Contemplating trade restrictions and industry protection

I’m just back from a family holiday in sunny south-east Queensland.  Being a New Zealander, I have a visceral fear of snakes, but as we saw them only in the zoo, one could concentrate on the upsides of Australia.   Seriously good newspapers for example.  Daily surf swims in the middle of July.  Plastic bags in plenty of shops (Queensland seems to have outlawed – the very useful –  thin supermarket bags but not others).   And, of course, one could look around, and read the papers, and contemplate what productivity and higher material living standards really mean.  It was a while since I’d been in Brisbane, and the central city certainly had a look and feel more prosperous than what one finds in Auckland (or Wellington).

At the turn of the century, GDP per hour worked (PPP terms) was about 31 per cent higher in Australia than in New Zealand, and on the latest OECD estimates than gap is now 41 per cent.    And it isn’t as if Australia itself is some stellar productivity performer.  (Those with longish memories may recall a time barely 10 years ago when there was serious political talk of closing the economic gaps with Australia, but –  as a result of policy choices of both National and Labour governments –  the gaps have just widened.)

I couldn’t see state-level GDP per hour worked data for Australia,  but there is GDP per capita data.  The gaps between New Zealand and Australia aren’t as large for per capita income as for labour productivity, simply reflecting the longer hours the typical New Zealanders engages in paid work over their lifetime.  For Australia as a whole, GDP per capita (PPP) terms is “only” 34 per cent higher than in New Zealand.  In Queensland –  with below average state GDP per capita –  that gap is “only” about 25 per cent.   Even a 25 per cent difference purchases a lot of (say) cancer drugs, new cars of whatever other public or private goods and services people aspire to.  I’m sure the Australian health system has its problems, but I was struck reading three papers a day over 10 days not to see stories about health underfunding.    And yet the (various levels of ) Australian governments spend a smaller share of GDP (35 per cent) than New Zealand governments do (38 per cent).

So there was sun, surf, papers, productivity in Queensland.  And there was another thing I always look out for abroad.

trout 2

I prefer fresh but the little supermarket near where we were staying “only” had smoked.  Not, in this case, the Australian product but (so I was surprised to notice when opening the packet) Norwegian.

trout 3.jpeg

The wonders of a global market and all that.   But just not in New Zealand.

There are, of course, plenty of trout in New Zealand –  all descendants of trout introduced in the 19th century (it isn’t exactly a native species).  In fact, some of the trout species in Australia was introduced from New Zealand.

But if there are lots of trout in New Zealand, the only way you can consume any is to go and catch one yourself, or make friends with someone who fishes for them and who will gift a trout to you.   It is as if I could only consume milk if I owned a cow or had someone close by who would give me milk.  Perhaps the first half of that sentence did describe much of the world prior to the 20th century, but even then the sale of milk wasn’t banned.  But the New Zealand government has for decades now banned the sale of wild trout.

When I went looking, I discovered that the sale of other trout isn’t outlawed in New Zealand, but as a recent regulatory impact statement prepared by the Department of Conservation put it.

The sale of trout (except for wild trout) is allowed in New Zealand. The reason it is not available for sale is because there is no way to obtain trout to sell – trout farming, selling wild trout, and importing trout are all prevented by legislation or the CIPO.

(that’s a customs import prohibition order).  The prohibition extends to smoked trout.  Here is the latest version of the restriction, just renewed a few months ago.

Read literally, clause 4(1)(b) appears to suggest that the imports for sale are only prohibited if they are for amounts of less than 10 kgs.

trout 4.png

That can’t have been what was intended, but it appears to be what the law says. [UPDATE: I misread it.]

There was a policy process undertaken last year that led up to the government’s decision to renew the import ban.  It was weird policy process, described thus

There has been no public consultation on the options covered by this paper. The views of the various interest groups are well known to officials, but there may be Treaty implications if a firm decision was taken without formal consultation with iwi. The nature of the issues mean that a decision has to be made as to which set of interests should be given precedence.

Officials –  of course –  consider they know all that needs to be known.  And quite Treaty issues arise in respect of foreign trade in a species itself introduced to New Zealand is beyond me –  but fortunately I’m no longer a public servant.

Of the official agencies that were consulted, MFAT actually favoured allowing the import restriction to lapse. I’m not usually a fan of MFAT –  and had Beijing objected for some reason, no doubt they’d have taken the other side –  but well done them on this one.  It isn’t a good look when New Zealand prattles on about open trade, rules-based orders, when it maintains in place a near-absolute prohibition of the importation of an innocuous, but tasty, food product.

I guess no one looks to the Department of Conservation for high quality and rigorous policy analysis, especially on economic issues.  Their RIS on the trout CIPO did nothing but reinforce those doubts.

The entire official case for the prohibition of imports of trout (and, by implication, for continuing restrictions on domestic trout farming –  although that isn’t the focus of this particular policy process) appears to rest on supporting the recreational trout fishing industry.

22. The import prohibition and the prohibition on the farming of trout are aimed at protecting the New Zealand wild trout fishery.

Like, for example, banning deer farming to protect hunting of deer in the bush?  Or pig farming?  Or salmon farming?

The officials even acknowledge that (for example) allowing the sale of salmon has not led to widespread salmon poaching, and that other countries successfully manage to have wild trout fishing and trout sales.  But, they plaintively suggest, New Zealand is somehow different.   For example

If imported trout could be sold, the illegal sale of wild trout would be much more difficult and costly to detect.

Which is, of course, not an argument for maintaining the existing restrictions but for removing both import and domestic sales (and farming) restrictions, not continuing to run industry assistance to a small tourism sector –  somewhat akin to the protection that used to be offered to the New Zealand car assembly industry or the New Zealand television assembly industry.  You get the impression reading the document that the DOC officials have simply got all too close to their mates in Taupo, and are subject to regulatory capture.

The documents contains this paragraph

42. The Government’s objectives in regard to the issues examined in this paper can be summarised as follows:
• Maximise recreational and tourism values of wild trout fishery
• Maximise employment and economic values of wild trout fishery
• Maximise economic growth and employment opportunities in the wider economy
• Provide for maximum consumer choice in purchasing decisions
• Minimise risk of friction in negotiations with trading partners.

These objectives are not referenced to any fuller document in which “the government” makes its case, and they have the feel of being made up on the fly with little or no supporting analysis.   They go on to state

43. The interactions between these issues mean that it is not always possible to progress all of these objectives simultaneously. Actions that could advance some of the objectives may restrict progress on other objectives. Decisions on which objectives should be given precedence therefore need to be made by elected Ministers.

In a way, of course, that is true.   If your goal is to maximise the size of the protected sub-industry, whether buttressed by direct subsidies (think film), import bans (trout), domestic production of a related product (trout farming ban) it will conflict with overarching goals about consumer choices and economic efficiency (as well as that lesser goal about living the words about a free and open economy with respect to trading partners).  But, as in so many industries in the past,  that tension should be resolved in favour of the consumer and of economic efficiency.  In this case, it isn’t even clear that there really is much of a tension.  DOC’s RIS offers not the slightest evidence that allowing imports of trout meat (smoked or otherwise), or even allowing domestic farming of trout, would make any difference whatever to the number of North American anglers who come to Taupo.  Perhaps on the domestic side there might be a smaller number of trout fisherman…….in the same way that a much smaller proportion of us milk house cows, collect our own eggs, or whatever than we once used to.   The only “value” really being protected here is that people who don’t go fishing shouldn’t be able to eat trout in New Zealand.  If that is a values-based policy framework, it is a pretty weird one.  Logically, one might apply the same daft policy to native fish too.

It is really quite shoddy advice, in support of shoddy policy.   As one gets to the end of the RIS one gets the impression a reasonable number of government departments are beginning to conclude that the policy around trout is a nonsense and should eventually be revisited.   But it isn’t clear that DoC is among them –  then again, they are probably brought up to dislike all introduced species (may not even be too keen on people, disturbing that natural environment), and they simply aren’t the agency that should be responsible for an issue of industry protection policy and interfering with the ability of New Zealanders to easily consume a safe and lawful product.

There was petition last year seeking to introduce trout farming in New Zealand.  Whether it gets anywhere, only time will tell, but it is hard to be optimistic when the current government extended the existing import ban again only last year.   Perhaps New Zealand consumers will have to hope that foreign governments will take up the issue more seriously, and put more sustained pressure on the New Zealand government to remove the barriers between consumers and trout (more cheaply and efficiently than holidaying abroad).

 

27 thoughts on “Contemplating trade restrictions and industry protection

    • We have fish that we will not sell and prefer the fish to die of old age and contaminate the waterways.
      As a recognised continent we have the largest ocean boundaries in the world but won’t mine or explore for oil or gas or minerals.
      We have top grade coal in Huntly but we will not mine and instead we import poor grade high polluting coal from China to burn.
      We have premium grade iron ore in our black sandy beaches but we do not dredge.
      We have forests we do not cut

      This is the NZ way. We are either too wealthy and do not care or we have rocks for brains.

      Liked by 1 person

      • With the NZD getting up there around 0.60 cents against the Euro. I just booked my Xmas and New Year holidays in Paris/London for the family saving $1000 off the price from China Eastern flight just compared to a few months ago when I was looking. I think we just do not care too much as long as there is food on the table, a 55 inch TV with surround sound, beer in the fridge and regular annual holidays overseas with a strong NZD.

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  1. The Australian and the Australian Financial Review (my 12 year daughter was keen on the Courier-Mail so I flicked thru it too, but it was no better than NZ papers). I’ve had conversations in the past with Australians bemoaning the quality of Aus papers, to which I can only so that, relative to NZ, you don’t realise how well served you are.

    Liked by 1 person

  2. When I traveled NZ some years ago I did find both your newspaper and TV stations poor.
    I can’t say either of the OZ papers are any good these days. They were back in their halcyon days though in the 70 and 80s.

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    • I have watched so much internet TV drama offered on Netflix and another Chinese website with the latest TV drama from around the world each and every day but I find the local offerings in NZ starting to grow on me again. I actually find the NZ content refreshingly different like comfort food.

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  3. What a curious case of policy making – what other fishy advice is being given or policy that exists that also distorts trade in this manner?

    Is this a one-off catch or is there dozens of similar policies (i.e protection of a small industry, reduced choices, lower economic efficiency as a result) that aren’t especially well thought through?

    Also on your broader contention about NZ Vs AUS productivity I see a recent analysis by PwC put Auckland’s performance significantly behind Australian urban area performance over the past 10 years. Given the super city legislation and structure came about 10 or so years ago it seems to me to be another example of New Zealand policy making falling well short of its objectives. Perhaps if many citizens hadn’t felt as though their wealth had increased significantly over that period through paper based gains on the value of their house there would be more voices clamouring for better results from policy.

    Good to have you back writing – makes the commute more thought provoking!

    Liked by 1 person

    • My bank just gave me a $200k booster which brings up my unused overdraft facility to $500k. That gives me the ability to build perhaps another 2 100sqm houses to boost my rental income. It’s not paper gains if you do something with that paper gain.

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    • In fairness, NZ is probably less bad re the prevalence of such bad regs and trade restrictions than many other countries, Australia, for example, has a ban on banana imports – allegedly on biosecurity grounds – so that whenever there are problems with the domestic crop, Aus domestic prices go thru the roof.

      I once listened to Alan Bollard’s recount an effort he had made when Secy to the Tsy to do something about the trout ban. It sounded as if it was totally futile – too many (small but intense) vested interests – but reading that DoC RIS did make me a little optimistic that perhaps change might finally come here, if not immediately then at least in the next 10 or 15 years.

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  4. To what extent is Australian productivity based on mining? Mining is an easy industry when you have a huge desert with no forest or people

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    • The big difference between NZ and Australia productivity performance is now mining. Both countries have been in relative decline for 100 years, altho Australia less dramatically than NZ. The two countries have had pretty similar econ policies in the broad sweep of modern history, and both now have similar deeply damaging immigration policies – bringing in really large numbers of non-citizens to remote places, in an age when distance seems to be at least as important as ever, perhaps more so. Because Aus has (or has been able to develop) more newly-opened up natural resources per capita than NZ, the rapid population growth does less harm there than here.

      As a reminder, real GDP per hour worked in the leading bunch (various northern European countries and the US) is more than 20 per cent higher than in – natural resource blessed – Australia. The gap (from Australia) to Norway – also natural resource blessed – is far larger.

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  5. I used to do a bit of trout fishing (unsuccessfully) before leaving NZ. I recall at the time there was a big push for “catch and release” by fish and game – I presume this is still policy. It made me wonder, given the ban on farming and imports, under what circumstances can one expect to actually dine on trout? Most of the waterways I fished in (Waikato river dams) were stocked by farmed trout in any case.

    Australia has plenty of good trout fishing in Victoria and Tasmania, at least when not in drought. And a trout farming industry as well.

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  6. Most of the waterways I fished in (Waikato river dams) were stocked by farmed trout in any case.
    ———————————

    Most of NZ waters contain wild trout. The only stocked waters are where it is not possible for trout to spawn. In Otago, where I mostly fish this concerns a few quite small irrigation dams. May this situation remain forever, there is no need to farm trout. If you want to eat it you can catch it. Try it sometime…

    By the way “catch and release” is not compulsory.

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    • The numbers or proportions of wild/stocked waterways is irrelevant. Point is, it is already undertaken in NZ, but just not for commercial sales.

      “May this situation remain forever, there is no need to farm trout.”

      That is the whole point of the post – you are begging the question… why not? The need to farm any animal is best judged by the landowner where the farming is to take place. The landowner may perceive there to be a good market for that type of product, however the landowner in NZ is blocked (by threat of state violence) from pursuing that opportunity.

      Providing that a landowner wishing to farm trout can show there are no substantial externalities to the farming activity (i.e. the ponds are isolated from other waterways) then there can be no decent argument against it.

      The DOC argument that it would make poaching difficult to detect is nonsense – it is already the case now that poaching occurs. Avocado theft also occurs but that is not a reason for banning avocado orchards and only permitting wild avocado gathering from taking place (I am aware avocados will not spread in the wild – it’s just an example). Having a legitimate market will most likely deter poaching as the cost/risk of poaching will be disproportionate when compared to purchasing the legal product.

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      • The DOC argument that it would make poaching difficult to detect is nonsense
        ——————-

        In my view, a far more important argument against commodification of trout is the possibility of introduction of various diseases. A case in point is whirling disease, which was virtually unknown in NZ salmonidae prior to introduction of commercial salmon farming. Unfortunately, it is not be possible to isolate ponds from other waterways. Waters, which are stocked by F&G at present use fish from NZ hatcheries, so there’s no problem.

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  7. Quite so Damoyo.
    We have a similar non issue with farmed salmon, mussels and oysters; regulated commercial operations (with paper trail) and an exploitable wild population. No large scale poaching problem there. Commercial fisheries the same. BTW plenty of wild, self seeded avocados here in Northland.

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  8. Michael, I think you misread the customs regulation. Clause 4(1)(a) prohibits both personal-use and commercial imports of 10kg or more; 4(1)(b) provides a personal-use exemption for less than 10kg. Taken as a whole, clause 4(1) prohibits commercial importation of any amount.

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  9. Good article Michael.

    One correction – I think the Treaty part they were referring to might be the Treaty of Waitangi.

    In terms of the RIS, yes you are right, poor quality. I thought RIS’s were where officials should try to be objective. It seems the comment about elected Ministers being the one who should make the decision is a cop out. Was there a Treasury comment to this RIS or decision by any chance?

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    • Yes, I realised it was Waitangi they were talking about, but I couldn’t (can’t) see any reasonable connection between trade (domestic or foreign) in an introduced/imported species and the ToW (except perhaps on the joint sovereignty basis asserted by a handful of Maori).

      I didn’t look further for other agency comment or even for the Cabinet paper, but yes one would have hoped this was the sort of issue where Treasury would have been at the forefront championing liberalisation.

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      • If you are putting your hands out to be paid out under the Treaty of Waitangi then basically it would all Maori Iwi involved in those taxpayer handouts subscribe to the joint sovereignty basis and not just a mere handful of Maori.

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  10. Brisbane has come along hugely in the past few years due to having some of the more progressive local governments. For example, there are a lot of very attractive medium density apartments that have been built in the inner ring suburbs, creating a structural oversupply and keeping prices in check. Doesn’t seem to be too much of a problem demolishing the old wooden houses to make way. They have also invested in some nice transport infrastructure.

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