Monday 13 July 2009

Cross-tasman trade in bread?

One of the things that worries me least is whether or not my bread is fortified with Folic Acid. For some things, I'd go to the barricades. This seems one of the more minor regulatory impositions; however, I can imagine it being very costly for small bakeries.

What I'm puzzled about is the National government's willingness to go carry through with the prior Labour government's policy in this area. They cite cross-Tasman trade agreements with Australia. Now, I can see the case for regulatory harmonization in some areas, weighing appropriately concerns about reduced Tiebout competition, but who trades bread across the ocean?! If efficiencies of scale in bread-making were so large relative to transportation costs, I'd expect there to be one or two big bakeries serving all of New Zealand. Instead, they're everywhere! Coupland's, the big South Island bakery, doesn't seem to ship bread even up to the North Island, never mind to Australia.

Whenever I see things like this, I start thinking about Bootleggers and Baptists. This is all of course just speculation, but folic acid supplementation really seems like the kind of thing that can be done at very low per-unit costs by the very big bakeries but at much higher per-unit costs by the little guys. There are fixed costs in redoing your recipes and testing things out. So it seems a possibility for the kind of regulation designed to raise rivals' costs. So, there's the bootleggers. The Baptists, as often the case, are the public health folks demanding that somebody think about the children.

National's candidate explanation makes no discernible sense, unless there's a massive trans-Tasman trade in bread that nobody's told me about. Bread is about the least likely thing to ship across the ocean though: low value per unit weight so bad for shipping by air, and highly perishable so bad for shipping by sea. So I'd be a bit surprised if the trade regulations were the real story. Purely speculation, but might it be the case that big bakeries have already incurred the fixed costs of rejigging production lines and are keen not to see that investment sunk without it similarly being imposed on the little guys? I see no exemption in the regs for small bakers unless they want to go purely organic.

Or maybe my paranoid goggles are on again now that semester's started and I'm again teaching Public Choice.

1 comment:

  1. Well, it's because it's not about what Wilkinson knows, it's about who she is. Don't forget that parliamentary democracy is based on a popularity contest and ministerial positions are a result of schmoozing people, not knowing the realities of everyday situations. A poorly briefed minister usually means a poor back office setup.

    Folate in bread is a by-product of FSANZ and coordinated standards for political reasons, pretty much the same as European Union rules that govern the same things.

    You're right, a trade in bread would be silly, and Wilkinson is just making herself look sillier every time she opens her mouth.