Local Bodies: The Myth of Free Trade Agreements

Written By: - Date published: 12:38 pm, June 16th, 2014 - 49 comments
Categories: Economy, trade - Tags: ,

Reposted from bsprout at Local Bodies.

I have attempted numerous time to comment on Ele Ludemann’s Home Paddock blog in response to her post on Free Trade Agreements and promoting the false perception that they are vital to our economy. While I can’t imagine that Ele would be deliberately blocking my comments, none of them have been allowed to appear. Here is what I was attempting to say:

Most FTAs favour the larger nations and Australia’s FTA with the US has been a disaster for employment and the environment and the balance of trade favors the US by $13 billion. The growth of imports from the US continues to grow far faster than their exports to them.

Our CER deal with Australia has not actually served us that well when Australian supermarkets can block our products and New Zealanders working and paying taxes in Aussie can’t access the services that they help fund.

I recently attended a presentation from the Deputy Governor of the Reserve Bank and when he was asked about the importance of the FTA with China he actually couldn’t put a value on it. Apparently there was no evidence to show that the increased demand for our primary commodities wouldn’t have occurred without it.

As for the TPPA, all evidence from leaked documents so far show that corporate lobbying and influence provide real threats to Pharmac, patent rights for our IT industry and the potential for our Government to be sued for loss of profits.

Our open borders may make us the 3rd easiest country to do business in but that doesn’t mean that is an economic advantage, it actually exposes us to exploitation and is one of the reasons why our Current Account deficit is one of the largest in the OECD. The real fear should not about the loss of FTA’s but the real consequences of having them in the first place.

The IMF has indicated that our economy is actually quite fragile and it is interesting that an ex IMF official compares our economy with Ireland’s and suggests we are at the point of collapse.

Key is obviously aware of this and Pattrick Smellie suggests that the early election date was really to get it done before the economy dips again and the fragility of the recovery is properly revealed.

49 comments on “Local Bodies: The Myth of Free Trade Agreements ”

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  1. thechangeling 1
    16 June 2014 at 2:27 pm

    Criticizing FTA’s these days is a hard thing to do as not many ears are listening critically it would seem seeing as the Labour Party have continued the ‘neo-liberal model of development’ by signing an FTA with China, and the only alternative party with an opposing point of view has been relinquished to the Greens/Mana.
    The critical problem as I see it in New Zealand (and around the world) is the creation and use of unemployment as a method of transferring wealth from the public sector to the private sector (by suppressing wages and down sizing the public sector) which is in turn owned either directly or indirectly by members of right-wing political governments aka ‘The National Party’ Government in New Zealand.
    Making an increasing proportion of what a country actually consumes seems such a very simply equation to ensure all citizens can be gainfully employed and in turn enjoy a good standard of living, but in a neo-liberal environment where dairy is held up high because National Party MP’s in particular have a vested interest, this is clearly not the case.
    If only 16,000 people actually work in the dairy sector then how does this translate to being good for all NZ (a mantra that’s continually pushed down our throats on the msm) whilst the FTA’s that are slated to help that sector continually expand at the expense of 150,000+ unemployed and another 350,000 underemployed people continue with lives that are poor, dull and meaningless.
    Manufacturing has been the sector that’s employed most New Zealander’s over the past 100 years or so but is under constant attack with both competition via FTA’s at home and abroad and also an artificially high dollar so this is where a coordinated solution probably lies.

  2. tracey 2
    16 June 2014 at 2:45 pm

    Is there somewhere to examine our trade with a nation pre and post an fta and to see if in any of fta the money flowing to nz exceeds to money flowing to tge other party?

    • john 2.1
      16 June 2014 at 4:44 pm

      In 2008 we exported $2b to China and imported $6b. (a $4b deficit)

      Today we export $10b to China and import $8b (a $2b surplus).

      • thechangeling 2.1.1
        16 June 2014 at 5:04 pm

        The ‘surplus’ or ‘deficit’ is irrelevant for two reasons. Firstly in the situation of a surplus which is usually derived from agricultural exports, those earnings go to the owners, managers and shareholders of the farms that produced them. Presumably some tax does go to the government and low wage farm workers continue to receive low wages and are also used ‘flexibly’ whenever farm managers decide to save money by cutting staff.
        It’s a commonly perpetuated myth that greater New Zealand gets any access to this extra money derived through an export surplus. Also few if any jobs are created by exporting more as is frequently touted as unemployment statistics remain at 150,000+ and 350,000 who can’t find enough work to make ends meet (depending on whose stats you want to believe).

        • john 2.1.1.1
          16 June 2014 at 9:28 pm

          The Changeling says “The ‘surplus’ or ‘deficit’ is irrelevant for two reasons. ”

          If that were true, we could just go into massive deficit, the whole country could put themselves on holiday leave, not do any work at all, and simply purchase everything they wanted from overseas, and not sell anything.

          • thechangeling 2.1.1.1.1
            16 June 2014 at 11:15 pm

            Or we could become self sufficient and make what we actually consume instead of being wedded to an internationally derived capitalist matrix that makes this country very dependent and vulnerable to neo-liberal capitalist cycles and pressures.

            • Draco T Bastard 2.1.1.1.1.1
              16 June 2014 at 11:17 pm

              +111

            • john 2.1.1.1.1.2
              16 June 2014 at 11:23 pm

              We could make our own cars, but they’d cost so much few people could afford them.

              With massive subsidies, and a market 500% bigger than ours, not even Australia can afford to make it’s own cars.

              It’s lala land to think we could.

              Besides, we’d still have to buy the plastic, rubber, aluminum, copper etc from overseas.

              • Draco T Bastard …
                16 June 2014 at 11:41 pm

                We could make our own cars, but they’d cost so much few people could afford them.

                That’s the delusion of the finance system and not actual reality. Factories are all made so that each unit costs the same to make – no matter where it is.

                Besides, we’d still have to buy the plastic, rubber, aluminum, copper etc from overseas.

                Got them all here – except the rubber and we could probably make synthetic from what we do have.

                • john …
                  16 June 2014 at 11:55 pm

                  Draco says “Got them all here”:

                  Nonsense. We can only supply a fraction of our own oil needs, and we don’t have bauxite and copper in commercial quantities.

                  Draco says “Factories are all made so that each unit costs the same to make – no matter where it is.”

                  Yeah right. So a factory producing 1,000,000 Toyota Corollas has no savings compared to a NZ factory producing just 1000 a year.

                  • Colonial Viper …
                    17 June 2014 at 12:05 am

                    All your examples are irrelevant. NZ doesn’t need 1M Corollas a year. The export land model ensures that no one will be supplying NZ with oil in 20-30 years time.

                    And NZ uses minimal amounts of Al and Cu, now that we’re no longer a manufacturing nation.

                    But there is no doubt that we will need to change our lifestyles and our attitudes, in an age of energy and resource depletion.

                  • Draco T Bastard …
                    17 June 2014 at 12:10 am

                    Nonsense. We can only supply a fraction of our own oil needs, and we don’t have bauxite and copper in commercial quantities.

                    Commercial quantities is a rather restricted view. We have them and they can be mined and economically as well (which means we have the resources available to mine and process them).

                    As for the oil, well, we really should stop using it anyway.

                    So a factory producing 1,000,000 Toyota Corollas has no savings compared to a NZ factory producing just 1000 a year.

                    That is correct. Each Corolla still requires exactly the same amount of inputs.

                    As I say, our financial system is delusional and causes us to see things incorrectly and uneconomically. That’s why our environment is being destroyed with our political parties saying that we need to keep growing even more when we really need to be doing the exact opposite.

      • Saarbo 2.1.2
        16 June 2014 at 10:04 pm

        The question is: Would that have been any different if we didn’t have an FTA with China? China would still have restructured its dairy industry leading to low domestic supply and the need to import billions of dollars worth of milk powder…the FTA had nothing to do with that. Interesting Post…spot on the mark I reckon.

        • john 2.1.2.1
          16 June 2014 at 10:37 pm

          But the significant majority of the increase in exports to China has NOT been dairy – it only makes up 1/3 of our exports to China.

          Trade form ALL goods has skyrocketed since the FTA.

          At a time when overall imports into China actually went DOWN, our exports there skyrocketed.

          Before the FTA it took a decade for exports to go up $1b. They’ve since gone up $8b – that’s 80 years growth at the previous rate.

          • Colonial Viper 2.1.2.1.1
            16 June 2014 at 10:42 pm

            We’ve already signed the China FTA. Maybe it proved positive for NZ.

            That doesn’t say fuck all about the stipulations or conditions of the TPPA.

            • john 2.1.2.1.1.1
              16 June 2014 at 11:04 pm

              The funny thing is, for years we’ve heard calls for increasing the value of things like our huge logs exports – we should be employing Kiwis to make products out of wood here instead of exporting cheap raw products.

              Yet when there’s an agreement that will finally allow us to do just that, instead of being priced out of the Asian market with tariffs on our finished wood products and even sawn timber, the same people are against the ONE thing that will allow what they’ve been calling for for years.

              • Draco T Bastard …
                16 June 2014 at 11:16 pm

                We’re still priced out of the Asian market because our dollar remains artificially high and the currencies of Asia are artificially low. This may correct over time but I’m figuring that we would have dropped into serious decline before then and won’t actually be able to afford products from Asia. Meanwhile, Asia will no longer need any products from us.

                • john …
                  16 June 2014 at 11:32 pm

                  So that’s why we can’t sell wood products to Asia – the high dollar. That explains why we’re selling so little to China.

                  Oh wait a minute. Our exports to China have skyrocketed – 80 years worth of trade growth just since the FTA in 2008.

                  • Draco T Bastard …
                    16 June 2014 at 11:43 pm

                    But we don’t sell wood products to Asia – we sell raw wood and then import the wood products. And that is totally uneconomical.

                    • john …
                      17 June 2014 at 12:15 am

                      So why do you think forest companies are desperate to get the TTP agreement so we can sell more processed timber into Asia?

                    • Draco T Bastard …
                      17 June 2014 at 12:25 am

                      Probably because they’re stupid. The TPPA isn’t going to help us.

                      If we were producing/selling processed wood our saw mills wouldn’t be shutting down.

                  • Colonial Viper …
                    17 June 2014 at 12:11 am

                    john, the China FTA is a done deal. It’s history.

                    It says nothing about whether the TPPA is good for NZ or not. The TPPA is not modelled after the China FTA. My bet is that the TPPA cuts our sovereignty out from under us and is essentially a corporate rights document – and must not be signed.

                    • john …
                      17 June 2014 at 12:23 am

                      But that is exactly what BSprout is trying to say at the top. That the China FTP hasn’t made any difference (which it obviously has), so the TPP won’t be any good.

                    • Colonial Viper …
                      17 June 2014 at 12:29 am

                      The TPPA corporate rights document needs to be shit-canned. Now.

                      The China FTA is ancient history.

  3. Draco T Bastard 3
    16 June 2014 at 2:59 pm

    The IMF has indicated that our economy is actually quite fragile and it is interesting that an ex IMF official compares our economy with Ireland’s and suggests we are at the point of collapse.

    Tat sounds about right. Too much reliance on just one product (farming) and a declining ability to provide anything else for ourselves over the last thirty years as the “free-trade” delusion destroyed our ability to be self-sufficient.

    Key is obviously aware of this and Pattrick Smellie suggests that the early election date was really to get it done before the economy dips again and the fragility of the recovery is properly revealed.

    Think I said that too when Key called the early election.

    • Wreckingball 3.1
      16 June 2014 at 4:31 pm

      “destroyed our ability to be self-sufficient” – you talk about this as though it is a bad thing.

      Why on earth would we want to be self-sufficient. Have you not heard of the phrase comparative advantage and specialisation?

      Shall we start manufacturing cars and shoes again? How is that going in Australia?

      • Colonial Viper 3.1.1
        16 June 2014 at 4:50 pm

        A high degree of self sufficiency and ability to enact import substitution will become increasingly important as energy depletion progresses and the global financial system comes under more strain.

        Have you not heard of the phrase comparative advantage and specialisation?

        Strategic economic concerns outweigh those limited theories.

        Shall we start manufacturing cars and shoes again? How is that going in Australia?

        Yes, why not. Employ NZ workers to make NZ goods – but on a strategic basis.

        Australia took the wrong track, specialising in commodity exports (rocks, mostly).

        • srylands 3.1.1.1
          16 June 2014 at 5:59 pm

          You seriously think we should make shoes and cars? That says it all about you. You have no credibility. Stick to quackery.

          • Colonial Viper 3.1.1.1.1
            16 June 2014 at 6:04 pm

            If you have a strategic argument to make on the future of NZ industry, please make it. I’m all years.

            You have no credibility. Stick to quackery.

            Well, at least I’m not an economist or a bankster.

          • McFlock 3.1.1.1.2
            16 June 2014 at 6:06 pm

            “Quackery”?
            Well, he would take “delusional and obsessive belief in a discredited religion”, but fuck-knuckle neolibs like you have cornered the market…

      • thechangeling 3.1.2
        16 June 2014 at 5:07 pm

        At the least more people would HAVE JOBS. And stuff made here almost always lasted longer than the rubbish made in China.

      • Draco T Bastard 3.1.3
        16 June 2014 at 5:08 pm

        Why on earth would we want to be self-sufficient. Have you not heard of the phrase comparative advantage and specialisation?

        Yes I have – I also know it to be as delusional as most of the rest of present economic dogma.

        On the loss from trade
        Dubious assumptions of the theory of comparative advantage

        Shall we start manufacturing cars and shoes again?

        Shoes, probably. Cars, probably not as they’re highly inefficient.

        The only reason why long distance trading seems to work is because we have a monetary system that doesn’t. It’s physically impossible for China (or anywhere else for that matter) to make things cheaper than we can. And economies of scale no longer apply as all factories are made to be as close to efficient as possible. That means that to make a device in a small would cost the same as if it was made in a large one.

        • Colonial Viper 3.1.3.1
          16 June 2014 at 5:10 pm

          Shoes, probably. Cars, probably not as they’re highly inefficient.

          Electric trains, trams and buses – definitely

  4. john 4
    16 June 2014 at 4:40 pm

    In the late 1990s, exports to China were $1b.

    It took a whole decade just to grow to $2b.

    The China FTA was signed in 2008, and the world went into recession.

    Today we export $10b annually to China

    Pre FTA the average annual increase was $100m a year. After the FTA the average has been $1333m per year.

    So the growth rate, during the worst recession in 80 years, was 13x higher (1300% greater) after the FTA, than before it.

    And we’re supposed to believe the FTA had nothing to do with it.

    Bsprout is living in lala land.

    • Colonial Viper 4.1
      16 June 2014 at 4:45 pm

      While you are at it you better remark that it was a Labour Govt who signed the FTA

      And we’re supposed to believe the FTA had nothing to do with it.

      It had some minor bearing but China wanted our milk anyways to feed their burgeoning middle class.

      • john 4.1.1
        16 June 2014 at 8:35 pm

        Yeah right. So they didn’t want in 2007, or 06, 05, 04, 03 etc,

        then suddenly when the recession hit, they wanted 1000% more.

        And I’m quite happy to acknowledge the China FTA was put in place by the Labour Govt.

        • Colonial Viper 4.1.1.1
          17 June 2014 at 12:12 am

          You’re just looking at the top level numbers. That says nothing about what actually happened.

          The fact that you are pretending it does – marks you as a superficial, 2 dimensional thinker.

          • john 4.1.1.1.1
            17 June 2014 at 12:21 am

            The fact that you think we would have got 80 years growth since 2008 without the FTP makes you delusional.

            • Colonial Viper 4.1.1.1.1.1
              17 June 2014 at 12:30 am

              The fact that you are still looking at top line numbers and trying to call simplistic conclusions from them marks you as a 2 dimensional thinker.

              Time to shit-can the TPPA corporate rights document, right now.

              • john …
                17 June 2014 at 12:49 am

                We’ve got exporters from many sectors telling us how the China FTA has made an incredible difference to them, but you’re mind is so made up that even with that, I’m sure you’ll find a way to delude yourself that even the exporters are wrong and you’re right.

                80 years growth since 2008 is just a big coincidence.

                Watch out for those distant Nigerian relatives who want to give you $17 million.

                • Colonial Viper …
                  17 June 2014 at 1:10 am

                  The China FTA is a done deal. It’s not being re-ligated.

                  The current issue on the board table: time to shit-can the TPPA corporate rights document, right now before it is too late.

                  • john …
                    17 June 2014 at 1:27 am

                    On my list of things that concern me, and the problems NZ faces, sorry – I couldn’t find the TPP.

                    I tried a paranoia sandwich, and a drink of conspiracy theory, and put on some doom and gloom tinted glasses – but nope – the TPP still doesn’t bother me any more than the enormously successful China FTA did.

                    • felix …
                      17 June 2014 at 7:39 am

                      What the fuck has the China FTA got to do with it? That was a trade agreement.

                      The TPP is nothing of the sort.

                    • framu …
                      17 June 2014 at 8:15 am

                      john – you got some points here – but if your going to be a dick why should i bother reading?

                      once again – people are making valid points – your ignoring them and resorting to nonsense

                      up thread you recognised the difference between china FTA and the TPPA – now your steadfastly avoiding the point

                      and frankly – you should care about the TPPA – for the simple fact that its being sold as a free trade deal when its nothing of the sort.

                      if a car salesman said the mini you were looking at was a bmw – would you buy it?

  5. Wreckingball 5
    16 June 2014 at 5:51 pm

    Another baseless assumption from you VP.

    “A high degree of self sufficiency and ability to enact import substitution will become increasingly important as energy depletion progresses and the global financial system comes under more strain.”

    1) As resources become more scarce, it is going to become even more important to be very good at what we are good at. Trade will continue so we have to make sure we are producing things that we are good at producing. How is this protectionist claptrap you are proposing going for North Korea? They manufacture the majority of their products, they probably have full employment and they don’t have anything useful to trade with the rest of the world because they haven’t specialised.

    2) Where is the evidence that the world financial system is under ‘more’ strain? Ok we had a GFC, we have had the Oil Shock, Asian Crash, dot com bubble in the past. We have recovered before, and most of the indicators show that we (especially NZ) are well on the way to recovering again.

    3) Why should the government be able to use my money to subsidise certain industries? I know how to spend my money more efficiently than the government.

    • Colonial Viper 5.1
      16 June 2014 at 6:11 pm

      1) As resources become more scarce, it is going to become even more important to be very good at what we are good at

      Nonsense. We don’t even know what we are good at yet. In 1900 Nokia was good at sawmilling.

      Trade will continue

      Nope. Not the high speed globalised trade of today, and especially not using USD.

      How is this protectionist claptrap you are proposing going for North Korea?

      North Korea’s problems don’t stem from import/export restrictions.

      2) Where is the evidence that the world financial system is under ‘more’ strain?

      Go away – you know nothing. The fact that most governments in the world have now passed legislation enabling them to take money directly from your bank accounts via “bail ins” to save banks in future crises should give you a clue to something they know, which you don’t know.

      most of the indicators show that we (especially NZ) are well on the way to recovering again.

      They lie.

      3) Why should the government be able to use my money to subsidise certain industries? I know how to spend my money more efficiently than the government.

      No you don’t. More to the point, it’s not your money. It’s the government’s money. The government printed it and the government gave it its value. You’re just a very temporary custodian.

    • Draco T Bastard 5.2
      16 June 2014 at 6:19 pm

      As resources become more scarce, it is going to become even more important to be very good at what we are good at.

      A society isn’t an individual and thus doesn’t specialise. Due to it’s makeup of lots of individuals it’s quite capable of doing everything well.

      Where is the evidence that the world financial system is under ‘more’ strain?

      All the rising debt that can’t be paid for.

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