Garnaut Review Economic Model
Fri, Sep 05 2008Global issues
Climate
On a quick first reading of the supplementary report, this seems to be the key data related to the modeling results. For the more moderate 550ppm CO2 objective, the costs of a 10% cut in 2000 carbon emissions to 2020 are estimated at 1.1% of GDP (1.8% cut to consumption) comprising a net decrement of about 0.1+% of GNP per year. In other words, the expected net benefits are somewhere toward the end of the century (and seem to comprise assumptions about 'avoiding catastrophies').
Despite the boost to growth in the second half of the century, the sacrifice in the first half of the century is substantial, though the loss to GNP is fully recovered with a margin by the end of the century. The benefits that are purchased by this sacrifice take several forms. One is insurance against the effects of severe and possibly catastrophic outcomes on material consumption during this century. Another is increased protection against loss of non-market services this century. Yet another is avoidance of all of the rapidly increasing costs in through the 21st and into the 22nd century and beyond: the rapidly increasing negative impact on material consumption; the risk of outcomes much worse than the median expectations from the applied science (although beyond the 21st century, the median outcomes include more and more of the severe and possibly catastrophic); and the impacts on non-market values.
Drought in the “Sunburnt Country”
Fri, Sep 05 2008Global issues
Climate
Ian Castles has published—as a tribute to Dorothea Mackellar's poem, My Country (often known from a line in its second verse as 'A Sunburnt Country'), published just one hundred years ago today—a typically well-mannered but meticulous criticism of the CSIRO's paper on the future incidence of drought in Australia. Ian detects, and documents, the CSIRO authors' habits of ignoring pertinent but inconvenient criticism and points to some not-quite-credible claims that the CSIRO authors have previously published—in the IPCC's Fourth Assessment report.
It defies belief that the range of rainfall change in 2080 (relative to 1990) from all of these scenarios and models could be from minus 27 per cent to plus 54 per cent for “Northern NSW, Tasmania and central Northern Territory” - and yet be from minus 80 per cent (i.e. one-fifth of the 1990 level) to nil “within 400 km of western and southern coasts” [From One hundred years of drought and flooding rains - On Line Opinion]
Precautionary principle, misleading and undemocratic
Fri, Sep 05 2008Global issues
Climate
Public policy
The "precautionary principle" makes a dishonest claim (I don't say that people who invoke it are dishonest) because it pretends to be one thing—a justification—while being, in fact, a very different thing—an explanation. I say it justifies, at best, a wager and that wagers should not be the basis of public policy in democracies, certainly not when we are debating a decision that will cost us billions of dollars in taxes and probably still more in lobbying and tax-avoidance.
The Panic of 2007
Wed, Aug 27 2008Public policy
The sub-prime mortgage crisis sparked a financial market panic caused by lack of information on the current size of the problem. This market-information fault is due, in essence, to the way that the sub-prime mortgage is structured.
Not an easy analysis, but careful, complete, convincing. Hint: you can skip the really obscure stuff on derivative instruments and still find very good value in this paper, presented by an expert in synthetic financial instruments to the recent US Federal Reserve conference.
"A century after the Panic of 1907 we again contemplate the causes of a panic. Identifying the causes of the Panic of 2007 will in large part determine the policy response to the crisis. I have argued that the subprime crisis was caused by information problems related to declining house prices, which prevent subprime mortgages from being refinanced. The design of subprime mortgages is unique in that…
The unravelling trade consensus
Tue, Aug 26 2008Global issues
Trade framework
WTO
An much better account of the real, secular challenges facing the WTO than Larry Summers' jumbled column (see the Sidebar) can be found in Simon Evenett's dissection of the failure of the Doha Round, written almost a year ago. I think Simon has set the bar too high, but his call—presaging that of the Warwick Commission—for a period of reflection and a new start for the WTO is and intriguing account; accurate and carefully-argued.
"The EU and US pursued agricultural trade negotiating strategies that were not politically viable in their trading partners and their demands for tariff cuts on industrial products (driven up by the extent of unilateral reform in developing countries) could not be reconciled with some of the development-related princi- ples adopted for this Round. Finally, what was on the negotiating table was small compared to other developments in the world economy, making the cost of saying "no" easier and poten- tially reducing the attention spent on concluding the Doha Round in the first place." from Reciprocity and the Doha Round Impasse by Simon Evenett
Foreign direct investment approvals
Tue, Aug 26 2008Public policy
Investment
FDI
Below the fold, my Op-Ed in today's Australian Financial Review on the approval of foreign investment proposals.
In summary, I'm advocating a transparent policies and procedures using existing review institutions and laws (the Corporations Act, the Australian Stock Exchange Guidelines on business practices, the transfer pricing regulations of the tax laws) to regulate all companies doing business in Australia, including foreign investors. This will ensures continuing monitoring, reviewed by the Courts as necessary, in place of one-off 'authorizations' by the Treasurer on entry based on obscure—apparently arbitrary—interpretation of 'national interest'. No-one should have to ask the permission of a politician to do business in Australia. That's not how our economy (or democracy) works.
Are one-off investment approvals (and rejections) such as the Chinalco decision the right policy tool for managing closer economic integration with China in the 21st century? Or should we be looking for fairer review and on-going engagement?
Weaning and whining
Sat, Aug 16 2008Public policy
Micro-economics
Trade framework
Trade politics
I know one story about an import-competing, near-basket-case, industry that turned-around with the help of government support and a re-structuring plan, to become globally competitive and an export success story.
It's not motor vehicles.
“Sensitive” farm quotas revealed
Thu, Aug 14 2008Global issues
Trade framework
WTO
Details are starting to emerge of the expansion in import tariff-quotas in the EU that might have conceded included in a Doha deal. They are large numbers by any measure, because the EU now comprises 27 middle and high-income economies.
Differences over the ‘revival’ of WTO negotiations
Thu, Aug 14 2008Trade framework
WTO
While Pascal Lamy, the WTO Director General, rushes around the world trying to revive an agreement he claims was 'almost done' and within Members' grasp, the Chairman of the Agriculture negotiating group Crawford Falconer—who has been through the mangle trying to squeeze consensus out of the Members over two years—has a more skeptical assessment of the chances of 'revival'.
"Overall, there was a credible basis for conclusion on very many (and possibly one could have said “nearly all”) issues. But even “nearly all” is not all. And, as a matter of plain fact, there was decisive disagreement on certain matters while other very significant issues were not even dealt with. So there was no possibility to put a judgement on the “other” matters to the final test.
That said, had the “outstanding” matters been resolved (and that would have been no small matter), I do think the rest could have “fallen into place”. But such a judgement is a function of a very particular situation. That situation was one where, at the time, Members were conscious that there was a genuine endgame scenario. Members were, accordingly, prepared to accept compromises that were not generally their preferred options. That was a mind-set that applied as of yesterday. As of today that remains at best moot. " extract from: Chairman's report on July 'package' (WTO document JOB(08)/95)
Next steps for agriculture agreements
Wed, Aug 13 2008Global issues
Trade framework
WTO
The WTO's Doha Round of trade negotiations did not 'collapse'; they failed. The failure was not caused by the disagreement over the Special Safeguard Mechanism. The poor quality of the proposed agreements reflected much deeper problems that might also have caused the collapse of consensus. The Doha enterprise had priorities that were no longer aligned with the commercial realities of world markets and that had been by-passed by the political realities of the trading system.
It is important to understand the lessons of the Doha Round’s collapse and not be misled by the hope that extending its processes still further (more ‘Chairman’s’ proposals) will cure its shortcomings. Even if more tweaking could reveal the elusive ‘landing zone’ for consensus, agreement could only resuscitate a feeble and mostly irrelevant result for the sake of closure, rather than for the sake of substantial progress on contemporary trade problems.
Rather than engage in 'shuttle diplomacy', Pascal Lamy should be encouraging WTO governments to reflect on the systemic changes needed before returning to the project of multilateral market liberalization.
Fortunately for Australia, some of the factors that brought Doha to an end favor our market interests and allow us time to undertake the research and the diplomatic work necessary to help re-construct a more effective framework for multilateral trade agreements.
Australian food trade barriers revealed
Wed, Aug 13 2008Data
Trade data
Global issues
Trade framework
WTO
The World Bank's World Trade Indicators (WTI) are a relatively new, but very powerful, way of describing global trade policies and regulations. Their simplified metrics help to reveal the 'big picture' that emerges from a blizzard of trade and tariff data collected by the UN and WTO. Their method is theoretically sound but—as always—has limits and perspectives that need some interpretive care.
The latest (2008) results show world trade barriers continuing to fall rapidly through 2007
Over the last decade, countries have improved many aspects of policy relevant for trade. Worldwide, Most Favored Nation (MFN) average tariffs have fallen from 14.1 percent during 1995–99 to 11.7 percent during 2000–04 and further to 9.4 percent in 2007—a decline of more than 33 percent. In addition, a substantial amount of trade is conducted at a zero MFN tariff rate (MFN-0) or through preferential trade agreements… The most recent estimates indicate that all regions and income groups have witnessed substantial real growth in trade during this time. In 2007, average real growth in trade, 7.7 percent for the world as a whole, is within the 7–9 percent growth range of the last decade.
But one result that surprises is the very high level of revealed non-tariff protection of Australian agriculture.
Glimpses of a micro reform program
Sun, Aug 10 2008Public policy
Micro-economics
Paul Keating has a world-beating talent to sting. His descriptions of his successor as Prime Minister, John Howard, as a "dessicated coconut araldited to the seat" while his deputy Costello was "all tip and no iceberg", are exemplars of the jibe. But they're spitballs not barbs. They don't wound because they're often more-than-half boastful: in this case, a reminder that Keating finally crushed Hawke's coconuts after an 8-year partnership on the treasury bench.
Keating's latest provocation has irritated his own side of politics. Rudd's government, he says, lacks an 'overarching narrative'. Rudd waved the criticsim away with typically fogeyish phrase implying Keating's neuroses are on show ("Paul's sometimes not an entirely happy chappy").
That works, up to a point—there's something pathetic about an ex-PM trying to reclaim his own myth—but the criticism was not far off-target. After more than a decade of inattention, by an essentially idea-less conservative coalition government there are serious deficiencies in our transport, port and telecommunications infrastructure squeezing productivity and trade performance (especially commodity exports). Commitment to a coherent and transparent agenda of micro-regulatory reforms is urgent. But the signs from the Rudd government have not been encouraging so far.
Farmers unhappy about CSIRO drought ‘alarmism’
Thu, Aug 07 2008Global issues
Climate
In my experience you can count on farmers to sniff out hype. Even before David Stockwell completed his statistical analysis, the NSW Farmers' Association President thought the CSIRO had exaggerated the problem.
"Association president Jock Laurie says while the Climate Report does say ‘exceptionally high temperatures’ are likely to occur frequently, this does not equate to drought. Alarmist reporting has added confusion and pressure to farm families at a time when they can least afford it. 'We have received a number of calls from members who were extremely agitated, confused and upset about the reports of drought every second year in future.' Mr Laurie said." extract from: Stock & Land
CSIRO Drought Model ‘fails’
Wed, Aug 06 2008Global issues
Climate
David Stockwell at Niche Modeling has completed his analysis of the CSIRO's Exceptional Circumstances Drought Report. His conclusion punctures the hyperbole of it's launch.
"In a statistical re-analysis of the data from the Drought Exceptional Circumstances Report, all climate models failed standard internal validation tests for regional droughted area in Australia over the last century. The most worrying failure was that simulations showed increases in droughted area over the last century in all regions, while the observed trends in drought decreased in five of the seven regions identified in the CSIRO/Bureau of Meteorology report. Therefore there is no credible basis for the claims of increasing frequency of Exceptional Circumstances declarations made in the report. " extract from: Niche Modeling
In a model of transparency that CSIRO could do well to follow, David has posted his R programming as well as access to the data sets that he extracted from CSIRO, so those with the skill can reproduce his results.
Designing a carbon tax
Wed, Aug 06 2008Global issues
Climate
Trade framework
"Experts" are struggling for space in the media to peddle designs for a carbon "pollution" reduction tax. Paul Kelly in the Australian newspaper seems to approve a proposal by Geoff Carmody of Access Economics for a consumption tax in place of a cap-tax-equivalent on production of Australian carbon.
"'Australia can only control its consumption of emissions,' he says. 'Attempts to control Australian production are likely to drive it offshore with less stringent or no policy controls over emissions." extract from: The Australian
Carmody's argument, apparently, is that we're better off setting a consumption tax that will hit imports rather than exports and setting the tax rate to achieve only the 'weighted average' of carbon prices in other developed economies.
But will that really help Australia to weather (probably un-necessary, and even unlikely) global emissions controls?
Doha defeated by contrary goals, rear-view mandate
Sat, Aug 02 2008Global issues
Trade framework
WTO
Joseph Francois argues the Doha Round was strangled by an outdated agenda and unworkable principles, including the MFN rule. We're better-off burying our mistakes, he argues, and moving on.
"In a sense, developing countries are collectively asking that food prices go up and down at the same time. The inconsistency reflects divergent interests across the newer, non-OECD members of the WTO. It also highlights the fact that remaining impasses over agriculture are as much an excuse as a cause. The problem is irreconcilable differences in views on trade policy, linked to differences in stages of economic development
…The Doha Development Round was as much distraction as opportunity, with an agenda focused too much on intractable and outdated issues. Negotiations of some form should and will resume. The questions are "where?" and "between whom?" It is important that (developing) WTO Members allow them to take shape in Geneva, even if they do not have an immediate interest in participation, so that the plurilateral agreements that emerge are open to future accession. This means that WTO Members will need to be flexible in defining and allowing scope for sector level negotiations, or negotiations between a subset of Members, in place of an integrated process involving all Members." extract from: VoxEU
Earlier Entries
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About
Peter Gallagher is a leading Australian consultant on trade and public policy.[bio].
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Other things
Chroming the Internet
I find it much easier to believe the first part of this statement than the second part.
"So why are we launching Google Chrome? Because we believe we can add value for users and, at the same time, help drive innovation on the web." [From Official Google Blog: A fresh take on the browser]
I'm guessing that it's mostly about the money.
Democrat Convention
More entertaining than the Olympics. Notice the dark area where the press photographers are located? Great lighting. NY Times multimedia is outstanding.
SPS database
An american preoccupation
What evidence is there for this? None that he cites. Reminds me of the nonsense I saw tossed around Washington in the early 1980's about the allegedly 'obsessive' Japanese culture.
Nations are increasingly preoccupied with their relative economic standing, not the living standards of citizens. Issues of strategic leverage and vulnerability now play a bigger role in economic policy discussions.
[From FT.com—Lawrence Summers : The global consensus on trade is unravelling]
There could be four
Henry Gao asks a very pertinent question about a development in the management of WTO that might easily be missed (unless you're looking)
"Will this 'one country, two candidates' arrangement work in the future?" extract from: WTO and China Blog
Where our $70m went
The unnecessary Rudd/Brubmy bribe to build 'green' cars in Victoria is less than 2% of their current profit
"[Toyota] yesterday announced net earnings of Y356.6 billion ($3.57 billion) for the three months to June 30 -- the first quarter of the Japanese financial year -- and maintained its full-year profit forecast at Y1.25 trillion." extract from: The Australian
Krugman loses his kool
Is it my imagination, or is his NYT portrait looking a little crazed these days?
"The only way we’re going to get action [to cut carbon emissions], I’d suggest, is if those who stand in the way of action come to be perceived as not just wrong but immoral." extract from: NYTimes.com
This sort of shameful nonsense leads pretty soon to talk about 'patriotism' and 'moral majorities'.
No need for alarm about diet
Sandy Szwarc analyses the data from the latest NHANES survey of US dietary trends (ignored by most media).
"The new data doesnt support the need for public policies to address unhealthy gluttonous eating, and prohibit access to fattening foods. It does, however, provide clues that the anti-obesity hysteria might be contributing to risks for adverse effects, especially for young people." extract from: Junkfood Science
You can find the summary of the data here.
Holly Golightly
Dorien Leigh, the likely model for Holly Golightly in Truman Capote's story of Breakfast at Tiffanys died last month aged 91 in Virginia.
Spencer’s ‘smoking gun’
[W]e now have new satellite evidence which strongly suggests that…the real climate system appears to be dominated by negative feedbacks’—instead of the positive feedbacks…
Another Galilean ‘dissenter’
David Evans, ex-GreenHouse Office:
"The world has spent $50 billion on global warming since 1990, and we have not found any actual evidence that carbon emissions cause global warming … Computer models and theoretical calculations are not evidence, they are just theory." extract from: The Australian
It’s not just China, India
Germany's Finance Ministry, too, is critical of a plan to cut emissions that is more gradual than proposed in Kevin Rudd's Green Paper.
"The ministry was particularly critical of the EU's goal to cut the quota of emissions trading permits by 21 percent, compared to 2005 levels, saying this would cost Germany both jobs and growth." extract from: Deutsche Welle
The G-Other
I wonder if they're any better at meaningful collaboration than the G-8? No sign of it in this official snapshot taken in Sapporo, Japan, before their meeting with the G-8 in July, 2008.
A valentine in July
Need a reason to love aussie shares? Here it is—from the RBA's chart pack. Note the price indices relative to other markets, the consistently good value P/E, the high dividend yield. What's not to love? Forget the bears… buy a bit of future growth.
The ‘fat bomb’
Australians are not even near the top ranks of the world's fatties, despite the alarmist claims in the press. Here is the latest data from the World Health Organization. There's much more on Sandy Szwarc's Junkfood Science blog
| Obese Males (BMI >30): Latest Year | % | |
|---|---|---|
| 1 | Nauru | 79.3 |
| 2 | French Polynesia | 36.4 |
| 3 | United States of America | 31.1 |
| 4 | Kuwait | 27.5 |
| 5 | Saudi Arabia | 26.4 |
| 6 | Iraq | 26.2 |
| 7 | United Arab Emirates | 25.6 |
| 8 | Malta | 25 |
| 9 | Bahrain | 23.3 |
| 10 | United Kingdom | 22.6 |
| 11 | New Zealand | 21.9 |
| 12 | Croatia | 21.6 |
| 13 | Israel | 19.8 |
| 14 | Hungary | 19.6 |
| 15 | Chile | 19 |
| 16 | Mexico | 18.6 |
| 17 | Canada | 17.9 |
| 18 | Australia | 17.8 |
| 19 | Bosnia and Herzegovina | 16.5 |
| 20 | Slovenia | 16.5 |
| Source: WHO (http://www.who.int/bmi/index.jsp) | ||
Aids campaign a moral panic
"It is time to recognise that the Aids scare was one of the most distorted, duplicitous and cynical public health panics of the past 30 years. Instead of being treated as a sexually transmitted disease that affected certain high-risk communities, and which should be vociferously [sic, 'vigorously'?] tackled by the medical authorities, the 'war against Aids' was turned into moral crusade." extract from: Brendan O'Neill, Guardian.co.ukSound familiar?