Wednesday, 5 May 2010

National and Tariffs

National seems set today to vote down Roger Douglas's bill eliminating New Zealand's few remaining tariffs. While our tariffs are relatively low by international standards, they do result in lots of barefoot Kiwis.

Getting rid of the remaining tariffs would be the right thing to do, but wouldn't have very large effects on the overall economy. Prices on clothes, shoes, and some industrial goods would drop, but probably not by enough for voters to notice come the next election. However, they would remember the news stories about the next clothing plant that closes claiming it was due to tariff protection reduction (whether any tariff changes were marginal or inframarginal would not be discussed, of course). Gains to the winners outweigh losses to the losers, but the winners are dispersed and wouldn't much notice it. Logic of Collective Action meets the Myth of the Rational Voter.

So National could be right not to spend political capital on this one if they were saving up for moves that would earn them as much opposition but that would generate greater efficiency gains. Let's hope to see some of those moves in the budget....


  1. And so, ever the optimist, my estimation of how much great stuff will have to be in the budget increases...