USTR on NZ

The USTR has words of praise, and some minor critique, of New Zealand.* I read some of their critique also as praise.

Here's some praise:

Tariff rates in New Zealand are generally low as a result of several rounds of unilateral tariff cuts that began in the mid-1980s.  At 2.1 percent, New Zealand has one of the lowest average most favored nation (MFN) applied tariff rates among industrialized countries.  The average applied MFN tariff rate was 1.5 percent for agricultural products in 2009 and 2.2 percent for industrial goods.  In 2010, approximately 95 percent of all imports to New Zealand (by value) entered duty free.  Approximately 47.5 percent of New Zealand's MFN tariff lines are bound at zero duty rates, and 63.1 percent of lines are applied at zero.  The New Zealand government has stated that import tariffs will not be reviewed until 2013 and will remain at their current levels until at least 2015.

But they've a few critiques. They rightly note that our investment screening regime is a trade barrier to foreign investment in land; they're right. It's become politically arbitrary and needs to be fixed.

But I disagree rather strongly with two other assessments. They reckon it a bad thing that the draft patent reform bill would ban software patents; I don't. But I also don't expect that part of the bill to survive US pressure via TPP.

They also don't like that we let ISPs charge rights-holders, US or otherwise, NZ$25 for issuing an infringement notice. If each infringer really causes substantial damages, as rights-holders like to claim, the $25 shouldn't be an issue. But USTR says "The cost has deterred some rights holders from using the system."

USTR needs to think hard about optimal enforcement; it would be surprising if it were worthwhile to pursue enforcement action - which does impose real costs on both the ISP and the accused - where the damaged party doesn't reckon it worth $25. Heck, our small claims court charges $36.30 as its smallest possible fee for dispute resolution.

You need to pay the following fee to the Tribunal when you lodge your claim from 1 July 2011.
If the total amount sought under the claim is less than $1,000	$36.30
If the total amount sought under the claim is $1,000 or more but less than $5,000	$60.40
If the total amount sought under the claim is $5,000 or more	$120.80

If $25 deters US copyright giants from pursuing claims against alleged Kiwi infringers, it's amazing that anybody here is able to access our small claims system. Especially if infringements cost rights-holders $150k.

*HT: @PiratePartyNZ

Government make-work

One way America can work to solve its unemployment crisis: Hire one group to hand out free condoms for sex workers; hire another to consider those condoms as evidence that the bearer is a prostitute, arrest the bearer, and confiscate the condoms. It's win-win. Jobs for public health workers, police, judges, lawyers, condom-makers, the prison-industrial complex; hard to see any fault with it, really.

With the prostitution-free zones, prostitution is understood to be a crime of intent. No one is actually arrested in the act of having or agreeing to have sex for compensation; only for appearing as if they might do so. In the same vein, arresting officers in DC and throughout the US routinely search people suspected of prostitution for condoms, confiscating them as evidence of a crime. For some cops, condoms serve the function that marijuana does in a stop-and-frisk encounter (only there's no actual law against possessing or using condoms), unless a cop thinks you might be a sex worker or otherwise wants to move you along and into custody. 

Sex workers and health and human rights advocates have pointed out that it makes absolutely no sense for publicly funded police departments to confiscate condoms that publicly funded health departments make so widely available.

Washington DC confiscates condoms from sex workers; LA tries to make them mandatory for actors in pornographic videos (previous critique). I'd thought that optimal policy was "Condoms for some, miniature American flags for others!" Or combine the two (markets in everything, egads).

HT: @dr_alexpadilla

A lesson in contrasts

American legal scholars debate whether provisions in the latest defence appropriations bill would allow the government to hold citizens indefinitely without charge. Here's the latest summary:

The law provides that indefinite detention without charge may be imposed on anyone who has provided “substantial support” to groups that are “associated forces” of al-Qaeda; but it leaves undefined what constitutes “substantial support” and which groups might qualify as “associated forces.” Thus far, the lower federal courts have upheld detention of al-Qaeda or Taliban members, but not mere supporters, much less supporters of associated forces. And there is much dispute about whether the laws of war permit detention in those circumstances. Now Congress has essentially predetermined that question. Unless this and future administrations construe these provisions as limited by the laws of war, they risk authorizing detention that the laws of war would not. 

See also Volokh and Lawfare. And recall that American drug warriors have argued that marijuana users offer support to terrorist groups.

Meanwhile, in New Zealand, lawyers for the police have advised that sniffer-dog searches in schools breach students' civil rights, and so the police have stopped carrying out such searches, previously requested by the schools, pending further legal advice:

"Police are currently considering the legal implications regarding searches by drug dogs in schools," a spokeswoman said.

"Police understands the Ministry of Education is also working on good practice guidelines for schools so that they can search and confiscate items that may pose a safety risk."

She said police gave other support to schools, such as drug education, arranging counselling and prosecutions. "Where schools detect more serious drug offending, police become more actively involved."

Hutt Valley High School has historically had a police dog team conduct annual searches. But its request was refused this year "on the grounds that the police have no cause to search".

One cost of US dairy protectionism

One tangible cost of American dairy protectionism: baby formula prices.

In New Zealand, 900 grams of Heinz Infant 1 Gold Starter Formula costs $23.60 at Countdown. In $US terms, that's $20.68/kg. I often saw it for around the $18 mark on special when we were in that market.

In the US, the best comparison I can find is a 35 oz can of Enfamil at Safeway: $33. That's about a kilo. And, it's about the cheapest dry formula I can see on the Safeway site on a per ounce basis.

I can think of few other goods where the real New Zealand price is two thirds of the US price. Maybe the US formula has some kind of magic to it where it can make larger quantities of reconstituted drink, but I'd be a bit surprised.

Does American policy really wish to transfer money from poor mothers buying formula to relatively wealthy members of the dairy compacts?

Meanwhile, in Canada, The Real Canadian Superstore will sell you 730 grams of store brand formula for $15: $25.70 NZ per kilo. But I'm not sure that a sale flyer price of a store brand is a fair comparison.

Affirmative action

A Chinese IT outsourcing company that has started hiring new U.S. computer science graduates to work in Shanghai requires prospective job candidates to demonstrate an IQ of 125 or above on a test it administers to sort out job applicants.

In doing so, Bleum Inc. is following a hiring practice it applies to college recruits in China. But a new Chinese college graduate must score an IQ of 140 on the company's test.

An IQ test is the first screen for any U.S. or Chinese applicant.

The lower IQ threshold for new U.S. graduates reflects the fact that the pool of U.S. talent available to the company is smaller than the pool of Chinese talent, Bleum said.

...

Moreover, unlike many of the larger IT offshore development companies, Bleum is focused on long-term engagements with its clients, not on one-time projects. Over time, it hopes to hire 100 to 500 U.S. workers to help support North American customers.

So says Computerworld, HT Slashdot. [Note the piece is a year old now]

So, is it differential thresholds for the Americans because they bring complementary skills that are relatively scarce in China? Or are they being hired for entirely different positions in tech support while the Chinese workers handle the harder programming problems? Tough to tell from the article.

Preventing arbitrage

Pharmaceuticals are cheaper in Canada than in the States. Even in the absence of Medicare this would likely be the case; income-based price discrimination would have cheaper prices in Canada for goods characterized by very very high fixed costs and trivial marginal cost (adjusting for that the price of everything is higher in Canada). But price discrimination can only be maintained if you make it hard to arbitrage. Car trips to Canada are relatively pricey, but internet sales aren't.

How to prevent re-import this way? Beat the crap out of Google:

Department of Justice

Office of Public Affairs

FOR IMMEDIATE RELEASE

Wednesday, August 24, 2011

Google Forfeits $500 Million Generated by Online Ads & Prescription Drug Sales by Canadian Online Pharmacies

Internet Search Engine Accepted Advertisements from Online Canadian Pharmacies that Targeted U.S. Consumers and Illegally Imported Controlled and Non-Controlled Prescription Drugs into the United States

Ouch. The DoJ's argument is disingenuous though:

“The Department of Justice will continue to hold accountable companies who in their bid for profits violate federal law and put at risk the health and safety of American consumers,” said Deputy Attorney General Cole.  “This settlement ensures that Google will reform its improper advertising practices with regard to these pharmacies while paying one of the largest financial forfeiture penalties in history.” 

I call BS. Prosecution protects a price discrimination scheme and consequently works to keep drugs cheaper for Canadians; in the absence of restrictions on arbitrage, drug companies would have to charge Canadians US prices and would forgo profits in doing so.

If Google is to be policeman for international price discrimination regimes, I wonder what Google's policing costs are.....

We don't know how lucky we are... (a continuing series)

Kiwis often rightly complain about bad regulations here. But they too often assume that America is better. And so I like occasionally pointing to regulatory insanity in the States.

Item the First, courtesy of Radley Balko:

A few years ago, Kris Swanberg, having been laid-off from her job as a Chicago Public School teacher, remembered she received an ice cream maker as a wedding gift. TheChicago mom fished it out of her kitchen cabinet and eventually started a new career. Today Swanberg’s Nice Cream — on offer at local Whole Foods and farmers markets — is considered a star of Chicago’s rich and beloved artisanal ice cream scene, one that could be shut down entirely by state rules, she recently learned. She says that a couple of weeks ago a representative from the Illinois Department of Public Health came to Logan Square Kitchen and informed her she’d have to shut down if she did not get something called "a dairy license." Swanberg and others in her field had operated for years now without ever hearing of such a thing and, indeed, they say, the City’s Department of Business Affairs and Consumer Protection, to whom they applied for business licenses, never informed them they would need one to operate. To get this license Swanberg wrote, in an email, she would have to:

1. "Work out of our own space. Currently we work out of the Logan Square Kitchen."
2. "Have our product tested once a month for bacterial levels."
3. "Change all of our packaging and labels to meet state standards."
4. "Purchase a pasteurizer, which from what the state tells me will be about $40,000 or use a pre-made ice cream mix."

... Although the state is focusing on Swanberg first, other artisanal ice cream makers in Chicago are concerned they might be next. "I have to be worried. I am in too deep to cut my losses now," said a fellow ice cream maker who asked that her name not be used. "This is my life and passion, so I don’t want to be shut down. "Our biggest thing is wondering whether or not there is a way, considering the organic and local food movement, to change the regulations so that small local producers are not being regulated in the same ways as massive creameries — I mean, this is what they enforce for Haagen Dazs." Indeed, IDPH confirmed that these small operations are governed by the very same rules that apply to billion dollar ice cream companies. And although Illinois recently passed the The Illinois Local Food Entrepreneur and Cottage Food Operation Act, (currently awaiting Gov. Pat Quinn's signature) which suggests that the different sets of rules should govern tiny food operations and giant corporations, the bill does not apply to ice cream. Until she gets her license, Swanberg says she must stop putting product on the shelf. She hopes to meet with her fellow ice cream makers to figure out a plan that can allow them to deliver the same quality while abiding by state rules.

Here, I can buy beer at local farmers' markets that's brewed in a guy's garage and small batch organic yogurt from guys who I really doubt had to get a freaking dairy licence to make it. And where the US sends armed police squads, guns drawn, after folks selling raw milk, here organic raw milk sales are booming (though still under constraint) and (except for the armed offenders squad) our police are unarmed.

Item the Second: US nutritional/calorie regs on chain restaurants may wind up killing consumer choice at Dominos. Because large chains have to post calorie counts for every menu item, and because Dominos allows wide variation in toppings on pies, the number of potential calorie count items gets rather high. Go back to your stats text and read the section on permutations and combinations.

As Klein points out, a lot of the big corporations that the administration targets with these regulations completely miss the mark and end up saddling small business owners like the people who own Domino's franchises. Klein quotes one franchise owner who worked his way up from his job as a pizza delivery boy in the 1980s to owning four Domino's franchises in Maryland. The franchises average about 40k a year in profit. The new menu regulations could cost as much as $4,700 a year to maintain the new menus. "There are so many different things that I have to do right now that are just completely unnecessary that take away from our profits," the franchise owner tells Klein. "When does it end? When does this stuff end? Just give a small business guy a break and let me take care of my customers and take care of my people."

We don't know how lucky we are in this country.

But Peter Thiel does (first couple minutes):



From abroad, America looks increasingly like a boot stomping on a human face.