Scoop Election 08: edited by Gordon Campbell

on John Key’s hopes for trade progress at APEC (and the war on P)

November 9th, 2010

japan new zealand geisha kiwiLater this week, Prime Minister John Key heads off to the APEC conference in Yokohama, where his hosts seem to be living through some very interesting times.

Japan’s feeble recovery is being hurt by the weak US dollar on one hand, and also by China’s chronic refusal to revalue its currency to realistic levels. Public pressure is coming onto the new Japanese government to do something about the rising yen. Yet apart from a few token gestures to the Americans, China continues to keep its currency at artificially low levels in order to allow Chinese exports to make major inroads into the markets of its neighbours.

In mid September, Japan tried to give its own exporters a hand by staging a foreign exchange intervention to drive down the yen – but since then it has backed off, and generally heeded requests by a nervous G20 gathering that nations should not set off a ‘currency war’ in the region.

The Group of 20 industrial and developing economies have pledged to avoid setting off a potentially damaging global competition to weaken currencies to bolster exports.

Should Japan intervene again, that could stoke concerns about a potential “currency war” and undermine efforts by other advanced nations to persuade China to let its currency rise to fix trade imbalances, analysts say.

Well, so far, the ‘persuasion’ by US Treasury Secretary Timothy Geithner hasn’t led to any meaningful response from the Chinese. At yesterday’s post-Cabinet press conference, I asked Key if the APEC gathering did seek to pressure China to revalue, would New Zealand support such moves? Apparently not. “We’re not going to dictate to China what its policy around the yuan should be,” Key replied, pointing to evidence that the Chinese currency was – slowly – appreciating, and that it was up to everyone to convince the Chinese that a healthier US economy would in the long run, be in China’s own best interests. Good luck with that.

Would it be in New Zealand’s best interests for China to have a more realistic exchange rate? “Well, it would help us slightly in terms of export competitiveness,” Key conceded. For all parties, he added, it was time for common sense to prevail. Again, lots of luck on that front.

Tigers on tariffs we may be… but we still appear to be babes in the wood when it comes to how other countries re-jig their currencies to help their exporters. At this APEC conference, New Zealand will be pinning its hopes on the Trans-Pacific Partnership (TPP) trade agreement, in the apparent belief that this will deliver the prosperity we once looked to from the Doha Round of the WTO. In other words, we’re still locked into the same old cargo cult tendency, masquerading as a trade strategy.

Even if it wanted to, the Obama administration is hardly in a position to sign off on any TPP deal that would potentially disadvantage US farmers, manufacturers or service providers. Still, there are enough glimmerings of hope around to keep the TPP dream alive for the interim. Oddly enough, some of the more hopeful signs are coming from Japan – which seems to be desperate enough to try almost anything that might revive its perpetually flatlining economy. Last night’s Asahi Shimbun newspaper for instance, carried news that Japan is not only preparing to engage with the TPP process, but is even considering the gradual opening up of its agricultural markets.

Mind you, Japan is not exactly tossing caution to the winds. On the TPP it will reportedly be (a) conducting discussions in order to (b) gather information in order to (c) decide whether or not to participate. However, because agriculture is widely expected to be a key element of the TPP framework, Japan is also planning to have its options on agricultural reform on the table by June 2011, in time for next year’s APEC conference in Hawaii. That’s a major shift in attitude.

At Saturday’s ministerial committee meeting, Prime Minister Naoto Kan said: “We have been able to compile an important basic policy to ‘open up the nation’ with a view toward reviving Japanese agriculture.” As the Asahi Shimbun report also says, since the TPP process is aiming to eliminate tariffs within 10 years, Japan’s agriculture would be greatly affected by a flood of cheap imports if it joined the TPP process.

For that reason, the policy says “bold policy measures will be needed to extract the potential of Japanese agriculture by improving its competitiveness and expanding overseas demand.”

The basic policy calls for the establishment of an “agricultural structural reform promotion headquarters” with the prime minister as chairman in order to decide on a basic policy for agriculture by next June.

Evidently taking a leaf out of China’s book, Japan will simultaneously be trying to aggressively promote bilateral Economic Partnership Agreements (EPAs) with the likes of Australia and Peru.

The main focus of the basic policy is on fostering a stronger and sustainable agriculture that would be most affected by joining the TPP. Government officials have in mind the need to vastly change agricultural policies, which have been criticized for wasting public funds while not contributing to increased competitiveness.

The EPAs that Japan has entered into until now have exempted agricultural products from any elimination of tariffs. Thus, joining the TPP would push Japan “into a zone that it has never experienced,” according to [Chief Cabinet Secretary Hirofumi] Hirano.

That doesn’t mean the age of Japanese protectionism is over. It may be changing its shape though, from tariffs on foreign goods to subsidy payments to local producers to enable them to compete successfully with foreign imports. In other words, instead of Japan’s past reliance on tariff barriers to protect its agricultural producers, the new programme will seek to shift agricultural policy to one of direct payments to farmers. Ideally at least, those handouts would be paid to those farmers able to match the foreign competition :

However, because such a move would involve a large increase in government expenditures, the government will also have to decide whether to limit the direct payments to those farming households capable of maintaining a level of competitiveness matching that of foreign producers.

Even so, any drive for agricultural ‘efficiency’ would soon collide with political reality in Japan. For that reason, the estimates on how much should be allocated for these new forms of payment/subsidies are going through the roof :

This fiscal year’s budget contains 560 billion yen ($6.88 billion) for the income supplement program. However, farm ministry officials are seeking 1 trillion yen for the next fiscal year, in part because the program will be expanded beyond rice farmers. A high-ranking farm ministry official said that if tariffs are eliminated, the program would have to be expanded even further because many farmers would lose income to cheap imports. In that event, about 2.5 trillion yen a year would be needed for the program, the official said.

So Japan’s great new plan for abolishing tariffs on agriculture seems to entail the quadrupling of the subsidies it pays to farmers. That’s the great thing about free trade, especially at APEC. One prime minister’s ‘common sense’ on trade is another leader’s gravy train of subsidies. Keep that in mind when you hear that APEC is bringing down tariff barriers. Chances are, the relevant ‘income supplement programme’ will still be growing like Topsy, in brand new clothes.

***

pThe P Word.

Around the world, methamphetamine goes under a variety of names. On the website of the Attorney-General of Utah for instance, I found this intriguing list of nicknames and street slang for crystal meth, or P.

The listed terms include : all tweakend long, buzzard dust, bugger sugar, cha cha cha, cringe, devil’s dandruff, doody, dingles, dummy dust, gackle-a fackle-a, horse mumpy, jib nugget, rumdumb, pootananny, shiznastica, spagack, spindarella, spishak, spizzlefracked, spun ducky woo, tubbytoast and zoiks.

Unfortunately at yesterday’s press conference, the gallery missed its chance to ask the PM how the battle with spun ducky woo was going. Without preamble, Key launched into the latest statistics on pseudo-ephedrine seizures, P lab busts, P street prices etc etc.

As always, one can read such figures as evidence that the authorities are stepping up their game, or alternatively, that the tidal wave of P is showing no sign of abating. Some of the stats appear to be feeding on each other, making progress that much more difficult to track. If for instance, the street price for P has risen from $600 a gram in 2006 to a current price of $723 a gram this will in itself, be inflating the alleged street value of the Police seizures.

Ultimately, the problem has to be attacked at source. Presumably, China is still the main source of the pseudo-ephedrine coming into this country? ‘That’s my understanding,” Key replied. “ So what steps, if any, is New Zealand taking to ask China to limit its exports? Key : “The Foreign Minister has had some discussions with them on that. The issue is that its not illegal to purchase pseudo-ephedrine in China…The problem is that you’ve got gangs in China who source those materials, and send them to New Zealand, and other countries around the world.” So, as long as ingenious ways can be found to hide the pseudo-ephedrine inside goods coming into this country, free trade will ensure that the P menace continues to ravage our communities. Not that this item will be on the trade agenda at APEC, either.

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    1. 4 Responses to “on John Key’s hopes for trade progress at APEC (and the war on P)”

    2. By richarquis on Nov 9, 2010 | Reply

      “We’re not going to dictate to China what its policy around the yuan should be,” Key replied.

      So when he was working as a foreign exchange dealer, it was quite fine for him to decide what was right for foreign currencies. Now he says it’s not his place to even make suggestions regarding financial policy to China. So my question is this – Would his change of face make him a chameleon, or a weasel?

    3. By peter on Nov 10, 2010 | Reply

      Courtesy of my Sister in Law’s drug use we are now looking after her 2 daughters, and as she is facing serious charges in realtion to her P habit , it is highly likely that the children will be living with us for some time.

    4. By nznative on Nov 10, 2010 | Reply

      Call me a cynic but it seems very convenient that John Key and the Nats should make a big noise about P the same week that they release ineffective, youth focused Alcohol laws designed to protect the profits of the booze pushers.

      The P drug problem is small change compared to the huge alcohol drug problem that this country suffers from.

      The number 1 drug for crime, addiction, illness and social damage is booze.

      The Nats are Pro booze.

      The ” war on P “, is a smoke screen when the Nats are very very Pro-drugs ………….. as long as the drug is booze.

    5. By peter on Nov 12, 2010 | Reply

      NZ Native, sorry but I think you are very mistaken about the damage that P is doing here in NZ.

      One of my customers has his 30 something year old son so damaged by P he will never hold down any sort of job again, cannot form proper relationships with other people and will in all likely hood live with his parents for the foreseeable future.

      Another customer has taken custody of his brother in law’s children as his wife’s brother has destroyed his life and others thru his addiction to P.

      Sorry, But Alcohol may cause harm but P ensures a thorough destruction, I don’t know if you are aware but if you use P for long enough it will completely alter the chemistry in your brain, rendering you unable to feel real pleasure – ever again.

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