Politics and science had better heed the truth

The Wall Street Journal noted that 57% of Trump voters thought trade takes away jobs. The Rust Belt of the USA, where auto and steel jobs have been lost, will find that those jobs have gone not so much because of trade or immigration but because of technology.

Ironically, robotics and automation are allowing developed countries to bring manufacturing back home but the jobs won’t be coming with them.

A Trans Pacific Partnership which includes the USA has gone for the meantime but I would not write off its long term prospects.  The TPP took more than ten years to negotiate. A presidential term is four.  

Thankfully the flurry of executive orders has not yet included trade tariffs on Chinese and Mexican imports.  Perhaps the president is starting to listen to the advice that such tariffs will only hurt his own consumers and a trade war would be crushing for US farmers.  

New Zealand needs to hold the line in our trade with the US and make small gains where we can, but any trade deal, in my view, can wait.  ‘America first’ is not a good pretext for a balanced outcome.

We will also have to be careful not to be caught in the crossfire of any trade war, and the Government and our officials need to play their cards skilfully and tactfully.  There are opportunities in disruption.

If there is any area of government which needs investment priority right now it is our trade division.  We cannot afford the things we want and need, like hospitals and social services, if we cannot earn our way in the world. 

Four days before the North Canterbury earthquake I was at a Cairns Group meeting in Geneva.  I presented the NZ farmer view of the importance of free trade and the positive outcomes of deregulation. 

I noted the dulling effect subsidies were having on the dairy supply response.  I described the volatility in international prices caused by a thin market exacerbated by restrictions on trade such as tariffs and non-tariff trade barriers.

We also heard from professor Kym Anderson, School of Economics, Adelaide University, on the barriers to, and trends in, free trade.  Developing countries, he said, had until recently restricted exports through penalties such as export tax.  

Argentina farmers, for example, were penalised with an effective tax rate of up to 90% on their exported goods.  It seems bizarre to us but the intention was to flood the local market with cheap product.  The reality was that Argentina had less ability to pay its way. 

Its new government is reversing this policy and other developing countries are now starting to apply subsidies to stimulate production just as developed countries are reducing theirs.

Another emerging barrier to trade is the environmental penalties applied by governments in developed countries, such as ours, which, if based on production, have a negative impact on competitiveness and disrupt world trade. Just like export taxes, these penalties reduce a country’s ability to pay its way and perversely to afford the environmental interventions it desires. 

Some political parties here in NZ continue to be fixated on penalising NZ farmers in just this way through including biological emissions in a carbon tax or the ETS.  What is worse, since we are carbon efficient protein producers, any penalty will simply be exporting production to other less efficient players, making the global environmental problem worse, not better.  

Our decision makers need to resist post factual science and pandering to fear.  Our local councils appear to be particularly vulnerable in this respect. 

The problem for us is that once rules are notified in regional and district plans, the burden of proof to have them removed can become insurmountable. 

Councils need to realise that they have to work with farmers if they are to effect change; they must sort out fact from fiction early on and set out with rules which are practical, doable and evidence based.