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Foolish Labor policy on natural gas

The Labor Party propose restricting natural gas exports from Australia to ensure greater availability (and lower prices) for domestic gas supplies. This is a poorly thought through policy proposal.

The basic economics of international trade suggest we will export goods we can produce more cheaply than those produced in our export markets. Therefore, when we […]

Chinese tariffs on coal there & gone

An interesting feature of the proposed Australia China free trade agreement is that so little is at stake. Most of Australia’s exports to China and most of China’s exports to Australia are tariff free. The catch is the restriction on Chinese purchases of Australian housing and land and Chinese foreign investments generally which are subject […]

COPs work on automotive assembly

I haven’t read the report in detail – it isn’t that long but I’ve been caught up in other things – but Allen Consulting (acting for the Federal Chamber of Automobile Industries, FCAI) claim that, for $500m in government assistance, the automotive assembly industry “makes” the Australian economy $21.5b “larger”. Indeed not just “larger” but […]

Mining booms & Dutch Disease

The Corden Lecture was presented last night in Melbourne by Professor Ronald Findlay on the topic of Dutch Disease. Professor Max Corden was in fine form and gave a gracious introduction to the speaker. Findlay is one of the world’s leading trade thinkers. Although primarily a theorist he has recently written the monumental Power and […]

Craig Emerson’s free carbon quota proposals

Trade Minister Craig Emerson argues against border tax adjustments (BTAs) to protect import competing products subject to carbon charges in favour of emission quota handouts to local firms. The idea needs to be nuanced – as it stands it will not work effectively – but it is worth considering. The advantage of the free permit […]

Repost: A poor case for protecting the auto industry

I’ll repost this which I think stands as valid today as when I wrote it. Friends of mine, Peter Dixon and Maureen Rimmer have published an article in the Economic Record which again pushes the fallacious line that low levels of protection in the auto industry can be justified by the failure to impose optimal […]

Australia’s international trade – numbers that shock & awe

What’s happened to Australia’s international trade over the past 5 years? Most people know that Australia’s trade has grown strongly but I wonder how many understand the dramatic nature of the transformation that has occurred so very recently and despite the global financial crisis. Colleague RW collated figures for the year ended 2005 and for […]

Geoff Carmody’s views on externalities & trade

A letter to the AFR it declined to publish.

Geoff Carmody ( Opinion AFR, 19/11/09) argues that free international trade in emissions permits ‘reduce the selling country’s capacity for ETS-compliant economic growth’. Furthermore, “(t)hat growth capacity is added to the initial growth capacity of the countries buying the permits”. Carmody sees revenues to permit sellers […]

More on Rio, BHP-Billiton & Chinalco’s rejected love

I had thought my comments for Australia’s national interests being best served by rejecting the Rio-Chinalco deal were self-evident. My general argument was that Australia should not give up its monopoly power in the resource sector by transferring resource assets to Chinese firms with monopsony power over the […]

Transport costs, fuel prices & trade

As fuel gets more expensive the transport costs associated with international trade get larger and trade diminishes. By how much? Paul Krugman cites a study (by Nuno Limão and Anthony J. Venables) that deals with transport costs and geography as factors determining trade. It implies that a doubling of fuel costs will contract trade by […]

Exporting health services: Bumrungrad

While I lived in Thailand in the 1980s I always appreciated the possibility of cheap local dental and health care. It was easy to find well-qualified, English-speaking dentists and doctors – an incidental bonus was that the nurses who looked after you were often extremely attractive. The cost of these services was a fraction (about […]

Compensating the unemployed?

The NYT has a stern neoclassical defence of free trade (by Stephen Landsberg) with outsourcing. Landsberg is clearly discussing US-Chinese trade from the US viewpoint. The gist is that just as we should not feel morally obliged to compensate a restaurant owner when we shop for food at a cheaper McDonalds store so too the […]

Freeing up international trade with poor countries & wage inequality

Paul Krugman in today’s NYT summarises a widely-held assessment of the impact of trade with low wage countries on US growth and inequality. There is nothing radical about his claim – free trade with poor countries increases growth but increases wage inequality by driving down unskilled wages.

The same general message applies to effects on […]

E. coli conservatives

Paul Krugman blames Milton Friedman for promulgating the foolish libertarian precept that nothing should be regulated – not even the quality of the foods we eat. Why regulate food quality asked Friedman – firms will have sufficient incentives based on self-interest not to poison their customers.

That is generally a false claim – the incentives […]

No future for Australian car assembly?

Peter Martin has a good article on troubles in the Australian car industry. I’ll comment on a few points.

Australians have traditionally had a liking for large medium cars. This was the market segment where our manufacturers had a comparative advantage. We then imported small cars and exported, with for a time growing success, […]