Quotulatiousness

June 25, 2012

If NAFTA was real free trade “it wouldn’t contain 22 chapters of rules and regulations”

Filed under: Cancon, Economics, Liberty, USA — Tags: , , , , , — Nicholas @ 00:03

Free trade is the way to go, if you want to benefit the consumer. Producers don’t benefit as much: it increases their competition and means that bad producers are more likely to go out of business. Protectionists always rely on the visible “damage” that free trade does to these bad producers and minimize or completely ignore the (larger) benefits to consumers.

Jesse Kline explains why moving toward freer trade will benefit most Canadians, and the drawbacks will be to those who are least able or least willing to face real competition:

Prime Minister Stephen Harper announced this week that Canada will join the Trans-Pacific Partnership (TPP) talks, along with he United States, Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam, Mexico and, we hope, Japan. Some say this will be a historic free trade deal that will extend the NAFTA zone into emerging Asian markets; others believe the United States is using the process to impose its own draconian copyright regime on its trading partners, while protecting key industries, such as auto manufacturers. The truth is probably somewhere in the middle.

The problem is that the agreement is being negotiated under a veil of heavy secrecy. And if rumours that the negotiated sections of the agreement already contain over 1,000 pages prove to be correct, it is certain that the TPP will not give us anything resembling real free trade. Indeed, the Canadian public has little idea about what we are getting ourselves into, or how much the government knew about what it was agreeing to. Based on a leaked chapter of the agreement, it looks as though we just signed up for an entirely new copyright regime, a mere hours after the government passed its own made-in-Canada solution.

To the government’s credit, it is simultaneously pursuing trade deals with the European Union and China. But in these times of global economic uncertainty, we need to see the benefits of trade sooner, rather than later. Free trade leads to higher standards of living, and benefits society through lower prices and increased variety of consumer goods; it forces domestic industries to be more efficient. Fortunately, there is another way to achieve these benefits: The Canadian government could open our borders to the world by unilaterally removing all our trade barriers.

June 23, 2012

Trade deals as mutual disarmament pacts

It’s a very sad commentary that the only way the current “pro-business” federal government can even consider scrapping our supply management monopolies is because “our trading partners forced us to”:

If the government were of a mind to get rid of supply management — it swears it is not — that is perhaps the only basis on which it could: our trading partners made us do it. Certainly it would not dream of doing so otherwise. Such is the power of the supply management lobby, especially dairy, that a suffocating consensus has settled over the issue, of a kind rarely seen in a democracy. Consensus is not even the word. Every party strives to outdo the others in the fulsomeness of its support. And not just every party: every member of every party, in every province and at every level of government. It’s quite creepy.

Yet virtually every economist or policy analyst of note agrees that supply management is a disgrace. The primary effect of the quotas — the intended effect — is to drive up the price of these foods, staples of most Canadians’ diets, to two and three times the market price. The burden of these extraordinary price differentials, of course, fall most heavily on the poor, a fact that ought to trouble self-styled “progressives” but evidently doesn’t.

But it isn’t only consumers who pay. Since the quotas are tradeable, the premium over market prices gets capitalized into the value of the quota. The right to a cow’s worth of milk production, for example, runs to about $28,000, meaning a farmer looking to get into the industry faces an initial outlay, for the typical 60-cow farm, in excess of $1.5-million — just for the quota, never mind the cows, the barn and the rest.

April 7, 2012

Rationing is not the optimal solution to shortages

Tim Harford on the recently imposed “hosepipe bans” in parts of southern England:

But it was chucking down with rain this week. It was snowing, too. How can we be talking about drought?

Water isn’t like electricity: it can be stored, within limits. You don’t get a water shortage if you have a dry week and you don’t cure a water shortage with a few April showers. You get water shortages after a couple of years of low rainfall.

And how do you cure water shortages?

Hosepipe bans, apparently.

Is that a good idea?

Probably not. It’s appealing for the water companies because the revenue they receive is capped by the regulator. They can’t make more money by supplying as much water as possible to as many joyful customers as they can reach. It’s easier to just yell at customers to stop watering their lawns. It might be annoying but the water companies don’t lose much as a result.

[. . .]

You’re not suggesting a “flushing the toilet ban”?

I am not suggesting any kind of ban. It’s the idea of the ban that’s problematic. A new article by economists Jeremy Bulow and Paul Klemperer analyses the advantages to consumers of rationing schemes rather than simply raising the marginal price. The bottom line: the advantages are typically illusory. Rationing reduces supply, relative to what could be provided if prices were higher. It also misallocates resources — there’s no reason to expect that the people who get the scarce product are the ones who value it most. And rationing encourages all kinds of fun and games to try to get around the rules.

So you just want water to become more expensive.

I hope water will become cheaper, on average. But I certainly want it to be expensive to use lots of water at a time of shortage. We want everyone to have an incentive to save some water and the obvious way to do this is through water metering.

February 13, 2012

Ontario’s other alcohol sales monopoly

Filed under: Cancon, Economics, Law — Tags: , , , , — Nicholas @ 11:25

I guess it’s technically part of an oligopoly (?duopoly?), but along with the KGBO LCBO, the other entity that is legally allowed to sell beer is the mostly foreign-owned Beer Store:

… the experience highlights one of the many absurdities of a system where more than 80 per cent of beer sales are controlled by three multinationals — Labatt Brewing Co. Ltd. (owned by Anheuser-Busch InBev SA), Molson Coors Brewing Co. and Sleeman Breweries Ltd. (owned by Japan’s Sapporo Breweries Ltd.).

“The way the system is set up unfairly limits access to customers,” Mr. Beauchesne complained. “Molson, Labatt and Sleeman are completely in control of how beer stores look and feel, what products are promoted. They get to control the whole shopping experience and I get none of that control.”

The McGuinty government is pledging to review outdated liquor laws early in the legislative session that begins this week. MPP Grant Crack, parliamentary assistant to the Agriculture, Food and Rural Affairs Minister, said the Beer Store’s monopoly will no doubt come up.

[. . .]

After 85 years, the Beer Store is an anachronism.

It’s often hard to reconcile the ad world of beer — the snow-capped mountains, parties and hockey — with the utilitarian factory-like outlets where most Ontarians actually buy the stuff.

There are noisy conveyor belts, bottle crushers and cases of beer stacked on metal shelves in dank warehouses. In many stores, patrons still make their selection by picking from a row of dusty empties on a shelf.

Behind the counter, harried clerks juggle bottle returns and running the cash register.

Forget about tastings, attention-grabbing displays of new offerings or expert advice to help you choose from hundreds of selections. At the 437 Beer Stores, it’s get in line, pay the clerk, get out.

February 9, 2012

Michael Pinkus: Apathetic Ontario and the LCBO monopoly

Filed under: Bureaucracy, Cancon, Economics, Government, Liberty, Media — Tags: , , , , , — Nicholas @ 09:12

In the latest issue of his OntarioWineReview.com newsletter, Michael Pinkus again expresses frustration with the government-run monopoly on retail sales of wine and spirits in Ontario:

I have made this point before when talking about the LCBO Food & Drink magazine, which competes directly with other publications in the province for advertising dollars; a magazine that is paid for by the people for the people, which sounds great and a pillar to build a country on, but not when you are competing against the very people who paid the money in the first place (magazine editors, publishers, writers, etc. are taxpayers too). One of the sad realities is that with each bottle a publisher buys they are paying to put themselves out of business.

It’s bad enough that the LCBO are the only game in town to buy booze … it’s bad enough that they waste millions of dollars a year on fancy stores (when they don’t have to) … it’s bad enough that a government run monopoly competes against their own populace and private enterprises for advertising revenue … but now they have to blow dollars on advertising themselves, buying expensive jingles and song rights … is that where you want your tax dollars to go? Could we not find better uses for this money, seriously? And what happened to social responsibility? They are advertising so we’ll buy more — does that seem counter-productive to the social responsibility pact. Heck, I don’t see this many ads for Premier Liquors out of Buffalo, and they have competition.

In the coming weeks we’ll look a little deeper into the LCBO, see what the Auditor General had to say, and read what the pundits are talking about. Find out why our booze prices are being raised mainly because we can’t be trusted as a society to police ourselves when it comes to drinking the devil’s liquid. I just can’t believe that all this is going down and nobody seems to be saying anything on the subject. Over the past few weeks I have been listening to CFRB: John Tory and Jim Richards both made mention, Richards went as far as to speak with Chris Layton (media relations mouthpiece for LCBO) — while both announcers shared their outrage with listeners over various aspects of the LCBO’s conduct (John: advertising; Jim: price raising), the apathetic Ontarians who bothered to call in had very little to say on the matter, many believing the LCBO is doing a bang up job.

A quick search of the blog shows that just about every mention of the LCBO is a negative one. No surprise there: the LCBO is a relic of the post-Prohibition era and is still run in a way that would be familiar to the state-owned “stores” of the old Soviet Union. They are undeniably better both in selection and in service than they used to be, but just about every positive change was wrought by the mere threat that the government of the day was looking at privatization as an option. As soon as the threat went away, the positive changes could be slowed or even stopped: after all, where else are you going to go to buy your wines and spirits?

January 27, 2012

Is VIA Rail an unaffordable luxury?

Filed under: Cancon, Economics, Government, Railways — Tags: , , , — Nicholas @ 00:02

It hurts me to admit that long-distance passenger rail is an expensive relic of the past, and Canada’s government-owned passenger rail corporation is little more than a drain on the budget. I’m a railway fan: I founded a railway historical society, for crying out loud. I love trains, although I rarely get to use them myself. The freight railway business is doing well and it should continue to do so, as it’s generally much more economical for long-haul bulk cargo than any other option. But unlike in Europe, where population density allows passenger railways to remain a key part of the transportation network, distances and population distribution mean passenger railways can only operate profitably in a few areas (Windsor-Toronto-Montreal-Quebec City, and Boston-New York-Washington, for example).

Lorne Gunter says that recent reports about the federal government looking to sell off some or all of VIA Rail make lots of sense:

Bloomberg reported last week that the federal Tory government is quietly contemplating privatizing some or all of VIA Rail. Good. It’s about time, just as it was about time in 1991 when the Tories under Brian Mulroney thought about selling off VIA, or in 2000 when the Chretien Liberals considered it, or 2003 (Liberals again) or 2009 — the first time the current crop of Tories mulled it over.

It’s easy to imagine that every few years, Transport Canada bureaucrats return to the cabinet drawer marked “Keeping the Minister Preoccupied,” extract the file labelled “Secret Plans to Privatize VIA,” blow off the cobwebs and hand it to their latest boss. Then they sit back and wait for the predictable outcry from assorted special interests and from those few central Canadians who do actually use the train regularly.

Most years, VIA spends nearly twice as much as it makes. In 2010, for instance, VIA’s expenses were $536 million, while its revenues were just $274 million. That left a deficit of $262 million that had to be made up by Ottawa. Put another way, for every dollar VIA charges passengers for tickets, taxpayers put in 96 cents.

Shortly after we got married, Elizabeth and I took the train from Toronto to Halifax and had a great time: it was a very enjoyable trip, and we thought of the train ride as part of the vacation, not just a means of transportation. I’ve always wanted to ride The Canadian all the way to Vancouver, but at no point in the last thirty years have I simultaneously had the time available for the trip (four days on the train in each direction) and the money (right now, with a big seat sale going on it’d cost $2,137 for coach seats or $5,253 if we took a cabin). If that’s only half of what the trip would cost at market rates, there’s no way the service could support itself.

So the annual VIA subsidy amounts to an income transfer from people in most of the country who never use a passenger train to people in the central core of the country who prefer to take the train rather than drive their cars from Toronto to Montreal, but wouldn’t do so if they had to pay anywhere close to the full fare for their trips.

Every time I write about the absurdity of keeping VIA rolling, I get letters from people who insist they prefer the train to flying, driving or taking the bus or who believe trains have a lighter environmental impact or who say they can’t afford other modes. Fine, but why is it taxpayers’ duty to split the cost of your unprofitable preferences with you, 50/50?

January 26, 2012

What is really meant by the term “market failure”

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

Posting on the Institute of Economic Affairs blog, Tom Papworth tries to clarify what the term “market failure” actually means, in comparison to how it’s commonly used by politicians and journalists:

Firstly, it seems to blur the distinction between ‘the market’ and ‘the markets’ — a very common error in current discourse. The market is an economic concept that describes the myriad of choices and exchanges that take place between people every day; the markets are the very real institutions created for handling major financial transactions. It is not clear to me that this article acknowledges that distinction. This manifests itself primarily in the title and main theme: indeed, as Jan (and at least one commentator) does tacitly acknowledge, the financial markets are so shaped by government intervention that it would be a surprise if they did correspond to a model market.

And that brings me to the second problem: the suggestion that markets don’t fail when they ‘respond rationally, quickly and often brutally to conditions as they find them’. While that description is true, it has little bearing on the concept of market failure. Market failure typically refers to situations where the effects one would expect to see in a theoretical market economy do not in fact manifest themselves in real life. As the great man himself would be — and perhaps was — the first to point out (though without using these terms) markets fail because of factors such as monopoly and externality — monopolies undermine competition and so markets do not clear; externalities enable costs to be passed onto third parties and prevent all beneficiaries contributing to the production of goods. Information asymmetry is often presented as another source of market failure.

Now, to be fair to Jan, that precision of language is hardly prevalent among the politicians he is criticising. When they speak of market failure, it seems almost as though market success is defined by a number of uneconomic measures such as social justice, or even (that ultimate weasel-word) fairness.

December 19, 2011

Kelly McParland: “Norwegians are the most revoltingly perfect people in the world”

Filed under: Bureaucracy, Economics, Europe, Food — Tags: , , , , — Nicholas @ 14:24

Don’t worry, my Norwegian friends, it’s just small-minded Canadian jealousy that you tend to beat us in all the “Smug Country” polls and your national monopoly is even more constricting and incompetent than our equivalent national monopoly:

Everyone knows the Norwegians are the most revoltingly perfect people in the world.

They consistently top all lists of Things Good Countries Do.

They give more to foreign aid than just about any other country in the world. Countries are supposed to give 70¢ for every $100 of national production, but hardly any do. Norway gives about 40% more than the benchmark. They’re sitting on hundreds of billions of dollars in oil profits, and instead of blowing it on short-term expediencies (like a certain western province we could mention) they squirrel a lot of it away in an investment fund to help maintain their high standard of living when the oil runs out. And believe me, their standard of living is high: a cradle-to-grave nannyism that revolts conservatives but seems to work for Norwegians. (In Norway, life is so soft that even cows are required to have rubber mats in their stalls so they can rest comfortably between shifts).

They’re so perfect they’re annoying. Even Swedes get tired of hearing about them. So it’s kind of fun to read about how they’ve completely buggered up their supply management system, so that the entire country has been stripped of its butter supply just as Christmas arrives and everyone gears up to make lots of stuff for which butter is required. And if it reminds you of Canada’s own supply management system (think: dairy products and Quebec), all the better.

December 14, 2011

Your disturbing chart of the week

Filed under: Bureaucracy, Economics, Education, USA — Tags: , , , — Nicholas @ 09:18

Source: Cato Institute.

November 15, 2011

Stephen Gordon: One does not simply end supply management

Filed under: Cancon, Economics, Food, Liberty — Tags: , , , — Nicholas @ 09:29

Stephen Gordon in the Globe and Mail‘s Economy Lab on the economically indefensible Canadian anomaly known as “supply management”:

The best way to get a rise out of Canadian economists is to ask us about our dairy supply management system. It’s simply indefensible: a government-enforced cartel whose only purpose is to generate high prices for what most would view as essential goods. This sort of arrangement wouldn’t be — and isn’t — tolerated in another sector of the economy. Nor is it tolerated anywhere else in the world. So the news that the federal government is considering putting supply management on the table in order to join the Trans-Pacific Partnership trade deal is guaranteed to generate a certain amount of excitement among my colleagues.

It’s hard to believe that the interests of 13,000 Canadian dairy farmers could consistently trump the interests of 34 million Canadian dairy consumers, but yet the system is still with us. Why can’t we simply end supply management and let consumers benefit from lower dairy prices?

The problem is that current dairy farmers are — for the most part — not earning monopoly rents from what they produce. In order to sell their output, dairy farmers must first obtain a permit to do so, and dairy quotas are not cheap: more than $25,000 per cow. To a very great extent, the higher prices that they receive simply cover this initial investment.

October 20, 2011

This is why you don’t want to be a wine importer in Ontario

Filed under: Bureaucracy, Cancon, Wine — Tags: , , , — Nicholas @ 08:53

In the lastest issue of the Ontario Wine Review, Michael Pinkus explains the 16-point process that all independent wine and liquor importers have to follow in order to get their products into customers’ hands:

Recently I received an email from an agent giving a blow by blow account of the process of getting booze onto the shelf of our beloved Monopoly, including the hair pulling and gnashing of teeth that goes along with it.

[. . .]

“I can take samples to the Licensees — Restaurants & Hotels — and if they want to buy it this is the procedure:

1) They must purchase a minimum of one full case
2) They must pay the LCBO a 25% deposit
3) If I want to reduce the freight rate down from $100+ per case to a reasonable freight rate . . . more like $12/case then I need to gather a minimum of 20 cases in orders with specific Licensees names on them who have all paid the deposit.
4) The LCBO Private Ordering department then processes the paperwork
5) The producer would then ship the product to an LCBO pick-up location
6) We wait until the LCBO consolidates our small order into a large container with other suppliers
7) The product usually takes 4 months to arrive and then spends another month going through Lab Analysis at a cost to the supplier of $175 per product.
8) When the product finally gets released we have to hope that the original licensees that ordered it all take delivery
9) The producer gets paid 60 – 90 days after the order lands in Ontario (while the agent pays to get it out of the Private Ordering warehouse).
10) The agent then has to chase the customer for at least 90 days to get them to pay since they will likely have an excuse not to have a cheque ready upon delivery
11) We have to do this for a total a 300 cases sold within one year to EARN the privilege of getting into the Consignment warehouse.
12) Once granted consignment space . . . we can start to ship from the producer to the LCBO consignment warehouse by the pallet (~56 cases)
13) In consignment, the product can be shipped without an advanced licensee order . . . but still must sell by the case to customers.
14) The producer gets paid once ALL of the order is sold through: 120 – 240 days later.
15) If the product does not sell through within 120 days of arrival then the LCBO confiscates the remaining order, discounts it, and puts it into a sale warehouse.
16) This frees up more space back in the consignment warehouse so that they can trap more agents into over-shipping and then the LCBO can punish them for trying to treat Ontario like a free enterprise liquor system.

Oh, and if the LCBO decides to add your product to their regular merchandise, you’ll be out of luck as it’ll probably sell for less than you can (and your hotel and restaurant customers are paying for exclusivity in a lot of cases, so they’ll stop ordering through you if it’s available in the LCBO retail stores).

August 25, 2011

Niagara winemaker being punished for “stepping out of line”

Filed under: Bureaucracy, Cancon, Government, Law, Wine — Tags: , , , , — Nicholas @ 09:18

Michael Pinkus who rarely lets an opportunity pass to let us know how he dislikes the LCBO (or as he sometimes calls it, the KGBO), reports on the troubles of Daniel Lenko, who appears to have provoked retaliation from the board for his criticisms:

An “order to comply” certificate was slapped on Lenko’s winery door. The order, from the Region of Niagara dated July 18, 2011, listed two areas of concern an official found after inspecting Lenko’s property on June 29, 2011. First, “Lenko must cease and desist from discharging winery production waste” (Lenko says this waste is 99% water and 1% wine) into an unapproved septic tank and then discharging that onto the ground surface. Second, Lenko is ordered to apply to the Region for a permit to construct a sewage system and, upon application, submit a detailed design plan from a qualified engineer or sewage systems designer and, upon approval, proceed to install the new system by Sept. 14, 2011. Costs for this work could get into the $50,000+ mark.

[. . .]

Then it hit me. I saw Danny’s face peering back at me from between two barrels in a May 6, 2011 article in the Toronto Star entitled “Grape Expectations frustrated by LCBO”. In the article Danny, who has never been shy about his dislike for our monopoly system and those who run it, said: “In the real world, there’d be an alternative, some place else to sell our wines, but the LCBO’s the only game in town … They say they’re the best at what they do, but how can you say that when they have no competition? What’s wrong with having a VQA store?” Another prominent quote in the article is not attributed to anyone, but with Danny’s face front and centre at the top it is easy for any reader to make an inference (rightly or wrongly): “Would I like to get more of my product on the shelves? Sure. But why would I provoke an 800-pound gorilla? There’s just no way to win that battle.”

[. . .]

The aforementioned picture at the top of the article had a caption that read: “Daniel Lenko started his winery in 1999 using the grapes from the vines that his father planted in Beamsville in the Niagara Wine Region, in 1959. Lenko sells his wines from the kitchen of a small house on the vineyard which he also uses as a wine testing lab and an office.” Now what do you think it take for the LCBO to get on the horn with the AGCO (Alcohol Gaming Commision Ontario — who “oversee” the wineries) or even a local official and say to them: “maybe you’ll want to look into this Lenko guy a little harder” he is after all selling wine from his kitchen and a kitchen might not be considered a suitable place to be selling alcohol from. I think someone is making an example of Danny.

July 13, 2011

Expanding government-provided flood insurance?

Filed under: Economics, Environment, Government, USA — Tags: , , , , , — Nicholas @ 12:42

It has always amazed me that the US government is the primary insurer for flood damage, but the idea of putting the few remaining private insurace companies out of business is insane:

The House of Representatives is scheduled this week, as early as today, to consider an extension and “reform” of the National Flood Insurance Program (NFIP), administered by FEMA. Since Hurricane Katrina in 2005, the NFIP has been about $18 billion in the hole. And this is from a program that only collects around $2 billion a year in premiums, which barely covers losses and expenses in a normal year. So make no mistake, the NFIP is still on course to cost the taxpayer billions more in the future.

Even before Katrina, the Congressional Budget Office estimated that the NFIP was receiving a subsidy of close to a billion dollars a year. Under CBO’s optimistic projections, the House’s reform bill would increase NFIP revenues by about $4 billion over the next ten years, making only a small dent in the program’s current deficit.

If private insurers aren’t willing to offer insurance to people and businesses located on flood plains, isn’t that a strong indication that building a house or a plant on that location is a bad idea? Why should people who chose not to locate in risky locations be forced to subsidize the risk-taking of those who do?

May 31, 2011

Colby Cosh tweets

Filed under: Cancon, Humour, Technology — Tags: , — Nicholas @ 09:49

Colby Cosh works for Maclean’s, which is owned by the same corporate entity that provides his cell phone service. He’s not been impressed with his employer’s other line of business:

Tue 31 May 04:28 (On the whole, I would rather buy a mealworm-infested phone from a Somali pirate than deal with Rogers any further.)

Tue 31 May 04:32 (A pirate prob wouldn’t tell me how *lucky* I was to get a refurbished battery to replace the inert one in the phone he sold me 4 wks ago.)

Tue 31 May 04:34 (…which I had to relinquish for 2 weeks in order for the incalculably complex operation of “swapping in a working battery” to be executed.)

Tue 31 May 04:34 (…Not a NEW battery, mind you. I bought the PHONE new, but the replacement battery is refurbished. I am explicitly supposed to be grateful.)

May 3, 2011

Michael Geist on what the Conservative majority means for digital policies

In short, he sees it as a mixed bag:

For example, a majority may pave the way for opening up the Canadian telecom market, which would be a welcome change. The Conservatives have focused consistently on improving Canadian competition and opening the market is the right place to start to address both Internet access (including UBB) and wireless services. The Conservatives have a chance to jump on some other issues such as following through on the digital economy strategy and ending the Election Act rules that resulted in the Twitter ban last night. They are also solidly against a number of really bad proposals — an iPod tax, new regulation of Internet video providers such as Netflix — and their majority government should put an end to those issues for the foreseeable future.

On copyright and privacy, it is more of a mixed bag.

The copyright bill is — as I described at its introduction last June — flawed but fixable. I realize that it may be reintroduced unchanged (the Wikileaks cables are not encouraging), but with the strength of a majority, there is also the strength to modify some of the provisions including the digital lock rules. Clement spoke regularly about the willingness to consider amendments and the Conservative MPs on the Bill C-32 committee were very strong. If the U.S. has exceptions for unlocking DVDs and a full fair use provision, surely Canada can too.

The Conservatives are a good news, bad news story on privacy. A fairly good privacy bill died on the order paper that will hopefully be reintroduced as it included mandatory security breach notification requirements. There will be a PIPEDA review this year and the prospect of tougher penalties for privacy violations is certainly possible. Much more troubling is the lawful access package which raises major civil liberties concerns and could be placed on the fast track.

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