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No rice, please. We're Korean!

Kitty Miv, Editor
25 October, 2012

Kitty's Kountry Rankings are below, with a description of how they are kompiled. This week, as every week, I give out three Encomiums to countries which have done Good Things, and award three Execrations for countries which according to my highly personal and partial views have done Bad Things.

Now here's something that should make you laugh. Or gasp. Or turn on a re-run of Fawlty Towers. The Korean import tariff on popcorn is 630%. And that's South Korea, in case you were wondering. In North Korea it's probably classified as a WMD.

Mind you, under the Korea/EU FTA it's going to be reduced to nothing (subject to ASG, whatever that means) over a mere seven years (it's 14 years under KORUS, so EU popcorn exporters - probably expatriate Chinese in Brick Lane - should be thankful for small mercies).

This is supposed to be a laurel wreath (800% duty, and no, I'm not going to tell you why) for Korea and for Good Commissioner Karel de Grucht of the EU, who unexpectedly brought home the bacon (a mere 22.5% duty) last year, so I hesitate to tell you that the tariffs on rice (not enough noughts on my calculator) are not being reduced. Not this year, not in 2020, not ever. And I thought that French farmers were difficult.

I suppose there is some sort of logic in applying import bans to US rice, although surely it costs about five times as much as Korean domestic rice, since at least it grows quite naturally in America. But the EU? When did you last see paddy fields in Brick Lane? Or even in Cyprus, which is probably the hottest part of the EU. Of course it never rains there, which is a bit of an issue for paddy fields.

Honesty compels me to admit that there is rice production in Europe, heavily subsidized by the CAP, of course, and using unbelievable quantities of expensive (subsidized) public water; but it accounts for less than half of consumption, so presumably not too much of it is exported.

Trying hard to make out the reasoning behind this madness, I suppose that a Burmese rice producer could ship her product to Palermo, have it re-packaged as long-grain Mafioso rice, probably with a subsidy from the local Marxist council, and re-export it to Korea, thus condemning honest Seoul rice dealers to a lifetime of penury. See, I should have been a novelist.

Moving on. To the Tasman Sea. Or rather its fiscal abolition, through the creation of a common economic space between Australia and New Zealand. I haven't been there, but the differences between the two countries probably seem as pointed, if you are there, as they seem pointless, if you are not. Before anyone gets upset, I speak purely economically. Let national diversity flourish, of course, is my watchword. But it is hard to see why these two countries, of all possible economic pairings across the globe, should have such different fiscal systems. So moves towards economic parity are welcome, and should progress smoothly, although the moves so far seem very tentative

At a time when the US Administration's free trade credentials are looking tarnished, it's good to see progress being made on an East African trade agreement. There used to be a time when the US could be relied upon to be internationalist; that is long gone, unfortunately, although not all of its standard-bearers have gone. Henry Kissinger remains to remind us of how things used to be at the State Department. But where are the likes of Cyrus Vance? Anyway, with elections only a month away, it is pointless to hope for better right now: free trade is always the first casualty at the hustings. I'm going to make sure to send Mitt Romney a free trade bible (the Wealth of Nations) in case he wins - anything to stop him from making his promised egregious 'currency manipulator' declaration on China.

Victor Orban continues his one-man, or at least one-party crusade against the assorted suits of Brussels and the IMF, although maybe we're not allowed to refer to Christiane Lagarde as a suit? If he thinks he knows better how to run a country's economy than the world's united fiscal experts, then why doesn't he take Hungary out of the EU and join Vladimir's Potemkin village of a common market to the East? The answer is obvious: his countrymen and women wouldn't agree. So the sooner they turf him out of office, the better it will be for Hungary. Meanwhile, if you were thinking of starting a bank, that's one place where you don't want to do it!

Speaking of banks, do you know what was agreed at the EU summit last week, because I certainly don't? Francois Hollande talks about a 'banking union' in the eurozone in 2013, while Angela Merkel rows back, demanding 'quality' before 'speed'. Whatever was agreed, or will be agreed, as far as I can see it is all a plot to spend your and my money on propping up banks which ought to be allowed to go bankrupt. Here is how it goes: 1. banks lend money to governments by buying their bonds; 2. the governments get into debt up to their eyeballs and the banks won't lend them any more money; 3. the banks start to dissolve because their holdings of government bonds are worthless; 4. governments buy the banks for a fraction of what the banks had lent them. But that game has come to a juddering halt at step 4., because of Greece, which hasn't got the money to do it, and can't borrow the money from the ECB or the IMF. So now they have a nice new game, which is to pretend that the banks are stateless (like refugees), and they will recapitalise them direct from the European Stability Mechanism (ESM) which has somewhere between EUR500bn and EUR1 trillion to spend, and it won't count as government debt. But it will count as eurozone debt, so what's the difference? Well, the crucial difference is that Italian taxpayers have to pay off Italian debt, whereas eurozone debt has to be paid off by eurozone taxpayers in proportion to their contributions to the ESM. Germans therefore pay most, and that's why Angela Merkel doesn't like the deal. And has anyone asked the taxpayers? Of course not, and not one in a thousand of them has any clue as to the trick that is going to be played on them. Maybe it's all a necessary part of forming the United States of Europe; but it would be nice to be asked! So, black marks all round, but especially for France and Germany, which are leading the charge, willy-nilly.

Kitty's Encomiums and Execrations

Methodology: each week (this is the 23rd) three countries are given encomiums and three are given execrations. Those are the entries below with descriptive links. In the following week, each encomium counts as 1 for that country, and each execration counts as – 1, being added to that country's existing score. Over time, therefore, a ranking will build up for each country, and further countries will join the listing. Germany has a ranking of – 1, since in the second week it had an execration and in the first week it had an encomium, leaving it at neutral; then it had an execration in week four, thus dropping to – 1, and another one in week six, dropping to – 2; finally in week 13 it got something right, so it went back up to – 1; then in week 16 it gained a further star, so then it was in neutral territory until week 23 when it dropped back to minus one.

The rankings are intended to be a proxy for business friendliness; evidently they are highly partisan, but hopefully one day they will become useful for decision-making, even if for the moment it is all just an amusing game. For any country in negative territory, you should think carefully before starting a business there.

Kitty's Encomiums:

Australia puts one foot in the water . . .

and New Zealand doesn't bite it off

Korea but don't ask about the rice

United States being internationalist

And Kitty's Execrations:

France eyes wide shut

Germany eyes wide open

Hungary will not be the Victor




About the Author

Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net



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