Really worth protecting!

Today, dear readers, we go back to the House of Lords where another of this blog's favourite people, Lord Stoddart of Swindon asked a question:

To ask Her Majesty’s Government what was the total trade deficit or surplus with the European Union in goods and services between 2010 and 2013; and what is their estimate of any deficit in 2014 to date.

There are certain advantages to asking purely factual questions that cannot be twisted too much. Even Lord Livingstone's official had to come up with some figures:

UK’s trade deficit with the European Union was £28.5bn in 2010, £21.7bn in 2011, £39.5bn in 2012 and £56.2bn in 2013. Currently, UK trade balance figures cover the period up to the second quarter of 2014. In the first half of 2014, UK’s trade deficit with the European Union was £25.5bn.

Remember those figures next time some idiot or europhiliac (but I repeat myself) tells you how vital and important Britain's membership of the EU is to its trade with the rest of the EU.

What a difference a day makes

Alas no, I am not writing about the opinion polls on the Scottish referendum, which have been yo-yoing quite alarmingly, thus giving the opportunity every two-bit politician, activist and media hack to pontificate. No, this is about another messy situation that may not be more important in the long run (who can predict such things?) but is of greater immediate interest and worry to all except the dedicated appeasers of Russia, of whom there are too many both on the left and the right. For a while it looked like the trade agreement between the EU and Ukraine, which intensified Russia's efforts to destabilize Ukraine, will, after all, come into existence. (With all its faults it was never going to be a substitute for close relations between Russia and Ukraine as that would have been impossible. Russian actions in grabbing Crimea and fighting a war in eastern Ukraine have ensured Ukrainian hatred for the idea of a close Russian agreement. Given President Putin's preference for the sledgehammer as a method of diplomacy there seems to be no solution to the mess that has been thus created.) On September 12 it was announced that

Ukraine leader Petro Porosenko has said the European Parliament and the Ukrainian assembly, the Verkhovna Rada, will on 16 September jointly ratify the EU-Ukraine free trade pact. Ukraine's foreign minister Pavlo Klimkin will also meet with EU and Russian delegates in Brussels on Friday to discuss implementation of the treaty.

Come September 13 (that, is today) and the story has changed somewhat.

Ukraine and the EU are to delay the entry into life of a landmark free trade treaty for more than one year due to Russian concerns.

The trade pact was originally to enter into force on 1 November.

But following meetings between European Commission trade chief Karl De Gucht, Ukraine’s foreign minister, and Russia’s economy minister in Brussels on Friday (12 September) it will now be implemented on 31 December 2015.

Defending the deal, De Gucht told press it means Russia will not impose trade restrictions on Ukraine in the next 15 months.

One does not have to read between the lines or indulge in the arcane pseudo-science of Kremlinology (how that word takes me back to my youth!) to understand what happened: they all met on Friday (that's yesterday) and the Russians once again threatened to impose trade sanctions on Ukraine that would undermine its fragile economy just as its .... ahem .... aid convoys to eastern Ukraine are anxious to destroy its fragile political structure. Upon which, the EU capitulated. This will, no doubt, be greeted with joy among the appeasers in the various eurosceptic circles.

Judging by the EUObserver summary there seems to be some confusion around the EU decision with, quite possibly, a break-down in communication between the various offices that are supposedly negotiating and making decisions, such as they are.

Meanwhile, a spokesman for the Kremlin (where are those Kremlinologists when one needs them?) has announced [in Russian but Mr Google will translate] that although there has been a big price rise in Russia on basic foodstuffs this had nothing to do with the counter-sanctions against Western imports. These price rises were happening, anyway, said Andrey Belousov, one of President Putin's assistants. He also explained that the sanctions imposed on Western imports were not really counter-sanctions, anyway, but were motivated by concern for the Russian consumers' health and, sometimes, for Russian products, though it is not quite clear which of the sanctions were motivated by which concerns. At least, neither he nor the others in President Putin's staff will go short of wine, no matter what sanctions or counter-sanctions Russia might decide to impose.

You mean one can trade with the EU?

Well, well. Who would have believed it. Apparently, it is not absolutely essential to be part of the EU in order to trade with it or its member states. Nor is it absolutely essential to take on every bit of legislation and regulation the EU issues (and there are many bits) in order to do that trading.

Oh surely not, I hear you cry. That is just a myth propagated by eurosceptics who live in cloud-cuckoo land or fantasy land or whatever the latest description of what it is eurosceptics inhabit is. Actually, no. It comes from the government.

Lord Stoddart of Swindon put down the following Written Question:

To ask Her Majesty's Government, further to the Written Statement by Lord Green of Hurstpierpoint on 6 December (WS 76-7) on the European Union Foreign Affairs Council, whether the outcome of the negotiations with Japan, Canada, Singapore and Morocco will require those countries to adopt all the legislation and regulations that apply to countries in the single market.

The Statement had enumerated all the countries the EU had signed or was about to sign or hoped to sign free trade agreements.

HMG in the shape of Lord Green of Hurstpierpoint (more here) replied:

It is not the case that as a result of these trade negotiations the countries concerned will have to adopt all the legislation and regulations that apply to EU member states.

The aim of these negotiations is to eliminate, as far as possible, duties applied to trade in goods and to address non-tariff barriers that affect trade in goods in services-ie rules, regulations and practices that affect market access. Non-tariff barriers can be overcome through a variety of methods. These include the adoption of international rules, mutual recognition of approaches to testing, standards, et cetera, and commitments to end discriminatory practices.

I wonder how jobs in those countries will be affected by greater trade with the EU.

Sometimes europhiliacs are incomprehensible

Mostly one can understand why europhiliacs like Lord Taverne ask questions but there are times when their thought processes are incomprehensible. Why did he put down this Written Question:

To ask Her Majesty's Government what are the current trade agreements between the European Union and non-European Union countries.

What was going on in his mind? What did he hope to achieve? The answer is that there are quite a few trade agreements between the European Union and non-European countries.

At present, the European Union (EU) has bilateral and regional trade agreements with the following countries:

free trade agreements (FTA) with Chile, South Africa, Mexico, and South Korea;as part of the wider European Economic Area, FTAs with Norway, Iceland, Liechtenstein, and Switzerland; andnegotiations with Central America (El Salvador, Costa Rica, Guatemala, Nicaragua, Honduras and Panama), Andean Nations (comprising Peru and Columbia), and Ukraine have been concluded, and will be ratified in due course. Negotiations are ongoing with other countries or groups of countries, namely: Canada; India; Mercosur (Argentina, Brazil, Venezuela, Uruguay and Paraguay); Singapore; Malaysia; Vietnam; Moldova; Georgia; Armenia; and the Gulf Co-operation Council.

Furthermore, the Government are supportive of negotiations starting in 2013 with Japan, the USA, Morocco and Thailand.

And that is not all:

In addition, as a member of the World Trade Organisation (WTO), a multilateral trading system for the 157 member countries, the EU is party to both the general agreement on tariffs and trade (GATTS) and general agreement on trade in services (GATS). The EU also has various other trade agreements with other countries or groups of countries: association agreements (AAs), economic partnership agreements (EPAs), stabilisation and association agreements (SAAs), partnership & co-operation agreements (PCAs) and memberships of the Customs Union.

It would appear that trade with the European Union and its member states does not depend on being members of the European Union. Is that what Lord Taverne wanted to know?

Another trade war with Canada?

The Wall Street Journal reports

The European Union's executive body will propose that oil extracted from sands should be treated as dirtier than conventional oil, a move that will inflame a spat with Canada, a major producer of oil from sands, an EU official familiar with the matter said Tuesday.

The European Commission, which has executive powers within the EU, agreed Monday to set a higher value for carbon-dioxide emissions from tar sands compared with crude oil extracted from conventional wells, the official told The Wall Street Journal.

This would discourage the use of oil from sands in Europe, where companies have an obligation to cut their CO2 emissions by 2020. To do so they will have to use the cleanest fuels.

Monday's decision is likely to deepen the EU's dispute with Canada, which is negotiating a free trade agreement with the bloc and says such a provision discriminates against one of its key exports.

Is this a random decision to ensure that European countries use oil from the Middle East in preference to oil from Canada? Just asking. Glenn Reynolds asks even more bluntly: "I wonder which Arabs bribed which officials?"

From that conference in Manchester

This is the last week of political grandstanding, known as the party political conferences. We just have to get through it.

I am quite pleased, as readers will know that the Boy-King has again said that there will be no in/out referendum on EU membership. There is no question in my mind that we would lose. Whenever any eurosceptic tells me with great pomposity or sincerity (take your pick) that we are bound to win I suggest one or two questions that are bound to come up in the campaign and ask him or her how he or she will reply.

For instance: exactly how do we effect that exit? What are we to do with all the deals that now go under the EU's umbrella but will no longer exist once we are out? I am not talking just about trade deals, which will have to be re-negotiated but about other matters, such as student exchange. Whenever I raise that one people look horrified, not having realized just how much of our life is now governed by the EU.

These are not insuperable barriers - everything can be renegotiated in a different framework and, probably, more advantageously to us but until we understand and have a plan how we proceed, we shall lose any referendum.

This morning I was once again told by e-mail from Bill Cash's office (no link to the text but it is not private communication):

In the most recent YouGov poll, almost half of the British public would vote for Britain to leave the European Union if there were a referendum on British membership. In fact, 47% would want Britain to leave the EU compared to 33% who say they would vote for Britain to retain its membership. This means the British people do want to see a real change.

Do these people really think that 47 per cent for withdrawal so long before the other side has even bothered to campaign is of any significance? That figure is not high enough and will become even lower as the arguments so few of us can actually answer will pour forth from well-funded sources.

In case, somebody wants a few arguments about the extent of our trade with other EU countries (which can and will be renegotiated if we ever get to leave), here are some. Interesting figures that show, unsurprisingly, our famous trade agreements to be not in our interest; and the refusal to tell the truth how much of that trade is actually with other countries but goes through Antwerp and Rotterdam.

Trade and the Rotterdam effect

The Written Answer to Lord Pearson's question

To ask Her Majesty's Government when they expect the United Kingdom Balance of Payments for 2010 to be published; and whether it will reflect exports and imports of goods and services which pass through Rotterdam and Antwerp.

admitted that there was an error in the original reply. So, we shall ignore that. Let us turn to the corrected response, which consists of a Letter from Stephen Penneck, Director General for ONS.

There is some useful information as to where various figures about imports and exports may be found, together with this explanation:

For UK imports originating from the EU, the "country of dispatch" is recorded on the Intrastat survey form as the country in the EU from which the goods were originally sent to the UK. For UK exports, the "country of destination" is recorded on the Intrastat survey form as the final EU country the goods are destined for, even if the goods travel through other EU countries on the way.

But what, I hear people ask, about the "Rotterdam Effect", which should really be called "Rotterdam and Antwerp Effect"?

Glad you ask that.

All Trade passing through Rotterdam and Antwerp is included in the United Kingdom Balance of Payments data and will be shown against the Netherlands and Belgium, respectively, where they are the originating country of dispatch (for UK imports) and/or the country of ultimate destination (for UK exports).

Complications can occur in EU trade when dealing with the "Rotterdam Effect". Some goods might be declared at an earlier than (final) country of dispatch and/or destination. Principally, the "Rotterdam Effect" causes imports and exports to be attributed to the country of transit as opposed to the "real" partner country.

Or, in other words, we are given erroneous figures about trade with at least two other member states of the EU and the Single Market because the the imports and exports are attributed "to the country of transit as opposed to the "real" partner country". (Why real should be in quotation marks in the reply is a little mysterious. The country that buys goods from us or sells us goods is the real trading partner without any quotation marks.)

The most recent analysis and data on the impact of the Rotterdam and Antwerp Effect was published in 2005. Is it not time to publish a more up-to-date version?

Fair trade or free trade

As Fair Trade fortnight kicks off and we are subjected to yet more emotional blackmail advertising on the subject, Philip Booth sounds a useful warning in the Daily Telegraph. He does not dismiss Fair Trade completely but points out the many problems with it and the very limited effect it has on poverty, adding that only free trade will help producers in developing countries. Hear, hear.

Incidentally, when those "fair" prices are set, who decides whether they are fair?

We need the trade so badly that we can give up everything else

Once the argument about peace in our time in Europe for the last fifty or however many years being all the achievement of the EU has been demolished, which takes about 30 seconds, we are left with jobs that will be lost if we are out of the EU and the trade, which is so important that we can and should give up our parliamentary democracy, common law, right to legislate and to defence to preserve it.

Quite apart from the fact that we are unlikely to lose the trade if we are out of the EU there is the question of what is it worth to us.

Lord Stoddart put down a written question:

To ask Her Majesty's Government what are the accumulated deficits or surpluses in the United Kingdom's trade with the other European Union countries between 2000 and 2009 in (a) manufactured goods, (b) services, and (c) goods and services.

The answer came via the Minister from the Director of the Office of National Statistics.

The cumulative trade deficit for total goods with the European Union member states over the period 2000 to 2009 was £283.4 billion. Within this, the cumulative trade deficit for total manufactured goods with the European Union member states over the period 2000 to 2009 was £279.7 billion.

The cumulative trade surplus for services with the European Union member states over the period 2000 to 2009 was £23.2 billion.

One cannot help wondering whether some other arrangement for trade might not be more beneficial to the country.

We need better stories

This lunchtime I went to hear Dan Ikenson of Cato Institute. Sadly, it was not in Washington DC (though, actually, I find that city rather tiring) but in London, the Adam Smith Institute, to be precise. His talk and the subsequent discussion was on the merits of free trade, the demerits of protectionism in a world of rapid transport and long production chains and the need for policy makers to understand these simple facts.

Among other points he mentioned that "we need better stories". In other words we, on our side of the political spectrum, must learn to produce good sound-bites and heart-rending stories. This can seem a problem only to economists and that is, of course, what has happened to much of the right - it has been captured by economists, who produce wonderful theories and spectacular graphs but find it hard to cope with the human side of the issues.

Mr Ikenson told of how his well-prepared presentations would be trumped by somebody referring to a clothes factory in, say, North Carolina being closed and what about the workers there. To which one should reply, said Mr Ikenson, well, what about the single mother with two children who cannot easily get a good job (or a full-time job at all) and who would have to pay far higher proportion of her income for her children's clothes if there were no cheap imports.

One could develop that story: people can get out of poverty by education and training. If that single mother with two children spends less on clothes and shoes for her children, she can spend more money on educational and training matters, such as books, visits to exhibitions, adult education classes and so on.

Let's have more and better stories. We need to collect them.

Same rules apply to the production of drugs as to any other

Two excellent articles on AfricanLiberty.org deal with the problem of drug production, the difficulties countries that need those drugs face and the prevalence of fake drugs in African and some South-East Asian countries. The conclusion is that, pace the activists and transnational regulators, lawyers and politicians, the same rules of economic development apply to the production and distribution of drugs as to any other produce. Sentimental ignorance kills many thousands of people unnecessarily every year.

In "Drug-induced dreams" Franklin Cudjoe, Director of Imani, looks at the insistent demands that African countries should produce drugs locally. He does not think it is the answer or not the whole answer:

Local production of medicines is not a bad thing in itself: there are many excellent African companies producing high quality medicines. The problems start when politicians intervene by pouring public money into new factories and into propping up businesses which would otherwise go bust. Quality is usually the
first victim.

He discusses the various reasons why African countries cannot manufacture all their own medicines at the moment and points out that harmful effect government legislation and high tariffs have had on the industry and on health care in many countries. These are introduced by governments whose members then travel round the world demanding subsidized local drug production.

Subsidised drug production is not only risky but is rarely cheaper than importing. A study by the US National Academies of Science showed that producing antimalarial drugs from start to finish in Nigeria would cost 15% more than simply importing them directly. The German aid agency GTZ says drugs produced locally in Ghana are often more expensive than imports from India,China, or Europe.

Such insights are not surprising: with globalisation demonstrating all the time that the production of certain goods is more suited to certain areas. This is why the Swedish don’t bother to grow grapefruit but do produce cars.

So why does this political support for state-financed local production continue? It is economically illiterate and endangers the health of Africans but it appeals greatly to activists and to vested political and business interests.

Any government that does really care about the health of its people must first drop the tariffs and taxes that hamper local production and that deter imports: unlike some doomed Five-Year Plan, it's an immediate boost to all patients, especially the poor.

And there you have it. An economically illiterate and dangerous policy that, quite literally, kills people is promoted by vested interests. All too often those business interests happen to be government political interests as well.

The other article is about counterfeit drugs, a terrible and dangerous blight in many poor countries, and often the outcome of inappropriate transnational campaigns. There is a link to a new report, produced by the International Policy Network, called "Keeping it Real".

It starts with a horrific statistic: counterfeit drugs kill over 700,000 people every year. Remember those scenes in "The Third Man" when the writer Holly Martin is shown what damage resulted from the counterfeit penicillin that his friend, Harry Lime, helped to distibute? Well, multiply that by many thousands every year.

The most fundamental cause of the spread of fake drugs in less developed countries has been the inability of manufacturers to protect the identity of their products. This is largely down to a lack of functioning rule of law, which makes it very difficult for manufacturers to protect their trademarks and brands – thereby handing a free rein to counterfeiters. In this context, the stiffer criminal penalties called for by WHO and other bodies may actually entrench the corrupt symbiotic relationship between counterfeiters, lawmakers and officials.

The suggestions the paper makes sound good but who exactly is going to put them into effect is unclear:

1. Strengthening local institutions, in particular the rule of law
2. Governments intervening less in the pharmaceutical market
3. Better use of technologies for identity preservation

Substitute almost any word for pharmaceutical and you would solve many of the problems of developing countries. Instead we keep giving aid, that keeps governments who benefit from there not being a rule of law, in power.