlights.

Such as...

not a bad way to start the weekend.

Bunks on planes - as long as you're upfront

The next generation Boeing 747-8 will look a bit different on the inside as reported by this site in Seattle. There will be a skylight, and the option for airlines to install bunks which are located in the ceiling space currently filled with wires and ducts (which are being consolidated and moved to the sides) - this means premium passengers could sit in a regular seat for takeoff and landing, but have a bed for overnight flights - not just a seat that folds down. All the photos are here.

One of the more amusing concepts is the "DreamLav" a more spacious bathroom than the closets currently on board, by using design more cleverly.

However, don't get too excited, it hasn't flown yet and wont till 2009, and only freight versions have been ordered so far. The likelihood that economy class passengers will experience much different beyond the toilet is probably low, as it is first and business class passengers that make most long haul flights profitable (and where the greatest competition on service, comfort is).

Nevertheless, rumour has it that several airlines that serve NZ, including Air NZ, Qantas and Cathay Pacific are interested, given that the mega Airbus A380 is too big for most routes into NZ.

Business NZ go back to the 70s

A report commissioned by Business NZ and a host of other industry associations has been slammed by the Greens for damning the carbon tax.

The report states that carbon tax will result in energy input costs increasing between 11% and 35% for the seven companies surveyed. Which is no surprise, it IS a new tax after all.

Business NZ rightfully damns it as making New Zealand less competitive. The Greens, prophets of armageddon, see it as a "thinly disguised attack from big business on one of the few positive moves New Zealand has made toward protecting the planet for future generations". Of course the carbon tax will make not one iota of difference to any global warming, but will boost the coffers of the state - it is a transfer from the private sector to the government - and since the Greens don't like businesses much and like government, it makes sense for them. They are correct about one point though - the carbon tax will increase the incentive on businesses to reduce energy costs, that's economic fact. That is why the Greens support it, it will have a marginal effect on energy demand, because it is fiddling with the price of energy.

However, the Greens neglect to note that businesses have powerful incentives to be efficient now, through the profit motive (which they don't like). The commercial sector is far more ruthless than the state sector, and private individuals. That is why the carbon tax makes a marginal difference.

So why is Business NZ going back to the 70s? It is because it suggests:

“This study indicates that New Zealand should seek some way other than a carbon tax to meet their Kyoto commitments - perhaps by way of assistance to help companies invest in energy efficient technology - instead of purchasing carbon credits on the international market.”

It wants a subsidy - it goes from opposing a new tax (which is fine) to wanting to tax OTHERS more, to pay for energy efficient technology. However, this is happening anyway. Take aviation, where the average jet airliner has improved in fuel efficiency by 1-2% per year, due to improvements in engine technology and the weight of airframes. That is achieved not by government intervention, but by the demand of airlines for lower costs - technology and capitalism working for good.

Business NZ should stop calling for subsidies, it IS a slip back to the 1970s when business in NZ lobbied government for special treatment, protection, tax incentives, subsidies and the like, instead of wanting to be left alone - it is NOT a sign of good business to seek the government to help you out. Governments almost always only help at the cost of others - you should only call in the government when you or your property are under threat of force or fraud - you call them, don't let them call you.

Dominion Post right on Transmission Gully

The Dom Post is right about Wellington’s Western Corridor highway issue.

It says:

“The "solutions" proposed by opponents of the coastal upgrade do not withstand scrutiny.
Tolling the road to pay the difference between the two alternatives is impractical. Officials have calculated that only $115 million could be raised through tolling, and only if the speed limit on the existing coastal road was cut to 50km/h to make it less attractive.

Reprioritising other roading projects in the region is not an option. There are already more motorists inconvenienced by delays in Ngauranga Gorge, in and around the capital and between Wellington and the Hutt Valley than there are up the coast.

Building only the top half of Transmission Gully or a two-lane version of the road would not solve the congestion problems the road is intended to fix.

It appears from Sir Brian's questions that the Western Corridor committee is investigating the possibility of a compromise that could see some, but not all, elements of the current coastal proposal implemented. “

Quite right too. It is a very hard decision – parts of the coastal route would be very hard to consent, but Transmission Gully is a very expensive waste of money – another Think Big project, which has advocates from some who should know better, given the history of their political party. I've blogged so much on this already which you can read in the November and October archives.

David Farrar supports Transmission Gully, but it appears to be because it is more achievable that the coastal upgrade - although the coastal upgrade consists of 4 discreet projects, and the Nats have proposed a major streamlining of the RMA which would make the coastal route more achievable. I haven't seen where the extra $350 million for Transmission Gully is going to come from though, as this presumably must be from not building other projects (Wellington has already effectively been promised its full share of petrol tax money from Labour, with all the Crown contributions that are being made).

The compromise the Dom Post is implying, would be interesting though there are no details.

My bet is that it involves leaving Mana as is for now, given that the recent upgrade has eased congestion there, but will see a 2-lane bypass at Pukerua Bay (to relieve that community of through traffic) and a flyover at Paekakariki to fix that nasty intersection. Given that Land Transport NZ has already approved funding for a median barrier along the coastal section, it could be argued that 4-laning the coast would be premature. The projects north of Mackays and south of Paremata would be unchanged (Western Link Road, Petone-Grenada), and the rail upgrade would proceed as proposed (without the very expensive double tracking north of Pukerua Bay).

That’s what I’d advocate, don’t do Transmission Gully or 4-lane the coast, for now. Most of the route closures are due to head-on collisions, which the median barrier will prevent. Since tolls wont pay for Transmission Gully even taking into account revenue from petrol tax and road user charges from those who are likely to use it, why should non-users pay? I thought that was what National and ACT advocated.

All of which means that we are back to making incremental progress. The cold hard reality is that once the projects listed above are done, the problems north of Paremata are not that serious and don’t warrant throwing a billion dollars at a project with a negative return. The road will be safe, the congestion will be manageable, and eventually, there will be need to be more work done – but by then there may be congestion pricing in Wellington, which may mean there is no need at all for extra road capacity.