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Comment by cocoland2 | Hacker News Reader

There were several caveats in RCEP that were huge red flags domestically. For example , Diary & associated products from NZ to India , Chinese goods getting re-routed through Vietnam (Manufacture a shoe in China , just label it in Vietnam and route to India) etc. that were a problem. It is worrying that Chinese influence is grappling ASEAN economies , most times it is the worry that they won't play fair with smaller trade partners. For once , a lot of people were happy in my state the agreement was not signed.

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> huge red flags domestically

Probably useful to specify what country you are in.

> Diary[sic] & associated products from NZ to India

NZ dairy is generally considered high quality and good cost, so it is unclear what the problem is here

> Chinese goods getting re-routed through Vietnam

People say this like customs enforcement agencies don't know about this. In some cases this is acceptable, but it depends on the exact trade rules about the amount of local content that needs to be added in a country.

Sure , I am from India.

The diary sector in India is largely unorganized , these are managed as daily livelihood for poor income families who have at best a few cows that provide them with livelihood. The co-operative sector in India mentioned how imports from NZ will wreck the system , for example the largest co-operative AMUL in India was against RCEP and imports from NZ (https://www.nationalheraldindia.com/india/rcep-amul-warns-mo...)

The exact trade rules and local content are in many cases impossible to vet and verify and are in many cases not transparent. And given the sentiment in India , no one will take chances with China

This just seems a naked protectionism argument.

Yeah! , that is why India is not (yet) a participant on RCEP. Given that I am in rural India , if protectionism saves someone from starvation , I am fine with it.

I imagine if you're posting on HN, you're not at imminent risk of starvation.

(No value judgement on your position though, I generally think that this treaty is a bad thing due to its role in expanding China's power and influence, when it should be contained.)

Point taken! It was not so much about me , financials are not a stance for my living. Philosophical as it may sound , my worry is for the hand cart puller who walks all day in pretty hot sun here , or for that maid whose husband has lost his daily wages due to COVID and how she makes ends meet for her kid selling milk to a co-operative here. India lives in its villages (quot: Mahatma Gandhi) and taking a livelyhood off in the name of globalization may not augur well with rural households in the long run

I do understand and sympathise, genuinely, but I think this approach is what has held India back for the last few generations. Just look at the speed with which China has modernised over the last 30 years in comparison. Protectionism freezes an economy and society in place.

Yes this policy helps some rural families, but it also condemns all the other rural families to getting only variable quality, intermittently available, expensive dairy products. Every protectionist support for a local industry imposes a cost on everyone else, to the point where everyone benefits a bit from protection, but also pays costs on all the goods and services they themselves consume. It may even be sustainable, but only at the price of sacrificing the chance of a better future.

Change is painful, no doubt about it, but opening up to international markets can also mean opening up to international investment, technical skills and partnerships. It needs to be coordinated and there should also be transition plans to mitigate some of the pain. I do believe it’s for the best though.

Protecting a failed industry from modernised competitors doesn't work. The industry has still failed and now lacks incentive to invest in new technology and infrastructure. Having committed to protecting it with tariffs and quotas in the name of jobs, government is now a captured regulator and props up the failed sector further with grants and tax breaks; in other words, it's now a leech on every other sector. Those commanding the sector pocket the majority of the support funds, since government is incapable of ring-fencing or auditing their use.

So the strategy as a whole feeds a cycle of decrepitude, decay, and corruption. Since it's unsustainable, eventually the house of cards collapses and everyone at the bottom of the economic pyramid starves anyway.

It's a particularly nasty case of a policy measure harming the people it was supposed to help. There's an adage in economics, "trade favours the poor"⁽¹⁾. Mark it well.

As a rather extreme example, the so-called "Great Depression" of the 1930s was significantly exacerbated by protectionist trade policies, ostensibly rushed in to shore up local industries with tariffs; in practice this caused the already-declining global levels of trade to collapse entirely.

Protectionism is the opposite of investment and renewal, and an enemy of prosperity.

⁽¹⁾ there's a related saying in political science; "trade stops wars".

Protectionism in agriculture is quite common all across the board is it not? And India doesn't even fare that bad If I am not recalling it correctly.

I agree with you in your assessment that protectionism breeds inefficiency, but you are imposing your strictly one sided take on 'what should be' without stopping to consider 'why it is',

it's an answer fit for a class of undergrads, quotes and all, but has little to no real world value as its so generalist in its assumption.

Economics is a black art, and subjectivity matters more than the principles.

What you say of agriculture is true, but exposes the strength of landowners as a lobby group, not some innate quality of protectionism. When tariffs, barriers, and subsidies are removed from agriculture, prices fall, and the people eat.

This isn't some abstract argument. If you want to talk about India, notwithstanding that India is so vast and complex a nation that only the unwary say "India this" or "India that" broadly, the country had a decades-long history of protectionism since independence, trying to get by with very low levels of international trade, and this being a crucial factor in the 1991 economic crisis: the government had no foreign currency reserves at time when the balance of trade was catastrophic due to rising global oil prices and the demand for modern goods from abroad.

Liberalization of trade is not without its problems - in particular, increasing wealth inequities, and cultural imperialism by economic means. Nevertheless, the subsequent lowering of barriers corrected the crises and has defined India's catapult to the top levels of international manufacturing and service provision.

Every country plays to its strengths and weaknesses. India is behind much of SEA in manufacturing or infra and would not be competitive with large scale industrial agriculture from NZ & Aus. In the short term it is a loose-loose.

India's strength lies in its size and its ability to pool resources and technology.

Compared to China, India is way more open market, it's institutions are transparent.

Where India has failed vis-a-vis China is its unwillingness to use its market size and pooling ability and play its strengths. India's past economics has been driven by too many western educated economists who fail to see India as a unique case instead have always attempted to use a European or American template for economic development.

> Where India has failed vis-a-vis China is its unwillingness to use its market size and pooling ability and play its strengths.

I think most assessment of the Indian economy put the blame on incredible amounts of bureaucracy as one of the main constraints on growth. The same ("we have to protect their jobs") argument is used to protect that.

Yes there is corruption in India and there is corruption in China, systemic corruption in any country becomes a service, bribes are a way to pay for the service.

Granted it is not nice to have corruption and it introduces gross inefficiencies. But that isn't the primary reason India is lagging behind China, nor is it entirely because of a lack of free markets.

One excellent example would be solar power, India could pool its market capacity, technological ability and finance to have built up a huge ecosystem, but instead it went the route of importing everything, even as it goes about building some of the largest solar projects in the world.

The Chinese are wealthy because they would never let go of such a golden opportunity.

Sorry but that's what free trade means.

If NZ produces dairy products more efficiently then they deserve the benefits. At the same time in India where manufacturing is far more efficient they have the opportunity to export as many manufactured goods to NZ as they want.

If the Indian government wants to tax their manufacturers to provide support to their now unemployed dairy farmers they are free to do so but ultimately both countries are better off with India paying overall less for dairy and NZ paying less for manufactured goods.

Most people aren’t free trade absolutists — they want a mixture of free trade and national security.

One example is US ITAR restrictions, which prevent certain technologies being exported.

Another is looking to protect local food supplies against foreign competition — eg, dairy co-ops from foreign mega farms.

There’s lots of empirical evidence that a mixed system is more stable with little to no loss to innovation.

Most recently, COVID demonstrated the problem with foreign supply chains.

Interesting point on Indian dairy co-ops. The NZ dairy industry, has from the very beginning had a strong co-op focus as well as being concentrated on exports, even as its beginnings in the nineteenth century.

Despite great pushes over the last forty years this remains in modern form to the present day and is seen by NZ farmers as an essential part of their success, as this has allowed them to pool resources and invest in the vertical integration (transport, factories, shipping) to compete overseas. A similar structure also exists in other countries (US with DFA milk, Denmark & Sweden with Arla are also in the top ten global dairy companies)

Until the early 1980s, NZ also operated a very protectionist trade policy dependent on access to traditional markets which ultimately failed badly. This experience and the (painful) resulting changes is a major reason why NZ is such a proponent of trade agreements and multilaterality more generally on the global stage.

There are multiple reasons to have cattle in India. One important ecological reason is production of manure, another is the preservation of local breeds, which often produces high quality but low quantities of milk.

The more immediate concern is that making millions of families dependent on government hand outs would be disastrous.

I'd understand an uproar against melamine labeled as milk etc being imported from China, but the concept that a pint-size country like NZ (population 5 million) with extremely expensive labor & shipping costs can "wreck" the dairy industry of a country of ~1.4 billion where the cost of labor is a rounding error is astonishing.

All kinds of things are possible these days - https://www.nationalgeographic.com/magazine/2017/09/holland-...

>with extremely expensive labor & shipping costs can "wreck" the dairy industry of a country of ~1.4 billion where the cost of labor is a rounding error is astonishing.

You are severely under estimating the cost efficiency of modern mass manufacturing vs a country with very little to no infrastructure in the segment.

Also, India bare has free-trade within the country. That's the easier and lower hanging fruit.

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