Quotulatiousness

April 16, 2013

Six political talking points on international trade that are myths

Filed under: Cancon, Economics, Media, Politics — Tags: , , , — Nicholas @ 11:32

In Maclean’s, Stephen Gordon collects six of the most common myths politicians use to justify trade distorting policies:

1) Exports are good. Not true; exports are the costs we pay for engaging in international trade. Diverting domestic productive resources to producing more things for foreigners doesn’t increase our standards of living.

2) Imports are bad. This is point one restated: imports are the benefits from trade. The reason we engage in international trade is to obtain goods and services more cheaply than we can produce them for ourselves.

3) Trade deficits are bad. I went though this at length in this post: noting that a country has a trade deficit (or, more properly, a current account deficit) is the same thing as noting that domestic investment is larger than domestic savings. It’s not obvious why this is necessarily a bad thing.

4) Trade deficits are a sign of a slowing economy. The Canadian trade balance is generally counter-cyclical: falling during expansions and rising during recessions. A trade deficit is standard fare for Canadian expansions, not something to get concerned about.

5) Liberalized trade increases employment. Again, this is point one restated. Liberalized trade may increase the number of workers in certain export-oriented sectors. But the effect on total employment in the economy is zero.

6) Liberalized trade reduces employment. Again, this is point two restated. Liberalized trade may reduce the number of workers in certain sectors vulnerable to foreign competition. But the effect on total employment in the economy is still zero.

April 14, 2013

Competition and co-operation in a free market

Filed under: Business, Economics, Liberty — Tags: , , , , — Nicholas @ 10:15

Sheldon Richman suggests that some people’s objections to free trade and free markets isn’t so much ethical as aesthetic:

Market advocates tend to respect the intellect of their fellow human beings. You can tell by their reliance on philosophical, moral, economic, and historical arguments when trying to persuade others. But what if most people’s aversion to the market isn’t founded in philosophy, morality, economics, or history? What if their objection is aesthetic?

More and more I’ve come to think this is the case, and I believe I witnessed an example recently at a lecture I gave at St. Lawrence University. During the Q&A a woman asked, in all sincerity, why society couldn’t do without money, since so many bad things are associated with it. She also suggested that cooperation is better than market competition. I replied that since money facilitates exchange and exchange is cooperation, it follows that money facilitates cooperation — a lovely thing, indeed. Government, I added, corrupts money.

I also said that competition is what happens when we are free to decide with whom we will cooperate. I don’t know if my response prompted her to rethink her objections to the market, but I am confident her objection was aesthetic. For her, money and competition are ugly. Perhaps I didn’t respond on an aesthetic level; it’s something I have to work on. But I tried, and so must we all when we encounter these sorts of objections.

Like that nice woman, many decent people dislike markets because they find them unattractive. And they associate markets with other things they find unattractive besides money and competition: (rugged, atomistic) individualism, selfishness, and profit. F.A. Hayek noticed this, writing in “Individualism: True and False”, “the belief that individualism approves and encourages human selfishness is one of the main reasons why so many people dislike it.” If that’s the case, philosophical, moral, economic, and historical arguments may fall on deaf ears. The objections must be met on an aesthetic level.

April 10, 2013

Despite government denials, the iPod duty is alive and well

Filed under: Bureaucracy, Business, Cancon, Government — Tags: , , , , — Nicholas @ 08:13

Expect to pay more for your iPods and similar devices, says Mike Moffatt in the Globe and Mail:

Last week, I wrote that the federal government’s changes to tariffs in Budget 2013 would result in new import duties on models of MP3 players and three of four models of Apple iPods. The tariff changes involve changing the tariff status of 72 countries, so music devices manufactured in China, Indonesia and Malaysia will pay a 5 to 6 per cent tariff rather than their “preferential” rate of zero, starting in 2015.

The article caused quite a stir, and the government denied it was true. A spokeswoman for Finance Minister Jim Flaherty said the article was wrong. “Music devices like iPods are imported into Canada duty-free under a long-standing special tariff classification from 1987,” she wrote. That classification, which was unaltered by the recent budget, is known by its number: 9948.00.00. (We’ll call it 9948 for short.)

However, a close reading of the relevant document, Tariff Item 9948.00.00 (9948 for short), shows that to qualify for the special classification, the importer must meet strict criteria.

My position that importers cannot meet the requirements of 9948 rests on three straight-forward premises:

1. It appears that sellers of iPods and MP3s are required to collect “end use certificates” from the final consumer on each sale, and be able to present these to the CBSA if audited.

2. The 9948 requirement for “end use certificates” appears to be actively enforced by the CBSA.

3. Retailers cannot reasonably collect these certificates from consumers when they buy an iPod.

These three, put together, make retail sales of iPods and MP3 players ineligible for 9948 and therefore subject to an iPod tariff. What follows is my evidence.

The importer must maintain a database (what Moffatt calls “an iPod registry”) of personal information on the final purchasers of the devices, but there is no matching legal requirement on the consumer to provide this personal information (which would probably violate privacy laws in any other context).

The CBSA’s Memorandum D10-14-51 requires that consumers attest that they will use the iPod in a manner in which it is “physically connected” to a computer (though not necessarily permanently so, according to the memo) and will “enhance the function” of that computer. The consumers must attest that their devices will be “solely used for the purpose for which they were imported.”

If a consumer uses a device in a manner not covered by 9948 during the first four years of ownership, the importer is required to “make a correction to the declaration of tariff classification and pay any applicable duties and taxes.”

This rule is not trivial. CITT Appeal No. AP-2008-023 discusses the need for sellers claiming the tariff reduction (here Code 2101, the predecessor to 9948.00.00) to show that the end consumer is using the goods in the manner described on the certificate.

But there is no practical way an importer could possibly verify and ensure that that the retailer’s customers have not changed how they are using iPods and MP3 players.

March 28, 2013

Challenging Prohibition-era federal laws

Filed under: Cancon, Law, Liberty, Wine — Tags: , , , , — Nicholas @ 09:57

Michael Pinkus updates us on a hopeful sign that we may soon see the end of one of Canada’s surviving Prohibition-era laws:

Almost two years ago I published in these very pages an interview I did with Ian Blue, a lawyer who had turned his focus to liquor laws, constitutional issues and even more importantly, the Importation of Intoxicating Liquors Act (IILA). Now, many think the law was struck down but in fact there was just an amendment made to the federal law that now allows you to carry a certain amount of booze for personal use across provincial borders without fear of being charged by your provincial liquor board. So why am I bringing up this “ancient history” — well it seems the constitutional challenge that Ian was hoping for has finally got a name and a voice in the form of Vin de Garde wine club, and the challenge is going forward — before you blindly blow this off as another soon-to-be failed attempt to challenge the power and might of the LCBO I suggest we revisit the interview, the article and the issues that surround it; there seems to be more relevance here than ever before. This is going to get very interesting.

    Have you ever been out to British Columbia and brought back a couple of bottles of wine? Better yet, have you ever driven across the border to Quebec and brought back a case of beer? If you have done either of these things then you my friend are a felon, capital F-E-L-O-N. That’s all according to the Importation of Intoxicating Liquors Act (IILA) of 1928, which is still on the books and very much in use by our liquor board (the LCBO). What it boils down to is, you can travel to Cuba and bring back 2 bottles of rum, go stateside and return with two bottles of wine, go to Mexico and carry back 4 cervesas; but you can’t cross Canadian provincial borders carrying any booze back with you. So, who’s ready to turn themselves in?

    Not so fast says lawyer Ian Blue, who has been looking into the matter for us. Ian is an energy lawyer who found himself in a conversation with fellow lawyer, Arnold Schwisberg, about the IILA and like an ear-worm (a song that won’t leave your head) Ian couldn’t stop thinking about the absurdity of the Act. “The constitutional issues around inter-provincial and international sales of energy have equipped me admirably to look at the IILA … it stuck with me until I wrote my paper on the subject ‘On the Rocks’.” Ian subsequently wrote a second article on the same topic (On the Rocks; The Gold Seal Case: A Surprising Second Look); both appear in Advocate Quarterly.

    [. . .]

    “Liquor boards would continue to exist, their power would just be diminished,” but they would definitely put up a fight, “You’re fighting entrenched interests, so if you’re diminishing their power they’re going to fight to try and keep it.”

    How big a fight? “I would be fighting 10 sets of lawyers one each from every attorney general’s department; probably 10 sets of lawyers from the provincial liquor commission; and probably lawyers from the police associations,” estimates Ian, but that’s just the tip of the iceberg. “What [a win] would mean is that if I wanted to have a private liquor store I could set one up and I could buy directly from the wineries in Niagara or British Columbia or foreign countries. Nova Scotia restaurants could order wines from Ontario. It would just loosen up the system. [It] doesn’t mean licentiousness; the province could still legislate standards for people who work in liquor stores, store hours, security, all safe drinking training, all that stuff; it’s just that you would not need to have liquor and wine sold through publicly funded liquor stores; being sold to you by unionized staff on defined benefit pension plans.”

    But what about those who claim a loss of provincial revenue as their argument for keeping the liquor boards as is? According to winelaw.ca, “The Provincial Governments make their money regardless of whether the sale is made in a government store or a private store. In fact, the revenue that government makes from liquor on a per capita basis for 2007/2008 was as follows: $192 for BC [a mix of private and government stores], $190 for Alberta [all private stores], and $139 for Ontario.”

March 25, 2013

Budget Day was also apparently opposite day

Filed under: Cancon, Economics, Politics — Tags: , , , — Nicholas @ 10:51

In Maclean’s, Stephen Gordon give props to the spinmeisters in the employ of the federal government:

Full credit to the government’s communications strategists: they managed to produce budget-day headlines that said the exact opposite of what was in the budget.

The first thing I read on the morning of budget day was the National Post story about cutting tariffs on hockey gear. There was also a matching A1 story in the Globe and Mail and I walked to the budget lockup in a cheerful mood. Even though the numbers involved were tiny, I couldn’t help but feel encouraged about how the measure was being marketed. Almost without exception, trade liberalisation is presented as a concession to the demands of foreign exporters, but the real gains from trade are those obtained from being able to purchase cheaper imports. These gains can be obtained by reducing tariffs unilaterally – the most famous example is the repeal of the the UK Corn Laws in 1849. There was no drawn-out process of negotiations with corn (wheat) exporters in other countries: the UK government simply eliminated tariffs so that the population could have cheaper food. The morning headlines led me to believe that our government was going to implement a unilateral tariff reduction for the simplest and best reason: because it increased consumers’ purchasing power.

I was wrong, of course. Yes, there were those 37 tariff reductions, but there was also the measure to ‘modernize’ Canada’s General Preferential Tariff (GPT) regime by ‘graduating’ 72 countries from the GPT; imports from these countries will now face higher tariffs. Mike Moffatt estimates that those 37 tariff reductions will be accompanied by 1290 tariff increases. [. . .]

So instead of a unilateral reduction in tariffs, the government is planning a unilateral increase. This is not how a pro-trade government behaves.

March 10, 2013

Do they have to destroy the Republican Party to save it?

Filed under: Media, Politics, USA — Tags: , , , , , — Nicholas @ 10:00

The defeat of the Republicans in the last US federal election has a lot of them starting to consider radical changes to the party in order to attract new voters. Some of these proposed changes are so radical that it’s hard to believe they wouldn’t rupture the party and drive away nearly as many as they hope to bring in. The farcical notion of a “conservative welfare state“, for example, would likely jettison any last vestiges of reducing the size of government:

[Matthew] Continetti is not the first conservative to argue — falsely as I note in an upcoming piece for Reason magazine — that courting new constituencies such as Hispanics, Asian Americans and other minorities will require the party to give up even its pretense of limited government. Still, Continetti’s basic point that the GOP does not have a coherent ideology that will allow it to court new constituencies while hanging on to its old ones is well taken. After all, how does the party appeal to the “millennial generation” that includes gays, young foodies and indie-music listening hipsters without losing the meat-and-potato social conservatives in, say, Charleston, South Carolina?

Continetti’s answer, dusted off from a 1975 essay by Irving Kristol, is that what the GOP needs is an authentically conservative version of the liberal welfare state. To fashion such a state, Continetti argues, would require:

    Republicans to revisit some of the assumptions they have held since the end of the Cold War. Maybe the foremost concern of most Americans is not the top marginal income tax rate. Maybe you can’t seriously lower health care costs without radically overhauling the way we pay for health care. Maybe a political party can’t address adequately such middle-class concerns as school quality and transportation without using the power of government. Maybe the globalization of capital and products and labor hasn’t been an unimpeachable good.

I am all for rethinking post-Cold War assumptions, but do we have to throw globalization and trade liberalization under the bus in the process? After all, hostility to trade has become passé even among Third World anti-trade activists such as Vandana Shiva — the last ones holding their finger in the dyke to stop globalization. This is in no small part due to the debunking done by economists such as Jagdish Bhagwati who have shown that even the immediate losers of trade liberalization win in the long run. So what is the point of reviving this animus especially since Continetti offers no new (or even old) evidence of trade’s downside?

[. . .]

In short, the ideal conservative welfare state would be a libertarian dystopia of even bigger proportions than the liberal welfare state. There is less welfare and more state in it.

But what is deeply ironic is that a magazine that accuses libertarians of isolationism because they oppose American military interventionism has no qualms about recommending a restrictionist immigration policy to keep foreigners out and a protectionist trade policy to keep foreign goods out. If I had to pick a term for this foreign policy, I’d call it neo-isolationism. And maybe I lack imagination, but it is hard to see how a party that wants to engage the world through its “fearsome military” — rather than through voluntary exchange and mutual cooperation — could gain enough moral high ground to craft a winning political message, especially in a war-weary country.

February 11, 2013

Senate report calls for tariff cuts

Filed under: Business, Cancon, Economics, Government, USA — Tags: , , , , , , — Nicholas @ 12:57

In the Financial Post, Terence Corcoran looks at the good and not-so-good aspects of a recent Senate report on the reasons Canadians pay so much more for goods than Americans (even when the goods are identical and the currencies are trading at par):

Retail prices in Canada, seemingly across the board, are higher. Even with the Canadian dollar at par, the price of everything from running shoes to televisions and Chevy Camaros to books is said to be above U.S prices. One bank report once put the Canada-U.S. price gap at 20%.

Somebody’s gotta do something, everybody agrees. Enter the Senate committee with one of the most hard-nosed, market-driven overviews of how and why Canadians pay more for goods at retail. The report dodges and fudges some key issues, especially farm product supply management, which was seen by the committee and the retail industry as too politically hot to handle.

[. . .]

Even in this, however, the committee pulls its first punch. The recommendation to “review” such tariffs — watery phrasing in itself — also suggests “keeping in mind the impact on domestic manufacturing.” Sorry, folks, but you can’t have it both ways. Tariffs are protectionist devices for manufacturers that consumers pay for. If you want to reduce the price to consumers, the $3.9-billion in protection for manufacturers has to go. End of discussion.

What makes The Canada-USA Price Gap even more valuable is its compact insights into the many causes of higher retail prices in Canada. The economy is a complicated and often unfathomable series of market and price relationships beyond the power and even understanding of policy makers. The report recognizes that fact time and again.

November 24, 2012

Regulating food container size as a form of soft protectionism

Filed under: Bureaucracy, Cancon, Food — Tags: , , , , — Nicholas @ 10:54

Terence Corcoran talks about the 1970s-era food packaging regulations that have suddenly become topical:

What started out looking like a regulatory non-event, the Harper government’s plan to repeal scores of petty federal rules governing the size of containers for packaged food in supermarkets, has suddenly become a great national food fight.

It’s industry against industry, food processors versus supply management, Heinz battling Campbell’s, baby-food makers against corn canners — all part of a war over jobs and trade and consumer dollars. Nominally over antiquated federal regulations, it’s also a war that highlights another reason why Canadian consumers pay more for products at the retail level.

[. . .]

Never mind peanut butter. Ottawa has detailed container specs for what looks like every food product on store shelves: canned vegetables, fruit juices, vacuum-packed corn, tomato juice, maple syrup, frozen spinach, pork and beans, bagged potatoes, soups, desserts, pies, sauerkraut, horseradish sauce, wine — and many more.

It is unclear why these detailed container-size regulations exist, but one explanation is that they are a result of Ottawa’s mass conversion to metric measure in the 1970s under then prime minister Pierre Trudeau. Under the metrication rules, the law mandated metric for all prepackaged food products.

Whatever the intent of the detailed regulations, the effect has been to erect trade barriers that have created protected industries that are now opposing the proposed changes. The Food Processors of Canada set up a web page, KeepFoodJobsInCanada, promoting an email campaign to force Agriculture Minister Gerry Ritz to block the plan to repeal the container-size regulations. It seems to have worked, so far.

November 15, 2012

I, Pencil: The Movie

Filed under: Economics, Technology — Tags: , , , — Nicholas @ 11:17

A film from the Competitive Enterprise Institute, adapted from the 1958 essay by Leonard E. Read. For more about I, Pencil, visit www.ipencilmovie.org

November 6, 2012

Adam Smith’s “invisible hand”

Filed under: Books, Economics, History, Liberty — Tags: , , , — Nicholas @ 00:01

From LearnLiberty.org

Why are some countries wealthy while other nations are poor? Prof. James Otteson, using the ideas of Adam Smith, explains how the division of labor is a necessary and crucial element of wealthy nations. Additionally, Otteson explains Smith’s idea of the invisible hand, which explains how human beings acting to satisfy their own self interest often unintentionally benefit others.

October 4, 2012

The zero-sum trading myth

Filed under: Business, Cancon, China, Economics — Tags: — Nicholas @ 09:44

In Maclean’s, Stephen Gordon decries the undying myth that if one party to a trade is benefitting then the other must be losing:

In The Myth of the Rational Voter, Bryan Caplan argues that the most important obstacles to implementing sound economic policies are not lobby groups or the ability of other special interests to influence politicians, but certain systemic, irrational beliefs of the electorate. This is hardly an encouraging conclusion, but if we needed any more evidence for at least one aspect of his thesis, the CNOOC-Nexen takeover is providing it.

One of the prejudices identified by Caplan is what he calls anti-foreign bias: “a tendency to underestimate the economic benefits of interaction with foreigners.” According to popular (mis)perception, dealing with foreigners is to be mistrusted: if they want something from us, then they must perceive some benefit from the exchange. And if foreigners are gaining, then Canadians must be losing.

September 29, 2012

Disabusing Canadians about mercantilism, one tweet at a time

Filed under: Cancon, Economics — Tags: , , , — Nicholas @ 10:29

Stephen F. Gordon is waging a lonely campaign to persuade Canadians that free trade is better than the managed, mercantilist “free trade” most of our governments have wanted since the NAFTA negotiations:

September 28, 2012

Even when they quote you accurately, they can still miss the point you’re trying to make

Filed under: Economics, Food, Media, Quotations — Tags: , — Nicholas @ 10:11

Tim Worstall, after thanking all the folks who got him to the point he can be quoted (and quoted accurately) in the Los Angeles Times, realizes that they’re using his words to present a point he isn’t trying to make:

I wrote here about the coming bacon famine. My point was that we’ve just had a bad crop and this requires a modest change in how we use that crop that we do have. We’d rather like people to stop feeding the now in short supply grains to pigs to make bacon and leave rather more of it to be eaten directly by humans. Further, I gloried in the fact that we have a system which achieves this. We have the futures markets: the future price of corn and soy and wheat has gone up. Farmers are culling their pig herds to avoid the future higher costs of feeding them. This will cause a shortage of bacon in the future and if not an excess then certainly more grain than otherwise that can be eaten by humans. I do regard this as a good result, yes. But what I am pointing to is the way in which in a market, price driven, system the entirely selfish pursuit of gelt and pelf, the desire purely for filthy lucre, brings about such a desirable result. The sole desire of agricultural commodity speculators is to increase the amount of cash in their wallets and reduce the amounts in those of other such speculators. Yet from this system we get a rebalancing of the use of a scarce resource which leads to more humans leading longer and better lives even if we’ve a certain shortage of pigs. At which point Hurrah! for capitalism and aren’t we all such lucky people.

[. . .]

Which is indeed what I said. However, we’re then told this:

    Worstall doesn’t go so far as to say we should stop eating meat, but his line of thinking is headed in the right direction. If we didn’t use grain as feed for livestock, we could take significant steps toward ending global hunger while also drastically reducing greenhouse gases. Meantime, we’d spare a whole lot of pigs — and maybe even our health.

All of which makes me sound like some kind of hippie, advocating vegetarianism and the equitable distribution of the world’s resources. When what I’m actually applauding is the way in which financial capitalism red in tooth and claw solves our distribution of scarce resources problems.

September 18, 2012

Canada ranks fifth in the world for economic freedom

Filed under: Australia, Cancon, Economics, Liberty, USA — Tags: , , , , , — Nicholas @ 12:19

The annual Fraser Institute report on world economic freedom may confirm what a lot of Canadians have been noticing: we’re now much more free than our American friends, at least by the measurements tracked in this series of rankings (PDF):

  • In the chain-linked index, average economic freedom rose from 5.30 (out of 10) in
    1980 to 6.88 in 2007. It then fell for two consecutive years, resulting in a score of
    6.79 in 2009 but has risen slightly to 6.83 in 2010, the most recent year available.
    It appears that responses to the economic crisis have reduced economic freedom
    in the short term and perhaps prosperity over the long term, but the upward
    movement this year is encouraging.
  • In this year’s index, Hong Kong retains the highest rating for economic freedom,
    8.90 out of 10. The other top 10 nations are: Singapore, 8.69; New Zealand, 8.36;
    Switzerland, 8.24; Australia, 7.97; Canada, 7.97; Bahrain, 7.94; Mauritius, 7.90;
    Finland, 7.88; and Chile, 7.84.
  • The rankings (and scores) of other large economies in this year’s index are the United
    Kingdom, 12th (7.75); the United States, 18th (7.69); Japan, 20th (7.64); Germany,
    31st (7.52); France, 47th (7.32); Italy, 83rd (6.77); Mexico, 91st, (6.66); Russia, 95th
    (6.56); Brazil, 105th (6.37); China, 107th (6.35); and India, 111th (6.26).
  • The scores of the bottom ten nations in this year’s index are: Venezuela, 4.07;
    Myanmar, 4.29; Zimbabwe, 4.35; Republic of the Congo, 4.86; Angola, 5.12;
    Democratic Republic of the Congo, 5.18; Guinea-Bissau, 5.23; Algeria, 5.34; Chad,
    5.41; and, tied for 10th worst, Mozambique and Burundi, 5.45.
  • The United States, long considered the standard bearer for economic freedom
    among large industrial nations, has experienced a substantial decline in economic
    freedom during the past decade. From 1980 to 2000, the United States was generally
    rated the third freest economy in the world, ranking behind only Hong Kong and
    Singapore. After increasing steadily during the period from 1980 to 2000, the chainlinked
    EFW rating of the United States fell from 8.65 in 2000 to 8.21 in 2005 and
    7.70 in 2010. The chain-linked ranking of the United States has fallen precipitously
    from second in 2000 to eighth in 2005 and 19th in 2010 (unadjusted ranking of 18th).

September 17, 2012

Harming the poorest during a food price hike

Filed under: Economics, Food, Government — Tags: , , — Nicholas @ 13:54

The Economist on the least effective ways of dealing with rising food prices:

Although the weather is the proximate cause of the price rises, governments are making matters worse. Look at America’s biofuels policy. By ensuring that a third of the country’s maize is turned into ethanol and fed to cars, it has driven up grain prices and made them more volatile by reducing stocks. At the start of this year America scrapped the subsidy for ethanol, and abolished the tariff on imports of the stuff — steps in the right direction. But a certain amount of ethanol still has to be blended with petrol by law. That keeps prices high.

Bad policies in America are encouraging bad policies elsewhere. Higher prices have spooked importing and exporting countries alike, causing them to turn away from volatile world markets and seek to insulate themselves. Between 2007 and 2011, 33 countries imposed export restrictions on food. Agriculture accounts for less than 10% of world trade, but more than two-thirds of the cost of all border distortions.

[. . .]

Farm protection is like a weed: it grows everywhere and seems impossible to eradicate. This newspaper has been making the case against it since 1843, when we were founded to oppose Britain’s protectionist Corn Laws. Sadly we seem to have made too little progress. At the moment governments are making farming less efficient than it should be. They are increasing poverty. Their policies are otiose, since there are better ways to help the poor, such as direct cash transfers. And they are counterproductive, because they exacerbate the problems they seek to solve.

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