Australia’s Foreign Affairs Minister, Julie Bishop, has recently expressed her government’s support for the possibility of the UK joining the Trans-Pacific Partnership (TPP), a nascent free trade area of eleven countries. This looks like an excellent opportunity for post-Brexit Britain.
TPP is an interesting case. Traditionally, most Free Trade Areas (FTAs) have comprised countries that were similar in terms of income levels and/or geographically close together. TPP is almost the complete opposite: a motley crew of old industrialised countries (Australia, New Zealand, Japan), countries whose economies took off during the first wave of globalisation (Chile, Malaysia), and new kids on the block (Vietnam), scattered across the globe. Several other countries, among them South Korea and Taiwan, have also expressed an interest in joining.
TPP is an interesting case. Traditionally, most Free Trade Areas (FTAs) have comprised countries that were similar in terms of income levels and/or geographically close together.
Joining an existing FTA – an off-the-shelf solution – is much easier than setting new ones, so hopefully, the UK will pursue that approach much more widely after Brexit. Efta and Nafta would be obvious candidates.
Joining TPP would, of course, not obviate a sensible agreement with the EU. TPP is not a very comprehensive FTA, and far-flung markets cannot replace markets close to home. But it certainly drives home the point that leaving the EU, and more specifically, the Customs Union, opens new trade opportunities for Britain.
Meanwhile, Argentina’s government is making some progress in rolling back the hyper-interventionist policies of the Kircher era. About time.
Argentina has long served as a cautionary tale. In the early 20th century, the country was richer than most of Europe, and certainly well ahead of Spain and Italy, where most Argentines’ families were originally from. But from the 1930s onwards, a policy trend towards nationalisations, protectionism and clientelism fundamentally changed the character of the Argentine economy. It led to a long period of relative decline. By 1990, Spain had become twice as rich and Italy nearly three times as rich as Argentina. While the 1990s and early 2000s were a period of liberalisation, Kirchnerism represented a return to the worst habits.
President Mauricio Macri’s government has abolished foreign exchange controls and export restrictions for agricultural products. Costly and distortionary subsidies for utilities are being phased out. A number of discretionary import restrictions have been scrapped. The market for air travel, currently dominated by the state-owned Aerolineas Argentinas, is being opened up to competitors.
All very promising so far. But these were the low-hanging fruits. And while Macri’s drive to eliminate distortions is laudable, he is clearly not a free-marketeer: he seems to see entrepreneurship is something which governments must actively promote, rather than something that just naturally flourishes if government gets out of the way.
Staying in that region: according to Bloomberg Markets, there is a possibility that Chile’s incoming government might split up Codelco, the country’s state-owned copper mining corporation, and privatise one part of it. This would not just be an economically sensible move, given that Codelco is heavily indebted, and reliant on government subsidies. It would also have some symbolic importance.
It is commonly assumed that from the mid-1970s to the end of Pinochet’s dictatorship, the “Chicago Boys” – American-educated, free-market economists – were given a free reign over the country’s economic policies. This is not quite true. The military junta respected the Chicago Boys’ expertise, but they never really trusted their free-market policies, which they often blocked or delayed. The large wave of industry privatisations, for example, only started in 1985, and even then, the generals insisted on exemptions. The most prominent one was Codelco.
Codelco had been created by Pinochet’s government, as a merger of various existing state-owned mining companies, and companies that had been recently nationalised by the socialist president Salvador Allende. It has been untouchable ever since, protected by an odd coalition of socialists on the Left, and economic nationalists on the Right. So in a sense, the company, in its present form, embodies the worst of all worlds. That alone would make a partial privatisation worthwhile.
Argentina has long served as a cautionary tale. In the early 20th century, the country was richer than most of Europe, and certainly well ahead of Spain and Italy, where most Argentines’ families were originally from.
When Saudi Arabia is in the news, it is usually not good news. The Kingdom is mainly mentioned in connection with human rights abuses, archaic laws, and support for extremist groups. The last few months were a bit of an exception. The most high-profile story was that the driving ban for women has finally been scrapped.
What has been less well documented is that this seems to be part of an emerging broader liberalisation trend, which also entails greater freedom in the economic sphere. Cinemas, for example, had been banned for nearly four decades. That ban has now been lifted – although the state still controls which movies people are allowed to see – and earlier this year, the first ones have been opened.
This has probably more to do with economics than with a desire for modernisation as such. A lot of entertainment is banned in Saudi Arabia, but the smaller neighbour countries are, relatively speaking, more liberal (it would be hard not to be). So a lot of Saudi citizens simply travel there when they want to have some fun, which means that those neighbouring countries also get to collect the associated revenue.
Now that the long period of exceptionally high oil prices has come to an end, Saudi Arabia needs to develop other sectors that can pick up some of the slack. Apparently, it is starting to dawn on the royal family that banning a lot of economic activity is not the best way to do that.