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Mandelson rejects green tax proposal PDF Print E-mail
Written by Tom Clougherty   
Monday, 18 December 2006
As reported in today's Financial Times, Peter Mandelson, the EU Trade Commissioner, is set to reject French proposals that would impose a new "green" tax on goods from countries that have not ratified the Kyoto Protocol. The proposal, which had the enthusiastic support of French Prime Minister Dominique de Villepin, would be "highly problematic... almost impossible to implement... [and] not good politics", said Mr Mandelson.

Taxing goods from countries that have not ratified the Kyoto Protocol would amount to little more than protectionism, with all the detrimental effects that entails. As Mr Mandelson says, "Not participating in the Kyoto process is not illegal. Nor is it a subsidy under WTO rules." The French government rarely misses an opportunity to shield domestic markets from competition and their latest proposals are just another example of that.

However, there is a real danger that environmental concerns will increasingly be exploited in this way by the opponents of freer trade and further globalisation, and that well-meaning policymakers will allow themselves to be misled. Fortunately Mr Mandelson is known to favour "positive environmentalism", rather than the usual punitive approach. Positive environmentalism recognises the importance of technology, innovation and economic development - as well as practical measures by individuals - in protecting the world's environment.

To his credit, Mr Mandelson is keen that the wider international community adopt such an approach. In a letter to Pascal Lamy, director-general of the WTO, he will suggest talks on scrapping tariffs on renewable energy and clean power generation equipment worldwide. A measure such as this would speed up the development and transfer of green technology all over the world. It would do far more for the environment than restricting trade and economic growth and, unlike the French proposals, would have the GI’s whole-hearted support.
Claire Melamedís departure and the end of Christian Aidís Trade Policy Unit PDF Print E-mail
Written by Alex Singleton   
Monday, 18 December 2006

Claire MelamedThe discredited ideologue who made Christian Aid a pariah in Westminster will no longer be working at Christian Aid after the end of this week. Claire Melamed’s time as head of Christian Aid’s Trade Policy Unit (CA-TPU) was deeply controversial and the unit attracted criticism across the political spectrum. Melamed was ideologically opposed to the market economy, saying that for markets for work: “everybody has to have perfect information - everybody has to know everything about what’s going on in the market and everyone has to know the same amount about what's going on in the market.” Her preference for political planning over the market economy was most evident in her opposition to free trade and her belief that developing country politicians should pick winners.

During her tenure, Christian Aid ran a series of shrill newspaper adverts attacking free trade, even comparing free trade to slavery and tsunamis. We at the Institute led the criticism of their position - such that at the April 2005 service to mark 60 years of Christian Aid, the Archbishop of Canterbury chose to talk about our views in his sermon.

Christian Aid lost friends by the way it dealt with criticism of its line. One vicar who dared disagree with Melamed’s line was sneered at by Melamed an article in the Church of England Newspaper. Responding in a letter, the vicar commented: “Just because I believe the Church should not back Christian Aid's campaign for protectionism, Claire Melamed misrepresents me as believing that the Church should not be concerned for the poor.” When David Cameron said that CA-TPU was teaching the wrong message, Christian Aid briefed newspaper gossip columns against Cameron, and called for Cameron to get clearance for his speeches from the organisation. The Financial Times described CA-TPU’s output as a "malign influence" and "strikingly irresponsible".

It appears that Christian Aid has recognised how CA-TPU was damaging the credibility of the organisation. The department was recently rebranded as the Christian Aid Trade and Private Sector Policy Unit and has started putting out messages more favourable to the private sector. With Claire Melamed leaving, hopefully this will bring a move away from the anti-capitalist left and into the economic mainstream.

Policy Exchange Christmas Party PDF Print E-mail
Written by Alex Singleton   
Wednesday, 13 December 2006

The GI’s Tom Clougherty and I were guests on Monday night at the Policy Exchange Christmas Party at Westminster’s City Inn. David Cameron was there to deliver a five-minute speech, introduced by Charles Moore, and other guests included journalists such as John Bryant (Editor in Chief of the Telegraph), Gabriel Rozenberg (economics guru at The Times) and Andrew Neil (BBC), along with all the bright young things who run Westminster. The Guido Fawkes blog has photos.

Gordon Brown misses the point... PDF Print E-mail
Written by Tom Clougherty   
Tuesday, 12 December 2006
Irwin Stelzer, director of Economic Policy Studies at the Hudson Institute, has an excellent article in the today's Telegraph, entitled "Brown's tax and spend would have stunned the Soviet Union". Stelzer argues that "growth in the low-productivity public sector, at the expense of the higher-productivity private sector, is eroding Britain's economic performance and dooming it once again to become the sick man of Europe."

He goes on to express his surprise and disappointment that "a man of the Chancellor's intelligence" has so fundamentally misunderstood the rise of India and China, and the implications that has for Britain's economy:

First, the Chancellor diagnosed Britain's ailment as the emergence of China and India as competitive forces in the world, for which his prescription is a large dose of new taxes and a steady diet of more government... Just as China and India are unleashing the productivity and ingenuity of their billions of people by creating more space for individual effort and entrepreneurship, and other international competitors are lowering and simplifying taxes, the Chancellor has decided to move in the opposite direction.

Every increment of new wealth will go to the public sector, to be used to implement a series of long-term plans the scope of which would have been breathtaking in the Kremlin of the old Soviet Union...

Stelzer is entirely correct. In a globalised economy the rise of China and India does have serious implications for Britain and its economic future: we need to become more competitive and more productive. Yet the government’s current approach - increasing the burden on business and allowing a relentless growth of the public sector - has had precisely the opposite effect. Sadly, this is unlikely to change. As Stelzer writes, the Chancellor's "first instinct is to solve every problem with more government and a more heavily burdened private sector." Brown’s pre-budget report was characteristically upbeat about the economy, but there may be tough times ahead.
Fair trade is a fraud PDF Print E-mail
Written by Tom Clougherty   
Monday, 11 December 2006
The argument against fair trade has been made before, but few people seem to have noticed. This week’s Economist is, therefore, a welcome reminder. The front page reads: "Good Food? Why ethical shopping harms the world".

Fair trade products are intended to raise the income of poor farmers. They are sold at a higher price and a subsidy is returned to the producer. OK - farmers in the developing world do not get a good price for their coffee or cocoa beans. But this is not because they are being exploited. Agricultural prices are low because there is massive overproduction - supply far outstrips demand so the market price falls.

The price system is what makes the market work. Low prices are a signal to farmers to diversify into other crops, which are actually in demand. Fair trade, by passing subsidies onto farmers, distorts these price signals and encourages farmers to continue overproducing the same crops despite the lack of demand. This forces prices even lower and the majority of farmers are left even worse off - "thus achieving... exactly the opposite of what the initiative is intended to do."

Another objection to the Fair Trade scheme is the political assumptions it makes about the organisation of labour. In the coffee market, for example, only cooperatives of small producers can be fair trade certified - this means the scheme completely overlooks the vast majority of developing world farmers who work on plantations. It also means that inefficient farming methods are rewarded and thus encouraged to persist.

Furthermore, consumers are usually fooled into thinking that all of the enormous mark-up gets back to the producers - in truth 90% of the premium paid goes to retailers.

Fair Trade is a good marketing ploy, but that’s all it is. It does very little good, and may do a lot of harm. Concern for the world’s poor is laudable, but consumers deserve to know that fair trade is not the answer.
Cameron calls for EU reform PDF Print E-mail
Written by Tom Clougherty   
Thursday, 07 December 2006
According to Iain Dale's Diary, David Cameron will be in Brussels today attacking the EU's "culture of hopelessness" and calling for radical reforms to help the world's poorest people.

Last year the EU made helping lift Africa out of poverty a priority. But many of the EU's policies are making poverty in developing countries worse. The EU remains committed to a largely unreformed CAP, an economic and humanitarian disaster which pushes up food prices for the poorest people in Europe and helps lock the developing world in poverty. And the EU still has higher trade barriers against poor countries than it does against rich. That's not good enough and it needs to change.

Aid helps the rich at the expense of the poor PDF Print E-mail
Written by Tom Clougherty   
Thursday, 07 December 2006
Aidan Hartley, who was born in Nairobi and has been a journalist in Kenya for the past twenty years, had a very interesting piece on the Guardian website this week. Although he "believes in charity" and has seen "lots of projects that have done a lot of good", he is very sceptical of foreign aid: "there are dozens of ghastly failures, usually involving millions of pounds of finance."

Almost everyone I have spoken to recently in Africa feels aid has failed because it enriches the big men at the cost of ordinary people. Foreign aid atrophies, and weakens the state in Africa, and the only people who grow stronger are the donors: governments and NGOs. It damages the prospects for ordinary people to better their lives, and turns ordinary Africans into victims.

Africans are hard-working people who like to have an enterprise culture. They are natural capitalists and do not need to be patronised by NGOs, who often have left-wing agendas. They need a hand up, not a handout...

We have reached a point where foreign aid has done more harm than good, and it should either be stopped or completely reformed.

Hartley is also a fan of microfinance, and echoes the GI’s call for DFID to take more interest in it: "microfinance is a good way to help people... if [DFID] has a microfinance programme, I don’t know about it."

Foreign aid is increasing and will continue to do so - both the British Government and the Conservative opposition are committed to giving 0.7% GDP in aid by 2013. But it is absolutely vital that we stop thinking about international development purelt in terms of inputs and start to measure success by results. The fact that something cost a lot certainly does not mean it’s any good. On the other hand, successful market-based approaches need not be very costly - microfinance, for instance, is capable of becoming a truly self-sustaining industry.

We also need to learn from India and China. Even at its best aid will never be a substitute for integrating the world’s poor into the global economy. That is the goal the development community should really be aiming for.
Chirac TV goes live PDF Print E-mail
Written by Tom Clougherty   
Wednesday, 06 December 2006
Four years ago French President Jacques Chirac said that France needed more weight in the "battle of images and airwaves" in order to fight "Anglo-Saxon" cultural imperialism - in the Presidential election of 2002 he made it a campaign pledge. After years of political wrangling and public scepticism France Vingt-Quatre will finally begin broadcasting tonight.

The broadcast will be on two channels simultaneously - one in French, the other in English. The goal of France 24 is to report international news from a French perspective, as well as reflecting the French way of life with at least 20% of programming focused on culture and lifestyle. France 24 follows plans unveiled earlier this year for a Franco-German search engine to compete with Google, which would be called "Quero".

Now, there's nothing wrong with competition in the international news media, but you have to wonder about using the taxpayer's money to fund a vanity project like this. France 24 will get its annual funding of €80 million from the central government and although the channel’s producers insist the channel will be politically independent, there is little to suggest this will actually be the case. Whereas the BBC is funded directly by the licence-payer, which ensures at least a degree of independence, France 24's neutrality will be maintained only by its willingness to say no when its political paymasters call. Station managers are not likely to bite the hand that feeds them.

If there were really demand for a French CNN then the market would provide it. If enough people actually wanted to hear their news à la française then the private sector would supply it. In any case, the very idea of Anglo-Saxon cultural imperialism is fundamentally misguided. It assumes that people are forced to watch American media, whereas in fact they freely choose to. Furthermore, the concept of cultural hegemony is woefully outdated in the age of the internet. Cultural variety and choice has never been greater than it is today, and that has nothing to do with Jacques Chirac.
It takes more than a single MP3 to embrace the DRM-free world PDF Print E-mail
Written by Mike Masnick   
Wednesday, 06 December 2006
Copy protectionThe Wall Street Journal is excitedly claiming that the recording industry, in a "turnabout," is now releasing unrestricted MP3s. From the headline, that sounds exciting, and would be really impressive if it were true that the industry was finally recognising how much damage copy protection has done to their market over the years. It's given Apple tremendous power over the labels by putting them in the power seat, while shrinking the labels' overall market by limiting who could actually make use of the files and what they could do with them. So, plenty of people have been pushing for the big labels to recognize the value of moving to unrestricted MP3s - and the success of both E-Music and Allofmp3 (no matter how legal or illegal it may be) in getting people to buy unrestricted files should show that there's a market for them.

So, what's the evidence that these record labels have turned around their thinking? Apparently, it's the fact that one label has decided to release one song as an unrestricted MP3. It's not at all clear how that's a turnaround, or even a trend worth WSJ treatment. After all, it's not even new. Yahoo has already done a few tests with different labels and unrestricted songs - and this is more of the same. While it's good to see some very, very tiny experiments, that's hardly a turnaround and it's hardly a recognition of the problems caused by copy protection. It's just a weak admission that these labels still don't know what they're doing so many years after it's become clear to plenty of other people that this is the direction they have to go in.

Crossposted from TechDirt.
European Commission pushes for free trade PDF Print E-mail
Written by Tom Clougherty   
Monday, 04 December 2006
On Wednesday this week EU Trade Commissioner Peter Mandelson will ask the Council (a meeting of the EU member states' foreign ministers) for mandates to pursue free trade agreements with several Asian countries. The council will pronounce on the mandates at their meeting on 11th December. If they give their approval negotiations could begin in the first half of 2007.

The commission has set its sights on free trade treaties with India, South Korea and ASEAN (a ten-nation grouping which includes Thailand, Singapore and Vietnam), as part of the EU's new trade strategy which sets business competitiveness as the main objective of trade policy. This means the Commission is keen to conclude free trade agreements with "high market potential countries" like the emerging economies of the East.

The Doha round of trade talks are still, officially, the EU's number-one trade priority, but the Commission’s new strategy is a clear break with their previous multilateral focus. Trade officials also hope that bilateral FTAs will allow them to go much further than would have been possible under WTO negotiations, tackling issues like investment, competition and public procurement, which were dropped from the Doha agenda in 2003.

The proposed free trade agreements, if successfully concluded, would be very good news for the EU. Europe cannot afford to be isolated from the global economy, and European politicians need to embrace international competition rather trying to ignore it. The Commission seems to have the right instincts on trade, but their actions do not always live up to their words. The EU is too often constrained by the protectionist mindset of many of its member states. Let’s hope this time will be different.
Green light for GM potatoes PDF Print E-mail
Written by Tom Clougherty   
Friday, 01 December 2006
The British government has approved a plan to grow genetically modified potatoes on two trial sites, in Cambridgeshire and Derbyshire. The crops have been modified to make them resistant to blight, a disease that costs growers £70 million each year. DEFRA's decision was met with the usual howls of disapproval from the green lobby - the Soil Association called it "stupid". Never mind that this trial will only involve planting two hectares of the crop, and that nothing produced will ever be eaten. According to Chris Wilson, BASF corporate communications manager, "the potatoes grown will be tested under carefully controlled conditions and then destroyed."

Anyway, I welcome the decision. Genetically modified crops are good news for two reasons. Firstly, they reduce the need for fertilisers and pesticides, making farming a more environmentally sensitive business. Secondly, and most importantly, genetically modified crops are vital to the fight against extreme poverty and hunger in the developing world. They have the ability to make a real difference to the lives of the world's poorest people by increasing farm yields, reducing the threat of adverse weather and crop disease, and boosting agricultural incomes. And it is worth noting that GM food has enjoyed nine years of trouble-free consumption in the US.

In the light of these benefits, it is disappointing that European countries continue to be so strongly opposed to genetically modified organisms (GMOs), despite a distinct lack of scientific evidence indicating the danger they are said to pose. The EU recently lifted its outright ban on GM foods, having come under increasing international pressure to do so. The WTO ruled that the ban constituted an illegal barrier to trade and was tantamount to protectionism. (Agricultural protectionism in the EU? Surely not…)

Although the blanket ban has been lifted, individual member states may still prohibit genetically modified organisms. Furthermore, European regulation of GMOs remains extremely strict. All new varieties must be approved by the EU regulators, acting in accordance with the precautionary principle. This essentially means that producers must prove their GMO will not harm the environment or human health. It is, of course, very difficult to prove a negative, so few GMOs have made the grade.

Even when GMOs are approved, foods produced from them are subject to very strict labelling and traceability requirements: all foods with a GM content of more than 0.9% must be labelled: "This product is produced from GMOs". The legislation also applies to animal feed and products derived from a GM ingredient whose presence is undetectable. As you would expect, these tough labelling and traceability rules constitute a massive restriction on the GM trade in Europe.

Yet the impact of these regulations has been felt far beyond the borders of the EU. In 2002 more than two million Zambians, a quarter of the population, were dangerously close to starving. The US responded by sending a huge shipment of corn and soybeans, some of which had been genetically modified. Zambia's president, Levy Mwanawasa, rejected the food aid, saying it was "poison". Genetically modified crops could bring immeasurable benefits to Africa. But African governments will never accept them so long as the EU persists with its luddite policies - Africa cannot afford to sacrifice it's largest agricultural export market.

DEFRA’s decision to allow GM testing is a sensible one, but Europe must go much further in accepting genetically modified organisms. For too long the debate has been led by the environmental and agricultural lobbies, with little regard for science. That needs to change.
The wrong approach PDF Print E-mail
Written by Alex Singleton   
Friday, 01 December 2006

DrugsA new report jointly published by the Centre for the New Europe, the Stockholm Network and the Center for Medicines in the Public Interest calls for huge increases in the power of the European Union and for the adoption of the precautionary principle to fight counterfeit medicines:

Why are European governments ineffective in fighting organised international crime?... The reason for their failure is nationalism, and their lack of trust of other Europeans. Each national government and parliament thinks it knows best. Each is reluctant to share information with others for the greater European good.

The solution, they say, is an EU cross-border police force with arrest powers:

Europe needs to create its own cross-border law enforcement agency with operational powers. The USA has its FBI. Europe has nothing. The gutter press would complain that ‘foreigners in jackboots are now arresting our citizens at dead of night. Didn’t we fight the Second World War to prevent this?’ Instead of being afraid of such criticism, Europe’s national leaders should look forward and provide leadership in solving our new problems, such as organised crime.

There needs to be a greater EU-level regulation, too, apparently:

In Europe, given that counterfeit medicines and pharmaceutical crime are a cross-border problem and that largescale lack of coordination is probably the most fundamental problem hindering effective counteraction, there is strong justification for the adoption of a Europe-level binding instrument that provides the legislative framework to effectively tackle medicines counterfeiting. Whether or not there should be a specific piece of counterfeit medicines/pharmaceutical crime legislation (or sub-law) very much depends on the analysis of a detailed codification of potentially applicable legislation in the European states, which should identify areas of legislative gaps and lack of coordination. It is worth stating that some countries (not in Europe) have implemented counterfeit-medicine specific legislation (e.g. Republic of the Philippines, 2003). An advantage of such an approach is that it rightly serves to differentiate medicines counterfeiting and health crime from other forms of counterfeiting that do not result in the same degree of risk to health.

They want the EU to adopt an "agenda for action":

The EU needs to define a collective response to address current deficiencies and move forward with a coherent policy, and a legislative response to counterfeit medicines. This agenda will require action by the Council on the inter-governmental priorities, by the European Commission for specific EU priorities, and by the European Parliament on behalf of European citizens.

The report admits that they have no idea how much counterfeiting exists:

The absence of comprehensive and reliable data on the prevalence of counterfeit drugs also means that regulators, rightly from their perspective, can say there really is no major problem.

But, of course, the precautionary principle must apply:

What is certain, though, is that one death from medicines counterfeiting in Europe is one death too many, and that policy-makers and authorities should do everything in their power to prevent this possibility.

This report is a disappointing look at counterfeiting. Firstly, it fails to deliver evidence to back up its claims - the report uses phrases like "evidence exists" without explaining what evidence this is or giving a footnote. Secondly, the assumption that the EU is the solution is not one that I think everyone would share. Thirdly, the report will be used by those who oppose free trade in pharmaceuticals in Europe to create an EU regulatary system that can counteract the current EU belief that free trade must be supported. The report describes free trade as "parasitic" and people who legitimately buy from one country and sell in another are called "parallel profiteers". The report says that "one of the most serious impediments to an allied transatlantic war against prescription drug counterfeiters is parallel trade."

Privatisation works PDF Print E-mail
Written by Wilfredo Contreras   
Friday, 01 December 2006
An article in yesterday's Business section of the Times titled "Thatcher's legacy of cheap telecoms" presents an interesting review of the privatisation of telecommunication services in the UK. Mr. Searjeant explains that the original drive to privatise the BT predecessor was merely to "balance the books in the 1980's." The improved service and eventual sustainability of the industry was an unforeseen boon of the sale, icing on the cake if you will.

The telecom monopoly in the UK consolidated in 1912, when the General Post Office (GPO) became the sole supplier. In 1969, with the Post Office Act, the GPO became a public corporation, as opposed to a government department. This was the first sign of privatisation, which would later take place in 1984 with the Telecommunications Act. According to the BT History web-page, "[t]he new legislation [enabled] British Telecom to become more responsive to competition in the UK and to expand its operations globally."

The government, however, passed the Act within a framework that promoted competition: two years before the privatisation was complete, the government granted Cable & Wireless a licence to run its own network. The strategy was a phased privatisation, so that BT wouldn't pass from a public monopoly to a private one, allowing competition to enter the market and flourish. In the end, "[t]he new, more open and fairer policy, enabled customers to acquire telecommunications services from competing providers using a variety of technologies."

Recently, Ofcom's report, "The International Communications Market," found that the UK has among the lowest costs to consumers for communication services when compared to France, Germany, Italy and the US. Paying under £200 per month (PPP-adjusted), UK residents pay around £50 less per month when compared to German and US residents, though the difference is less marked when compared to the residents of other countries.

Twenty years after the fact, we have the benefit of hindsight to gauge for ourselves the advantages and success of privatisation: and if the advantages are apparent, why has privatisation stopped?
"An economy of the future" PDF Print E-mail
Written by Tom Clougherty   
Thursday, 30 November 2006
At Yale University on Wednesday night, Israeli Vice Premier and Nobel Peace Laureate Shimon Peres received a standing ovation after giving an address on globalisation and the prospects for peace in the Middle East. He told the audience that globalisation and increasing economic interdependence would bring about a new era of diplomacy: "we live in a world of global relations... Globality is becoming more and more the life and style of your generation."

Peres noted how industry has successfully transcended national borders and praised China and India as models for developing nations. In particular he commended their commitment to science and technology, saying: "Adopting an economy of the future has changed their lot and the lot of their people. The South is no longer the home of poverty, but the home of dynamic growth." Peres hoped that globalisation would have the same effect in the Middle East.

The Middle East situation poses problems with no easy answers, but Peres is definitely on to something. The Globalisation Institute has repeatedly highlighted the connection between freer trade and more peaceful diplomatic relations. Globalisation leads to economic interdependence and creates an international order where the cost of war becomes much greater. Free trade does not guarantee peace, but it certainly helps.
The insidious parasite of protectionism PDF Print E-mail
Written by Tom Clougherty   
Thursday, 30 November 2006
At their annual conference earlier this week the CBI's president, Sir John Sutherland, forecast that India and China would become the economic powerhouses of the world and, in particular, attacked the protectionist instinct of Paris and Washington:

It seems clear to me that protectionism is an insidious parasite in the so-called free trade eco-systems of many developed countries.

Sir John also highlighted the absurdity of France "proclaiming a yoghurt manufacturer - Danone - to be a national champion of strategic importance". On the rise of trade obstructionism in the US, he said: "As one quarter of the entire economy of the US is related to trade, let’s hope they find it difficult to convert this instinct for protectionism into law."

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