The usefulness of the 'Buy New Zealand Made' campaign

Both AntiDismal and NotPC have it wrong, says me. Both of them correctly note that the 'Buy New Zealand Made' campaign - an ad campaign put in place by Labour as a sop to the Greens - was completely useless in affecting folks' consumption decisions.

But that didn't make it useless.

The biggest problem with MMP is the costly bargains main parties have to make with support partners. The more efficient that main parties are at creating symbols to placate support parties that have zero real world effect, the better. Yes, they can cost a bit of money in the budget; NotPC says the Buy NZ campaign cost somewhere around $10 million. But that's insanely cheap compared to other anti-trade policies. I cannot imagine a better piece of policy that buys off the Greens and the nationalists while having trivial deadweight costs. Yeah, so every tax dollar has a deadweight cost somewhere around thirty cents. So the policy cost $13 million all up, pure loss. But compared to hiking tariffs or abandoning the free trade deal with China? Priceless.

Always remind yourself how much worse things could be.

Anti-dumping

I'd previously noted my disapproval of anti-dumping tariffs.

BK Drinkwater today points to a wonderful example of how anti-dumping works in practice, even in New Zealand.

Enter Michael McCormack, an Island Bay artist. He designs diaries adorned with Wellington scenes, has them printed in China, and sells them here. Everyone wins, right? He makes a bit of money to finance his passion, some printers in China get paid employment, and consumers get pretty diaries. Right?

Oh no. He gets slapped with an anti-dumping levy, because he doesn't sell the diaries to all those people in China desperate to have scenes of Wellington life in their stationery.
...
So this story has a hero. Where, you might ask, is the villain? Read on:

The diary duties were imposed after a complaint from the New Zealand industry, of which Croxley Stationery is the largest producer.

Of course. Some dude having two thousand diaries printed in China is obviously a threat to the local printing industry. So the industry calls in its mates at government to punish him.

Well done Croxley: you fail at capitalism. You've just been schooled by a struggling artist.

Don't we have a free trade deal with China?

Whatever blackboard explanations you want to come up with for the optimality of trade restrictions, this is how they play out in the real world.

Trade distortion files

Item the first: US stimulus "Buy American" legislation again has California ripping Canadian-built pipe fittings from the ground. Last time this happened, the Canadian manufacturer (different firm than this time) noted that 90% of its supplies come from Texas.

Item the second: An Indian car manufacturing company considers opening up some manufacturing in Christchurch, New Zealand, in order to export cars to China. New Zealand has a bilateral free trade deal with China, India doesn't. India offshore outsourcing to New Zealand: I wonder how many folks in India are protesting the potential loss of Indian jobs or will complain that when they phone the car manufacturer, they get some jerk on the phone who can't speak proper Hindi and doesn't know where Solapur even is?

Trade balances

David Farrar notes Kiwi backsliding on free trade. Well, the Kiwi version of backsliding is that we're delaying further tariff reductions rather than imposing new tariffs, but the direction of change is still disappointing. He notes that, since our free trade agreement with China, exports to China have increased by 60%.

Former Green MP Nandor Tanczos asked on the blogs whether imports also grew by 60%, being of the view that increased imports would be a bad thing. Sadly for opponents of free trade deals, the imports from China increased by only 15%. So what a success story for Goff – exports up 60% from China during the worst global recession in 70 years, and imports only up 15%.

Personally I would not regard it as a bad thing if imports had grown more than 15%. You can’t logically be in favour of one way trade and think we should be able to export as much as possible, but restrict what other countries can export. If imports from China are up, this means NZ consumers are getting to buy goods more cheaply, and it also continues to lift more and more Chinese out of poverty. China’s emergence as the world’s manufacturer has done more to reduce the number of global citizens in absolute poverty than 50 years of aid budgets.

We would expect our exports to China to grow more quickly than imports from there with this kind of deal; China's markets were more protected than New Zealand's prior to the change and New Zealand is much smaller than China.

Personally, I would not regard it as a bad thing if imports grew by more than exports. Remember that imports are a good thing and exports are the horrible price we have to pay in order to afford to import. To paraphrase Don Boudreaux, I'd be very very happy if I could, from the Principality of Cramptonia in South Brighton, Christchurch, import much more from my local supermarket without having to export more services to the University of Canterbury. And, indeed, if anyone is willing to dump products on Cramptonia at less than their cost of production, so long as I value the goods, I'm more than happy for them to do so.

American disappointments

I drove from Winnipeg, Manitoba to Fairfax, Virginia late in the summer of 1998 to start grad school at George Mason. I remember stopping in Pennsylvania (80% sure it was PA...it was a long drive) at a Sheetz gas station to fill up and finding a petition next to the gas bowser. Customers were invited to take away a form to mail to their Congressman protesting Pennsylvania's proposed move to mandate minimum gas prices, which Sheetz (a discount brand) rightly recognized as an attempt by the big guys to squeeze out the discounters. I was crushed. The Canadian press likes to paint the US as some horrible jungle of rampant individualism where government stays out of folks' way; I hadn't fully believed it, but I'd hoped for it.

Kiwis are experiencing similar disappointment currently. New Zealand had started talking about a free trade agreement with the US under each country's prior administration; things seemed to be moving forward with the change in administrations. And then the US pushes through massive dairy export subsidies. Says prominent Kiwi economics commentator Bernard Hickey:

I have previously argued in this piece “Why an American Free Trade is a ludicrous and dangerous idea” that it would be a mistake for New Zealand to negotiate a Free Trade Agreement with America. It would open the door for the lobby groups for US agriculture, pharmaceutical and movie/music interests to gut any deal so it was worthless, or even worse, force us to change our copyright laws and shut down Pharmac.

I said Americans lie and cheat on trade policy. They protest they want free trade, but regularly act to restrict trade and subsidise their exporters. Lobbyists dominate the trade agenda in America. Here is more proof of that.