Tuesday, 17 January 2017

TRUMP AND TRADE

Trump’s isolationist policies could make America a broken banana republic

Donald Trump’s politically na├»ve blue-collar voters stand to be the biggest losers if the new president makes good on his promise to pull the US out of the Trans Pacific Partnership (TPP) and other free trade agreements.

From a political standpoint, Trump may have read the mood correctly. There is always votes to be gained by telling voters what they want to hear, a Trump trait that extends to other policies too. For Trump, getting the votes was more important than being able to deliver on the promises. Getting the votes, by any means, was more important than the damage America would suffer if he did keep his promises.
International trade has been bringing prosperity to
increasing numbers for thousands of years

To understand how leaving the TPP will damage America, and the Trump Administration, one needs to understand the history of trade and economics, as well as the history of the Trans Pacific Partnership itself.

As long ago as the Palaeolithic Era (500,000-10,000 years ago,) people were discovering the importance of trading with neighbouring bands, or communities, by offering tools, food, skins and other commodities in exchange for the things they lacked. The world population at that time has been variously estimated at between 1 and 15 million people, although 3 to 6 million is generally regarded as a more accurate figure. It was at the end of the last great ice age when average temperatures were several degrees colder than now, and food was in short supply. Some had food and some did not, so they traded what they had for what they needed, and more people survived. It has been estimated that from the Palaeolithic Era prior to the Industrial Revolution, the average world GDP (Adjusted to 2016 US dollar value) was about $160 per year.

From the ancient bands developed the city states and later the nation states, defined areas with borders and government structures, usually kingdoms, where the ruler needed revenue. The best source of revenue was customs duty and tribute or bribery. Wars were frequent with rulers invading neighbouring territory to acquire what they wanted.
Opponents of free trade are often more gifted
with slogans than with logical argument 

We like to think of Europe as an early leader in economic wealth, trade, discovery and enlightenment, but before Columbus sailed off to the Americas in 1492, Europe was a struggling backwater. The powerhouse economies were in India and China and between them they accounted for 50% of the world’s trade and economic activity. Both countries operated extensive trade routes connecting the Far East with Eastern Europe, known collectively as the Silk Road. Both countries operated large fleets of sailing ships that plied the routes of the Indian and Pacific oceans, and the archipelagos of the East Indies, at least 1,700 years before the famous European explorers came on the scene.

Another myth that should be dispelled is that Marco Polo discovered the Silk Road and opened the world’s first major trade route. Polo was simply the first to have his travels recorded, as told to a fellow prisoner while he was locked away.

The Industrial Revolution (1760-1840) was made possible, not so much by the inventors of the machines, but the trade conditions that existed at the time. Industrialised production, and later mass production, would have failed without mass markets.
While most of the developed world is embracing free trade,
Trump is saying, "Stop the world. America wants to get off."

Throughout history, trade has always been controversial. The local producers always want to protect their market from cheap imports, while the consumers want choice, and governments want revenue. But history also shows that trade barriers, in whatever form, stifle economic growth, prosperity and employment. Trade unions and socialists have generally been opposed to easing restrictions on trade because they see free trade as something that will destroy local jobs and make the rich richer. But in a classic case, British Prime Minister Sir Robert Peel, leader of the Conservative Party, used the support of the left-leaning Whigs to repeal the infamous Corn Laws during the Irish famine of 1845-1852. The repeal permitted grain to be imported at a price people could afford to pay.

More was to come in the United Kingdom. In 1859, John Bright, a tireless campaigner for free trade, asked in Parliament why, instead of spending money to prevent a French invasion, did the government not try to convince the French to enter a free trade agreement. The outcome was the Cobden-Chevalier Treaty which reduced tariffs substantially and increased the flow of goods between the two countries by 100%. The treaty quickly sparked other European trade agreements with corresponding increases in trade and jobs.

After World War Two, the 1946 Bretton Woods Agreement, an attempt to stop trade barriers being erected, was signed because many people believed that trade protection was a principal cause of war. Twelve years later, in 1958, the European Economic Community came into being with six member countries and grew rapidly to become the European Union with 28 countries sharing the benefits of free trade.
HIGHWAY AMERICA

In the United States, free trade has also been controversial, but historically has been proved to be a success. Right from the outset when the 13 original states formed the Union, trade between each of them and other nations was a driving force. As more territories joined the Union, trade expanded. By the time the 49th and 50th states joined in the 1950s, the USA was already the world’s largest free trade block with the world’s highest standard of living.
In the decades that followed, the United States has effectively pushed out its trade borders even further. It has free trade agreements with a host of countries including Australia, Canada, Chile, Bahrain, Israel, Jordan, Mexico, Singapore, Morocco, Peru, Dominican Republic, Panama, Colombia, most Central American countries and South Korea. Also in the negotiating pipeline are agreements with the European Union, Thailand, New Zealand, Ghana, Indonesia, Kenya, Kuwait, United Arab Emirates, Malaysia and several others, including the Trans Pacific Partnership.

The TPP had its origins in 2002 at the APEC Leaders Meeting in Los Cabos, Mexico, when New Zealand Prime Minister Helen Clark, Singapore PM Goh Chok Tong and President Ricardo Lagos of Chile floated the idea of a new free trade zone, known as the Pacific Three Closer Economic Partnership. The agreement came into force in 2006 and Brunei joined in 2009. Meanwhile, Pacific Rim countries were queueing up to be a part of the action. The old agreement was renegotiated and renamed the Trans Pacific Partnership with the USA, Australia, Peru, and Vietnam joining the negotiations in 2008. Malaysia, Canada, Mexico and Japan joined later to make 12 partners in all.

In recent years, governments and business leaders have generally been in favour of expanded free trade, while unions, workers and socialists are generally opposed to free trade, and all free trade negotiators have had to run the gauntlet of public opinion. In private sittings (the only way possible for the best outcome) negotiators must get the best possible deal they can on the greatest number of sticking points. In trade negotiations, horse trading is the name of the game; a point scored here, a point conceded there, is a step closer to a satisfactory result. There are always winners and losers in the detail, even though many on the side-lines want total victory on every piece of detail, or the entire agreement should be dumped.

Understanding the concept of expanded free trade can be daunting for many people without political and trade experience. But by reversing the concept, with an example of a diminishing trade block, even Donald Trump should be able to understand the perils of not being a part of the TPP. Let us use for an example the United States itself. Let us supposed that 37 states, including California, Texas, Illinois and Ohio, were to leave the Union and impose tariffs and quotas on imported goods from the remaining states. The 37 states would face a serious economic downturn, but the economic life blood would be squeezed out of the original 13 to the extent that they would probably require foreign aid to survive. Wall Street would face the worst downturn in its history. Factories would close and farmers would walk off their land. Tens of millions would be unemployed and unable to obtain government aid.

New Yorkers, if they could afford to buy a car from Detroit, would pay possibly double what they currently pay. Slower production in Detroit plus import duties would be crippling for both sides of the new border. What would be the point in adding 50 or 100% to the cost of New York doing business with Chicago, or for Miami trading with Atlanta? Tighten the trade noose even more and make it unprofitable for Fifth Avenue, New York, to trade with Seventh Avenue in the same city. Why would any politician in his right mind want that to happen?

The answer to that is Donald Trump. Trump believes in restricted trade. Trump will fail America more seriously than America has ever been failed before, because staying out of the TPP and other free trade deals will isolate America more than it has ever been isolated since 1776. If Trump turns his back on the other 11 countries of the TPP and the 28 members of the EU plus the other countries that already have free trade agreements with the USA, he will have unemployment lines standing shoulder to shoulder from the Atlantic to the Pacific.  
Trump’s policy from the mouth could be the ruination of a great country. Already, there are murmurs that California may want to go independent. Texas could follow. What will really happen to America if the man of the mouth shoots from the lip once too often? Could there be another civil war? I certainly hope not, but the pot is brewing. With this president, America is headed for banana republic status.



Wednesday, 4 January 2017

NEW ZEALAND ROAD SAFETY

Road safety campaign fails as death rate rises in New Zealand

Highway patrol police are at a loss to understand why their road safety messages have fallen on deaf ears, thereby allowing a substantial rise in road fatalities in 2016. They are particularly concerned at the increase in deaths during the holiday period which ended today.

The holiday period ended with 19 road deaths, up more than 50% on the same period last year. The toll for 2016 is 330 deaths, up slightly on the previous year, but the trend appeared to accelerate in the final months of the year, indicating the likelihood of an even higher toll for 2017. By world standards, New Zealand with a population of 4.5 million, is not doing very well on its roads.

The all-time record number of road fatalities in New Zealand was 843 in 1973. After 1973, the trend has been generally downwards, but there have been factors other than good driving habits to account for the trend. Seat belts became law after 1973 and that had an immediate effect on the annual toll. Roading improvements played a smaller part in the post 1973 trend. More awareness of the dangers of drinking and driving also played a part. But the single greatest factor was the part played by imported used vehicles, mostly from Japan. The used imports were built to higher safety standards and had many features to make driving easier and therefore safer. They also replaced many locally assembled vehicles that were years beyond their safe lifetime.

While vehicles and roads have become safer, drivers have not, despite stricter legislation and ramped up enforcement. Many drivers habitually ignore what they consider minor laws, like stop signs, speed limits, passing and merging rules, following distances, and licence conditions. But ignoring ‘minor rules’ can quickly lead to an attitude where major rules can be ignored too. A lack of self-discipline on the smaller things often leads to a total disregard of many laws and a lowering of general standards of behaviour.

For many drivers, driving a vehicle that does not meet road worthiness requirements is often seen as nothing significant, and such a driver may also regard the requirement to have a current driver licence as not important either. It then becomes only a short step from there to driving drunk at excessive speed. Drivers in this category, I believe, should be treated as criminally insane and there needs to be a system in place to make it impossible for them to drive any vehicle. More on that later.

This writer and long-time professional driver believes it is time for police, road safety campaigners and politicians to return to the drawing board and draft an entirely new strategy. Much of what has gone before should be thrown out and replaced with far-sighted new plans. They must accept that the old ways have failed tragically, and that they need a new plan that will bring the public on board.

Except for the criminal driver mentioned above, the emphasis must change from stick to carrot. Punishment, where possible, must be replaced with education; demerits should be replaced with rewards. Fines, where fines are unavoidable, should be income-related with the fines revenue going to charities or foreign aid to dispel the misconception that fines are merely revenue gathering and have nothing to do with road safety.

Based on eLogbook, GPS tracking and remote disabling technology used by vehicle finance companies, a new technology could be developed to include a smart-card driver licence. Use of the new integrated system could be made mandatory for all new drivers, drivers with convictions and commercial drivers. The smart card could replace, or be additional to, the traditional ignition key, meaning that the engine would only start for a current licence held by a person authorised to drive the particular vehicle. The smart-card driver licence would lead to fewer accidents and insurance claims, and would be beneficial to all road users. Remote disabling would give police a safe and effective alternative to dangerous pursuits. As a bonus, the GPS component could assist in solving crime involving motor vehicles.

All drivers should be subject to the same driving time limitations. The driving time and rest period records, whether paper or electronic, that currently apply to some commercial drivers, should apply to all drivers, professional and amateur.

The current system of roadside checks for vehicle compliance and breath testing could be extended to include driver re-testing. Drivers failing a brief oral test of traffic law could be immediately required to submit to a more extensive test, and in the event of another failure, they could be required to undergo a full driver assessment, refresher course and licence test within a specified time. For most infringements, this system would work better than instant fines or a court appearance.

Split speed limits (different limits for different classes of vehicles) have failed to make driving safer for anyone. The assumption has been that heavy vehicles should have a lower speed limit because they take longer to stop in an emergency. But that assumption is wrong, except at very low speeds when a heavy vehicle may have a lag time between acceleration and braking. At highway speeds, heavy vehicles will often stop short of cars in a nose-to-tail pile up. This is because the heavy driver has a better view ahead, is often more experienced and alert than other drivers, and has a long wheel base which makes it easier to retain directional control under maximum braking. Many American states that once had split speed limits have now changed to uniform limits as the safer option. It is always safer to go with the flow.

Passing lanes on many New Zealand highways are inherently unsafe. The current policy of one kilometre long passing lanes is the problem. For many drivers, a kilometre is long enough to start a race, but not long enough to safely finish the race. It would be better to have passing lanes at least five kilometres long, even if that means fewer such lanes.

Road markings and signage are sadly deficient on most New Zealand roads. No passing lines are often misleading and just plain inappropriate. When I observe no passing lines, I often wonder if the person(s) making the decisions about where to put the paint, has ever driven on a road with traffic coming the other.

Road crash investigation is another area requiring a new approach. The motive for investigation appears to be to find fault and to prosecute. The objective should be to find the primary and contributory causes so that the chances of a similar accident in the future can be reduced or even eliminated. During investigation, a closer look at drivers is a must; what have they been doing in the hours leading up to the accident? How much driving experience have they have got in total and with the vehicle involved? How many previous accidents and/or infringements have they got? Did they learn to drive with a driving school and a professional driver, or did they learn from friends or family? These should be key questions for investigators. However, many of these questions will remain unanswered unless drivers are required to record their driving activities and experience, the way pilots are required to record their flying.

In the opening comments, mention was made of moving the emphasis from stick to carrot. We know that the payment of fines fall into two categories: some fines are paid as simply as buying a newspaper, and the offender keeps on offending. The fine is nothing. The second category has a backlog of unpaid fines because he/she cannot afford to pay any of them, and once again that offender, with nothing to lose, keeps on offending. Demerit points are another part of the stick that needs to go. Demerits are no deterrent to people who only drive an hour or two at weekends, and are unfair to professional drivers who face a greater range of demerit offences and drive on average five times the distance that average amateur drivers do. When a professional reach 100 demerit points he not only loses his licence but also his income. Clearly, fines and demerits don’t work as well as we would like.

So, here's the carrot. Every driver licence could carry a classification from say F to A with F being applied to the first full licence issued. As drivers gain experience, without any  infringements or avoidable accidents, their licence could be upgraded to a higher class. A class A for example could apply to any driver who completes a million kilometres with no avoidable accidents or infringements – a true professional. Drivers would have to be constantly vigilant to avoid downgrading. This system would have benefits for professional drivers seeking employment and others required to drive a company vehicle as part of their work. Rental and insurance companies would look favourably on highly graded drivers. Such a system would be a real incentive for drivers to drive by the book with all the care and attention that driving calls for.

But you say, don’t worry about that, within five years manually-driven cars will be a thing of the past. Well, no. There will always be manually-driven cars. In all probability, it will be more than thirty years before fully automated cars outnumber others. Even the worst drivers will consider themselves safer than robots, so the motor vehicle, as we know it, is literally here for the long haul.

Meanwhile, the problems of road safety are not going to go away of their own accord. Only a concerted effort and some radical thinking are going to reduce the accident rate and save precious lives. The big question is, will the bureaucrats and politicians be brave enough and innovative enough to tackle it?