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Where do consumers of widgets stand in all this?

Kitty Miv, Editor
01 September, 2015

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

In the parlance of global trade, "dumping" occurs when products are exported to one or more countries at below the price they are sold in their home market, or at below cost price. It is generally perceived that such pricing practices are deliberate and predatory: producers of widgets in country A slash prices to the point where producers of widgets in country B simply can't compete, enabling the former to grab a larger share of country B's market for widgets. To protect domestic industry, the remedy that country B's government will most likely use, after much lobbying from said injured industry, is anti-dumping duties. These force up the price of widgets imported from country A, thereby leveling the competitive playing field. Simple but ingenious, no? Well, no. Where do we consumers of widgets stand in all this? Nowhere, is the answer. It never seems to enter into policy makers' heads that consumers might be fed up with paying for over-priced widgets produced by domestic manufacturers who simply aren't as efficient and competitive as foreign factories. What's more, how does a country actually prove that dumping is taking place? It must be very difficult, hence anti-dumping investigations tend to take months, sometimes years. But isn't it funny how often governments seem to prove themselves right though.

And so I was pleasantly surprised to read that New Zealand has published a public consultation document on legislative proposals that will ensure that the impact of anti-dumping taxes on consumers will be considered before such a remedy is used. Whether this measure will prove effective at protecting the interest of consumers in New Zealand is another matter. I suspect it probably won't for the simple reason that, ironically, consumers won't be included in the actual consultation – and not by choice. You've got to wonder how many people take an interest in the intricacies of world trade law, and even if they do have some knowledge in this area, how many will actually bother to write in to the Government to express their views? The fact that the minister responsible for this initiative said he's been taking into account the views of farmers and "officials" in the shaping of this policy – not consumers – pretty much confirms this. Nevertheless, I can't disagree with the general thrust of the measure, and therefore an encomium goes New Zealand's way.

Sadly, it's the case in many countries that, save for putting an X next to someone's name on Election Day, people have very little say on government policy or the day-to-day running of the country. Switzerland, however, is something of an exception, with its system of "direct democracy," which allows citizens – who can manage to arm themselves with a sufficient number of signatures from their fellow countrymen – to challenge the Government's decisions and put their own ideas onto the legislative agenda. One of the latest people's initiatives goes to the very heart of what Switzerland stands for: individual privacy. Of course, for many people, including those driving the international tax agenda (the OECD, the European Commission, et al), "privacy" and "confidentiality" when included in the same sentence as "Switzerland" are merely euphemisms for "banking secrecy," which is a phrase normally used pejoratively these days: if you want to hide behind confidentiality laws, you must be up to something, is the political consensus. But it is tragic – and frankly a bit scary – that the desire to maintain a private life has become almost a crime in itself. I'm under no illusions that in most of the developed world, privacy is a thing of the past. Most people would be shocked to find out just how many agencies and private organizations hold their sensitive information on various databases, data protection laws or no data protection laws. Whether it would spark them into action in defence of their privacy, like it has in Switzerland, is moot; the genie is out of the bottle now. After all, we live in the age of social media, when millions – billions if Facebook's Mark Zuckerberg's recent claims are to be believed – seem compelled to share intimate details of their lives with the world.

The Swiss Government is, quite predictably, recommending that parliament reject the people's initiative on the basis that it will hinder their fight against crime. However, I'd rather praise the Swiss system for allowing its people (over 100,000 of them signed the petition) to fight privacy's corner, rather than execrate the Government for opposing it. They can't all be criminals and crackpots.

So Aussie Finance Minister Joe Hockey wants to cut Australia's income tax. Well, excuse me if I don't fall off my chair with excitement. The Australian Government has talked almost incessantly about the need for lower, simpler taxes and the need for a comprehensive shake-up of the Australian tax system, and frankly it's beginning to sound like a broken record (for anyone under the age of 30, that's the equivalent of a crashed iPod). Well get on and do it then! How many expert panels and White Papers do you need to tell you that the tax system needs fixing when you already know the answer! But perhaps I'm being a little harsh on Messrs Abbott and Hockey. It's going to be very difficult for this government to bring about meaningful changes to the tax system for a number of reasons. First, it's broke. Second, it relies on the whims of Clive Palmer to get legislation passed in the Senate. And, third, its mandate is fast running out. Indeed, perhaps it is the peculiarities and eccentricities of Australia's brand of constitutional democracy that has caused previous governments to fail to reform taxation. The way that elections to the lower and upper chambers are scheduled means that, typically, there is about a three-year gap between general elections, so it's little wonder that a long-winded and controversial measure like tax reform never gets a chance to pass. Still, I'm not sure that continually banging on about tax reform is really helping the Government's cause either. At some point taxpayers would like to know whether taxes are going to change or not, and tax reform seems to have been a topic of conversation in Australian politics for what feels like millennia. What's more, ministers are going to have rather eggy faces at the next election if they build up people's hopes, only to later dash them. We voters can be an unforgiving lot.


Kitty's Encomiums and Execrations

Methodology: each week (this is the 147th) one or more countries are given encomiums and one or more 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 is at minus 2, 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, but reverting to neutral territory in the following week, then dropping to minus one in week 50, and back up to plus one in week 51, then to plus two in week 52. Some weeks ago it dropped a place, but then quickly recovered one step. Etc etc.

The rankings are intended to be a proxy for business friendliness; evidently they are highly partisan, but as time goes by they are becoming useful for decision-making. For any country in negative territory, you should think carefully before starting a business there.

Kitty's Encomiums

New Zealand considerate

Switzerland people power

Kitty's Execrations

Australia same ol' tune!



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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