Don't Turn us into Irish Component Assemblers

Import News from the Importers Institute August 25, 1999
Don't Turn us into Irish Component Assemblers
(This article was first published in The Independent, 25 August 1999)

Bank managers and receivers hear the same story every day: businesses never go under through bad management. They fail because of the competition from cheap imports, or the exchange rate, or lack of subsidies. Not long ago, it was the exchange rate. How could exporters make a dollar when a dollar was worth almost a dollar? Now that it is worth almost a dime, the performance of our export sector remains indifferent. It must be time to start asking for subsidies.

That is precisely what some businesses are doing and what some politicians are promising. Labour got the ball rolling with an offer of $100 million. The Alliance upped the ante to $200 million and a bid to run a ministry in charge of dispensing corporate welfare. Some National ministers were most impressed with Irish and Finnish interventionism.

Some businesses are seduced by these calls. Bob Fenwick (The Independent, 11 August) says that we should exercise our sovereign right to provide whatever subsidies, incentives or support are necessary to grow the economy, retain the country's wealth, encourage business, motivate business and increase the standard of living. What Mr Fenwick overlooks is that we did all that, and more.

Look where it got us.

Fenwick says that manufacturers do not want the subsidies selfishly for themselves. They want other people's money because it is all supposed to be part of "fair trade," a concept that he differentiates from "free trade." Fair trade is a euphemism for protectionism. It justifies anti-dumping duties and "temporary safeguards," like the tariffs applied against New Zealand lamb exports.

Fenwick said that the American lamb tariffs are "quite acceptable under the fair trade banner but not under New Zealand's free trade level playing field experiment." Again, he overlooks the fact that we have identical protectionist devices, to the benefit of some manufacturers and the detriment of all consumers.

Fair-traders say because other countries subsidise their exporters, we should do the same. If the idea is to retaliate, this amounts to much the same as holding your breath and waiting for your opponent's face to turn blue.

If other countries decide to subsidise their producers, they do so to the detriment of their own citizens (and to the advantage of ours). It may be "fair," in their eyes, for us to do the same. It would also be very stupid. It is true that our export performance has, of late, been less than inspiring. Our politicians and bureaucrats do not need to tax their brains figuring out how to help. Their intervention is the problem, not the solution.

Imagine if you invest you savings in an orchard where you produce world-class apples. Would you give them to a functionary from a cooperative to sell it on your behalf, or would you try to get the best prices from the best marketers in the world?

In New Zealand, the State forces growers to entrust their product to someone who wears a brown cardigan when in the office, but not when messing about in fast boats paid for with growers' money.

In the Importers Institute, we often get inquiries from people who have found market opportunities for apples, kiwifruit or milk products. We have to explain to them that our producers are prohibited by law from selling their own goods. This would be comical, were it not for the fact that it affects the entire economy.

Not all subsidy seekers are asking for cold cash. Some want something called the knowledge economy, which amounts to much the same. The concept is still fuzzy. It seems to include the Trade New Zealand website that promotes our low wage economy as an ideal place to set up telephone answering services. The concept is also good for some academics and researchers to justify bigger budgets. Apparently, we have too many lawyers and accountants and should encourage more students to become electro-technical engineers. Then we could challenge Korea and Ireland in the component-assembly business. The real knowledge economy is elsewhere. Last week, Microsoft had a developer's conference in Auckland. Several hundred people paid several hundred dollars each to learn about the latest software development tools. Those people manage to turn out some of the best e-commerce websites in the world, without the need for a taxpayer-funded cyber corridor, or direction from bureaucrats.

Their skills are in global demand.

Labour's idea of increasing their taxes (because they are 'rich' if they earn more than US$32,000 pa) and then using the taxes to support shoemakers in the Wairarapa, is a good illustration of why these feel-good policies are so damaging to the economy.

Is there nothing that the government can do to support enterprise? Yes, it can do less. For example, there have always been regulations on the storage and transport of dangerous goods. Soon, it will also be illegal to import them without a permit.

A brand new bureaucracy, the Environmental Risk Management Authority (ERMA) was created to issue the permits. Any concerned person or organisation can object to applications that ERMA decides to advertise, on environmental or cultural grounds.

If this happens, importers will have to attend a public hearing in Wellington and pay fees of thousands of dollars.

Minister Simon Upton said, "The community, through its elected representatives has plumbed for better and closer management of the risks in this area, and somebody has to pay for it." Somebody does, indeed.

ENDS

Daniel Silva is the secretary of the Importers Institute.
Contact: daniel@silva.co.nz

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