Wednesday, 9 April 2008

Enter Winston

714667  The fact that Winston Peters has placed full-page taxpayer-funded ads across the country's newspapers today criticising New Zealand's freeish trade deal with China indicates one thing we've all known since the deal was announced: in an election year any deal like this will be electoral gold to any political party prepared to exploit the braindead bigotry and economic ignorance of a sizeable proportion of the population to its electoral advantage. 

Enter Winston.

Since NZ First's vote against the deal can do nothing to prevent the deal going through, all NZ First is doing with these ads is making NZ's rabid Stop-the-World-We-Want-to-Get-Off Club aware that the Winston First Party is still prepared to be the repository for their votes.  Meanwhile Helen Clark is prepared to accept all the bluster since it's better than a Winston Walkout (TM) just months before an election -- and she knows that if the Foreign Minister's ads opposing deals with foreigners and Peter Brown's pitch for the bigot vote pay off in votes as they hopes, the grandstanding exit won't be necessary

Despite his megaphone opposition to the deal however, close examination of Peters's criticism  shows there's very little if any cogent criticism to examine.  Not something of course that bothers the supporters to whom Peters is actually talking, whose criticism of this and much else proceeds along this one simple line: "Foreigners!"  (The truth of this is seen the fact that there's nothing in any of his comments about Tibet or human rights abuses or the like -- it's just xenophobia right down the line.)His criticisms are frankly just hollow noise.  See, here's all that the dickwhad is saying once you get past all the bluster:

Leader Rt Hon Winston Peters said there was simply not enough in the deal for this country for New Zealand First MPs to support it...  Under this FTA we will have to wait up to another 17 years to get the full benefits that have been promised.

And of course even longer if Peters's vote was to have any effect in killing the deal.  It's obviously not stated what more benefits he would like to have been agreed, since he fails to properly acknowledge even the benefits that have already been achieved -- another contradiction that he'll be confident his would-be supporters will be too braindead to notice.

Listed below are the explicit "areas of concern" that are supposedly causing the withholding of NZ First's support -- all of them rather surprising for a party of whom Winston First MP Brian Donnelly once told me they were mostly Adam Smith supporters, and all carefully stated to avoid the real reason, which (to repeat) is nothing more than pandering (he hopes) to a braindead xenophobic electoral base.  (Peters's criticisms are in italics; my own comments are in bold below):

* The stated return from the FTA is not worth the risk of exposing the few remaining elements of New Zealand’s manufacturing industry.
What "risk"?  As Paul Walker points out, "Trade will move jobs around an economy but has little effect on the total number of them." The only question for local labour is whether they work in low productivity areas in which we have little comparative advantage, or areas in which local businesses have a greater comparative advantage and achieve even higher productivity.  If the deal encourages industries to move labour to areas of higher productivity, that's a good thing.

* The timing of tariff reductions is weighted heavily in favour of China. What remains of New Zealand’s tariffs will be removed within seven to nine years whereas China has up to 12 years and possibly 17 years to reduce its tariffs.
And the sooner those local tariffs are removed, the better. They're not only a tax on consumers, but as a large part of imports to New Zealand come in the form of producer goods these local tariffs simply add another cost to local producers -- those for whom Peters claims to be talking.

* A huge imbalance already exists in trade between the two countries. China‘s exports to New Zealand in 2007 totalled $5.59b but New Zealand’s exports to China totalled only $1.95b for the same year.
Excellent!   We're getting more with less -- one of the huge benefits of trade.  Or does he think that when we give ten in order to receive fifteen that what we're doing is losing five?

* The projected benefit in dollar terms will make little impact on the trade imbalance. It should be noted that FTAs with both Thailand and Singapore resulted in a worse imbalance of trade.
Excellent!   We'll be getting even more with even less -- one of the huge benefits of trade.  Or does he think that when we give ten in order to receive twenty that what we're doing is losing ten?

* China has very low wages and fewer labour standards than New Zealand. What is left of our local manufacturing industry will simply not be able to compete on a level playing field.
See above under 'comparative advantage.'

* The movement of labour provisions should fall within existing immigration requirements – not FTAs.
So what? 

* The increasing levels of imported processed and non-processed foodstuffs from China threaten New Zealand's production of similar goods. New Zealanders should continue to have access to the quality food products of their own country.
See above under 'comparative advantage.'

* The clauses in the FTA relating to investment are of great concern.
Since none of those "concern"s are enumerated, one can only surmise they relate to the dastardly plans of those cunning yellow people to buy all of Manukau and ship it back to Quangdong.  Or something.

* Yellow people are not to be trusted, and the borders should be closed forthwith to them.
Okay, I made this one up. Can you tell?

Frankly, to even have to read this stuff is an insult to anyone's intelligence, since criticism of this sort of pseudo-mercantilist nonsense was something about which Donnelly's hero Adam Smith demolished all of two-hundred and thirty years ago.  Since old Adam's nine-hundred pages might be a bit much for politicians in their dotage, perhaps PJ O'Rourke's Smith-lite might be easier.  Since O'Rourke paraphrased from Smith, I've paraphrased to make it more even easier for Winston's acolytes:

The problem with Winston's China policy is not ideological. True, there is the difficulty of dealing with a dictatorial state where the entire  apparatus is under the control of a small, doctrinaire political elite. But Winston's MPs are used to that . The problem is that Winston is wrong about economic principles. And not fancy economic principles such as Income Velocity of Money, which caused some of us to get a D on our Econ 101 midterm. Winston is wrong about economic principles so basic that even a doddering old Commie with a high school education like Deng Xiaoping understood them.

Economic progress requires division of labor, freedom of trade, and pursuit of self-interest. One person produces one sort of thing--a sack of rice, perhaps. Another person produces another sort of thing--yoghurt, maybe.

Being self-interested, both people want both things, so they trade... But freedom of trade must be allowed. Taking the sack of rice by force destroys the pursuit of self-interest, which destroys the division of labor, which keeps anybody from doing anything about economic progress...

Trapped in the theater of Maoism, the Chinese finally noticed the emergency exit marked "Adam Smith." China's economy barged though Deng Xiaoping's Open Door. The door smacked economic ignoramuses around the world in the head and they've been wandering around in a daze mumbling nonsense about the unfairness of "our trade deficit" with China ever since.

But there is no such thing as a trade imbalance. Trade can't be out of balance because a balance is what a trade is. Buyers and sellers decide that one thing is equivalent to another. Free trade is balanced trade. You might as well have free love then claim your partner had sex but you didn't.

There is no such thing as a trade deficit. It doesn't matter if New Zealand imports all of its goods from China and exports little else but pieces of paper. We want the computer monitor, and the Chinese want more yoghurt and handsome portraits of Ernest Rutherford. No coercion is involved. Nobody is making New Zealanders buy Chinese goods. It's not like the Opium Wars when the British forced the Chinese to accept shipments of, shall we say, pharmaceutical imports. Maybe the Chinese will fight a war with the whole South Pacific--the Consumer Electronics War of 2009, with Chinese gunboats cruising the fountains in the world's malls. But it hasn't happened yet.

And isn't likely to.  As everybody knows, war is very bad for the consumer electronics market.  Read PJ's brief note on 'Trading with the Enemy' here -- or get the whole book:

On The Wealth of Nations: Books That Changed the World
by P. J. O'Rourke

Read more about this book...


  1. Robert Winefield9 Apr 2008, 16:49:00

    "The only question for local labour is whether they work in low productivity areas in which we have little comparative advantage, or areas in which local businesses have a greater comparative advantage and achieve even higher productivity."

    Isn't that the godamned reason the government has turned the speedometer on our factory tertiary education system to overdrive? To upskill the workforce and leave the menial tasks to someone else?

    Winstone is part of that process. He should be ecstatic! Managed to get someone else to do all of NZ's shit jobs, now NZers can go all Hi-tech...

    Oops they can't because nobody trusts the government not to nationalize the Hi-tech industry to save it from foreigners...

  2. That article by PJ O'Rourke was awesome. I'm never going to worry about a trade deficit again.

  3. Robert

    And there is the little issue of looming CO2 taxes. NZ is de-industrialising so that it can meet Kyoto requirements. Every fortnight or so another factory closes in South Auckland, biffing another group of workers out into the cold. And each time the economy slows a little as these increasingly deparate workers end up doing less productive tasks for less income- doing whatever they can find. In the end NZ has pitifully little in the way of scale manufacturing lately. That is going to cost big time soon enough. The cause of this problem is not China...



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