Freedom to trade

German State TV

Whenever I tell my American friends about how the BBC is funded, especially the part about TV licence enforcement vans driving around the country "smoking out" illegal TV watching, my words are met with utter disbelief. Simply put, if you own a TV and if you ever switch it on, you must pay a TV licence fee, regardless of what you watch or do not watch.

Well, the system in Germany is even worse.

Not only are the fees substantially higher -- to the tune of US$ 21 per month -- but they also fund two separate networks, ARD and ZDF, whereby ARD consists of at least 10 smaller networks. Not surprisingly, all the bosses are political appointees.

Naturally, this entire endeavour is no more and no less than a government sanctioned programme for robbing people of their hard earned cash, especially in a country where there are dozens of private and free TV channels, which seem to do very well without ever seeing a penny of the TV licence fee.

It is hardly surprising then that ARD and ZDF have decided to send major delegations of "journalists" to the WTO Minsiterial in Hong Kong. After all, Christmas shopping for the boys in Hong Kong at licence payer expense is more than a tempting proposition. However, even a cynical observer might have been surprised to witness the extent of these people's delusions of grandeur in Hong Kong. While Reuters, AP and CNN can apparently make do with one or two office containers, ARD and ZDF require four.

Of course, given the setting, it is somewhat ironic that the Germans should put the effects of state interventionism on display so persuasively. As a German saying goes: No point saving costs when it is others who are paying.

 

Pro- versus anti-globalization NGOs

For any German speakers out there, you might be interested in an article in Welt am Sonntag from this past weekend ("Freihandel hat neue Freunde", 11 December) which profiles the Liberty Institute in New Delhi, India, a member of the F2T coalition.

"Unshackling Africa"

Fellow F2T blogger Franklin Cudjoe, whose Ghanaian think tank Imani is a member of the Freedom to Trade Coalition, writes about Africa's home-grown problems with trade in today's Wall Street Journal. (For non-subscribers, the article is available on Imani's website). Here's an excerpt:

African leaders must be pushed to reduce economic intervention, free financial markets, remove bureaucratic obstacles to setting up businesses, establish property rights and enforce contract law. These are the forces that release entrepreneurial energy. But the ruling cliques will do none of these unless forced to do so as a condition of aid.

Santa and his little foolish elves

“The WTO wants to get rid of poverty by freeing trade in services, and [Lockheed Martin] has the solution – let’s bomb them using our freely traded products!  Let’s get rid of poverty by killing the poor!”  This was the result of an impromptu gathering of craptivists taking their fight to the General Agreement on Trade in Services (GATS).  One was dressed as Santa Clause and the rest of them as his little elves coming to tell the evils of what they see as a bad deal. While it’s difficult to understand this kind of logic, it seems they think freely traded services is something that should be stopped.  Their misguided logic is ostensibly based on the notion that publicly-owned monopolies are better at providing services than private, competitive firms.

Of course, since these attention-deprived people were shouting at the top of their lungs, they attracted enough attention to get me – and many other members of the media - to listen to their tirade.  Being upset at the lack of representation in their arguments, I jumped into the fray and offered a different opinion to those who were interested in listening; mainly that trade  in services offers the chance for millions around the world to be freed from the shackles – like protectionism – of poverty.

Imagine how much worse off we would be if India’s wonderful IT sector, for example, was closed off from the rest of the world and unable to trade in an area that some firms hold a considerable comparative advantage. Without being able to trade, just think of how many millions of lines of code that would have to scrap from the fast-paced world of software design.  Some of those programs go a great length to helping improve medical techniques, which have a direct impact on people's lives.

Perhaps these people think we have too much software and that too many Indians are escaping poverty?

“The WTO wants to get rid of poverty by freeing trade in services, and [Lockheed Martin] has the solution – let’s bomb them using our freely traded products!  Let’s get rid of poverty by killing the poor!”  This was the result of an impromptu gathering of craptivists taking their fight to the General Agreement on Trade in Services (GATS).  One was dressed as Santa Clause and the rest of them as his little elves coming to tell the evils of what they see as a bad deal. While it’s difficult to understand this kind of logic, it seems they think freely traded services is something that should be stopped.  Their misguided logic is ostensibly based on the notion that publicly-owned monopolies are better at providing services than private, competitive firms.

Of course, since these attention-deprived people were shouting at the top of their lungs, they attracted enough attention to get me – and many other members of the media - to listen to their tirade.  Being upset at the lack of representation in their arguments, I jumped into the fray and offered a different opinion to those who were interested in listening; mainly that trade  in services offers the chance for millions around the world to be freed from the shackles – like protectionism – of poverty.

Imagine how much worse off we would be if India’s wonderful IT sector, for example, was closed off from the rest of the world and unable to trade in an area that some firms hold a considerable comparative advantage. Without being able to trade, just think of how many millions of lines of code that would have to scrap from the fast-paced world of software design.  Some of those programs go a great length to helping improve medical techniques, which have a direct impact on people's lives.

Perhaps these people think we have too much software and that too many Indians are escaping poverty?

Justice for Who?

The spread of information and communication technology (ICT) is one of the most impressive ways market economies can help people can escape poverty on their own.  As a practical example, farmers in poorer countries are now able to ascertain market prices for their goods quickly through mobile phones.  This real time information empowers farmers to negotiate better prices with traders who have historically forced them to sell their produce at arbitrarily low prices - instead of market rates.

One of the key platforms of the Trade Justice campaign - aside from advocating more aid, which has already proven to be ineffective, and the cancellation of debts, which had no real market value anyway - is that trade should be "fair".  Smaller farmers should receive better prices, we are told, as supermarkets in Western countries stock "fair trade" products like sugar, coffee, and cocoa.

For farmers in these poor countries, fair trade means something completely different, though.  A personal friend who has visited "fair trade" farmers in Tanzania tells me that rather than getting marginally higher prices for their crops, these farmers receive almost none of the funds that are earmarked for them in wealthy countries.  Instead, these go to locals who are responsible for distribution, who then pocket the extra cash for themselves.  This corruption is made possible by wealthy "fair trading" companies who, too often, do not hold their local distributors to the kind of accountability that would force these powerful vested interest to firm agreements.  (It turns out that enforcing a contract can be is just as difficult for Oxfam as it is for other multinationals like Ford.)

In other words, fair trade introduces more useless middlemen who get richer at the expense of the farmers for whom the system is ostensibly designed to support.

Encouragingly, much of this is changing due to the introduction of competition among ICT providers, offering competitive rates for, among other things, mobile telephony.  Mobile phones empowering local farmers with the chance to get up to date information about the going market rates for their produce, and thus helps them to negotiate better deals with local traders.  Crucially, it also helps them avoid the fair trade trap.

A classic example, really, of how free trade is the only real kind of fair trade, despite how much propaganda which states to the contrary.

Access to Medicines MSF style

Medecins Sans Frontieres gave a press conference this morning about 'access to medicines'. I went along expecting to hear some constructive ideas about how to improve access through liberalising trade. Instead, the speakers seemed primarily concerned about the price of AIDS medicines in China, which they said had been driven up by the introduction of patents.

This seemed like a peculiar concern to raise at a WTO Ministerial -- especially since China is fully able to utilise the flexibilities of TRIPs (the WTO agreement covering intellectual property) to permit local production of AIDS medicines if there were real concerns about price and availability.

I asked the panel if it wouldn’t be more useful to focus on the issue of taxes and tariffs – given that some countries, such as India, continue to impose taxes and tariffs that can amount to as much as 50 per cent of the price of medicines. That seems to me a very obviously a real trade barrier.

Sadly, I did not receive an encouraging response: Ellen ‘t Hoen of MSF passed the question over to Carlos Correa, an Argentine economist, who said – without citing any specific evidence – that tariffs are not a significant barrier to access. But then Correa had previously argued that nations might consider using the recently enhanced TRIPs flexibilities to promote local production of a wide range of pharmaceutical products, which sounded more like industrial policy than health policy.

Several studies have shown that taxes and tariffs do adversely impact on access to medicines. Of course there are other important factors, such as the lack of the rule of law, which are at least as important. But to dismiss taxes and tariffs as an issue, especially when we are at a meeting of trade ministers, who might plausibly do something about it, seems counterproductive.

Free trade myths and realities # 2

Myth: Food security results only from domestic food production of food

Reality: Markets and freedom to trade are the best way to improve food security and to improve consumer choice. It is cheaper and better to grow bananas in Belize than in London, and trade means that resources are used more efficiently in each place (so that countries, such as Hong Kong, who cannot grow food use their labour, capital, and knowledge to produce other goods.)

Consumers benefit from lower prices associated with that efficiency. The environment also benefits because environmental resources are used less intensively. Without trade distortions, global trade in food would increase food security and decrease the cost of food.

HKPA loses face from Fickle Friends

If Hong Kong unions thought they could bolster the case for government control of labour and the economy, things have backfired.  They said in public the Koreans assured them there would be no trouble.  Whoops.

Hong Kongers have avoided the protests.  They know trade is good for them and have not showed up to support the anti-trade crowd. The English media is ridiculing the size and quality of the protests.  Last line of this article highlights the Korean's reading choices - including porno mags.  Satirical cartoons are ruthless.  The Chinese papers have been a little more restrained, complementing the Koreans for using relatively lame measures of protest. 

Hong Kongers marched 100,000 strong for universal suffrage.  They will stand up for what they believe in.  They will not stand up for an anti-trade message.  They may even get the craven self-interest of the Korean farmers who receive 63% of their income from government supports, shutting out poor country farmers at the expense of Korean taxpayers and consumers.

The Confederation of Trade Unions have made a lot of publicity out of this and Hong Kongers are not buying it.  Hopefully this will carry over to their other livelihood destroying economic control ideas in the months and years ahead.

Kind of Right, Kind of Wrong

So far it has been pretty quiet on the demonstration front.  Photographs reveal more photographers than violent protestors on all occasions.

Also, I predicted that Ocean Park and Disney would be quiet due to lack of normal tourists avoiding Hong Kong.  I also said it would be a great time for locals to go.  I was kind of right.  I didn't include the impact of school closures - or many Hong Kongers read my post and took their kids. 

Both government owned theme parks (Disney about 75%, Ocean Park 100%) had record days as parents had to figure out what to do with their kids.  See this.

Disneyland a first-time sellout as many take a day off

WTO and ICTs

One of the principle benefits of free exchange is that it enables everyone to make efficient resource allocations.  In practice, that means freeing people to spend more of their money they earn for themselves on things they think they actually need.

With such low levels of annual income, it might seem like the world's poorest have little to spend on things other than the bare essentials like food and water, but technology is becoming increasingly part of their lives thanks to the marginal liberalisation that have occurred in these countries in recent years.  Mobile phone operators, for example, are lining up in hopes of serving what they see as enormous potential markets in Africa and other of the world's poorest regions.  Huge investments in base station infrastructure mean that 50% of sub-Saharan population lives within reach of a mobile signal.  With some respect for investments and enabling at least some form of market competition, providers offering their services at constantly decreasing costs are giving millions an opportunity to lift themselves out of poverty.

Wider access to these, and other important ICTs is, however, unnecessarily constrained by governments.  This is morally reprehensible.  Part of this reason is due to predatory taxes and tariffs on such things as mobile phones (import duties as high as 45% on handset, which can be produced for as little as $30).  This helps create an environment that is anathema to the expansion of these technologies.

While stalling on headline issues like agriculture, it's imperative to note that development-friendly reductions (and eliminations) of tariffs should be reached now in many other areas as well.

To find out more about how governments obstruct development and access to ICTs, read this new report just released today.