US wages rise, bolsters rate hike case; TPP talks break down; Russia cuts rates; iron ore price falls; UST 10yr yield down to 2.19%; oil lower, gold higher; NZ$1 = 65.9 US¢, TWI-5 = 70.8

"... It is the simple fact that the old playbook – Australian iron ore, French leather, fried chicken (and New Zealand milk??) and Bavarian engineering – doesn’t work anymore.....it is over….and arguably over forever.

http://ftalphaville.ft.com/2015/07/31/2136075/the-whatever-china-needs-…?

So New Zealand doesn’t have the influence it expected with the US, Canada, Japan, other TPP-negotiating countries? Maybe there’s an overlooked answer.

The instincts of John Key and this government are to ‘wing it’ and hope that nobody is paying attention. This seems to work well in New Zealand, where a largely supine media (excepting National Radio) ensures no serious policy questions are asked.

But, the fact is, people elsewhere in the world do pay attention. They see that late last year New Zealand entered a ‘Comprehensive Strategic Partnership’ (that’s exactly what it’s called) with China.

Why would we do this? Every toadying New Zealand economist, every empire-builder in Fonterra, every political flunkey, every industry hanger-on, could parrot the answer. China would take all the dairy products New Zealand could ever produce, and pay premium prices for the privilege. And all for as far ahead as you could see. Our country would never have to look elsewhere. Together, China and unrestrained dairy expansion would pretty much solve our economic future once and for all.

And was there ever a greater national misjudgement than this?

Our dairy strategy having turned to custard (though the ‘Comprehensive Strategic Partnership’ with China is very much in place) we now turn ever-more urgent attention to attempting to curry favour with the US, Canada, Japan and other TPP-inclined nations. Our fervent hope – whatever the accompanying TPP strictures - is that they’ll throw our floundering dairy industry a life buoy.

It might be worth considering that the TPP has been established essentially as a vehicle for those nations which are not, or don’t wish to be, subsumed by China. Its conception and purpose is to provide a political and economic counterweight to Chinese power and its possible exercise and expansion. In addition, some of these nations, astonishingly, want to protect their own industries, the well-being of their own citizens, even their own food security. (The points are in no way intended to justify the anti-sovereign provisions apparently embedded in the TPPA. These are another issue entirely.)

The fact is, foreign affairs are larger than our government’s one-eyed focus on the well-being of Fonterra and the expansion of our dairy industry.

There’s an expression for what we’re doing. It’s attempting ‘to run with the hares and hunt with the hounds’. It doesn’t work long in the real world.

What New Zealand wants from the TPPA is nothing less than rescue from its own political and economic folly. It would appear too that our government is prepared to go to almost any length to secure some sort of rescue.

Is it a problem for the US, Canada and Japan that New Zealand decided to settle its future on an easily-replicated global commodity? Is it their problem that our dairy farms are up to their armpits in debt? That bank loan books and many of our farmers are circling the drain? Or are these problems of our own making?

Does New Zealand truly expect to have much leverage with the US, Canada and Japan having entered a ‘Comprehensive Strategic Partnership’ with China? Perhaps they’ll feel sorry for us. After all, it’s plain that this government doesn’t understand you can’t wing things on a world stage.

Well written working man , clever bugger

Damm fine post working man!

Over the weekend, Russia cut its official interest rate by 0.5% to 11%. They have tough choices to make. High interest rates hold back investment they desperately need. But lower rates drive down their currency making inflation even higher and painful.

Tough choices like this would be welcome in New Zealand.

Wintershall said it plans to join the new gas pipeline project led by Russia’s Gazprom that’ll deliver up to 55 billion cubic meters of gas annually to Germany via the Baltic Sea.

A memorandum of understanding was signed by BASF/Wintershall and Gazprom Friday. Read more

Patents on medicines. A longer period does not neccessarily promote research. Despite the self promotion much of the research spend by big pharma companies is not to find new therapies. They research to produce drugs that are the same as existing, but just different enough to avoid a patent conflict. Such 'research' produces no benefit for users, just a commercial angle for the companies. Often we end up with a new product that is just the same as from the other company, and often less useful.
New research is a minor part of the research spend. Extending the patent period will just divert more of the spend into this substitution research.

Key and Groser talking up the future of TPP this morning. But hopefully it's dead. And they were saying 'trust us' and 'don't be difficult' Sorry chaps, we don't trust you, and please understand democracy is difficult.

Anyone else wondering how many perfectly good bi-lateral agreements we could have struck with other countries, including most of those in the TPPA now, in all the time, effort and money that has gone into the disaster that is the TPPA.

Japan in Depth / Japan, U.S. misjudge N.Z. stance on TPP
http://the-japan-news.com/news/article/0002329596

Sure, the dairy industry is important to New Zealand. It has, however, become very important, not because it’s a success, but because it’s in a mess, teetering on top of a debt mountain. Productivity is out of kilter with grossly inflated land values. In 'good' times, it used to be called ‘farming for capital gain’. Yes, some are making money in the sector, but the industry as a whole has been swallowing banknotes as fast as you can print them.

Employment? A couple of years ago (googled this) Federated Farmers estimated that about a fifth of all dairy workers in New Zealand were from overseas. Presumably these numbers will be higher now, not lower, and their wages – by all reports - are bouncing along the bottom, and too often beneath the minimum wage.

Criticizing the dairy industry is almost seen as unpatriotic. Mike Joy, pointing out the appalling and increasing environmental degradation, is called traitorous, for heaven’s sake. No-one here wants to see New Zealand go down the drain. But the dairy industry would deserve greater respect if it was a high-value or premium producer, and one genuinely managing our environment. It’s neither of these.

Expanding a commodity outfit at huge capital cost (leaving the environmental consequences and costs out of it) is a pretty good way to come unstuck. The money is being made by others further up the food chain, and Fonterra’s evident inability to operate satisfactorily at a high professional level was well exposed when Danone – one of its largest customers – decided to walk. Maybe they thought China would be altogether an easier market, but choosing easy with nothing more than a handful of commodities is choosing failure.

On the TPPA, there’s no denying the US and other influential countries are throwing their political and corporate weight around. And being asked to trust John Key, Groser, etc, doesn’t cut it. Good on Jane Kelsey for keeping her teeth around their ankles.

There is, like it or not, a contest of values with China, and the TPP is on one side of the wrestling ring. For those countries keen to join, it’s about trade, business, etc, but also about (vaguely) common political and social values – things like international law, property rights, an independent judiciary, freedom of speech, freedom of assembly, freedom of religion, democratic elections, etc. These are not China’s strong points. True, they’re pretty uneven country by country elsewhere, but the rights they have are a darn sight better than their absence. For many Asian and Pacific rim countries, maintenance of these rights - in effect, their political and social structures - are real concerns.

On the other side, where TPPA stands, under US dominance, corporate and financial interests are pushing for whatever winnings they can get. So we need our eyes wide open when the small print is shoved across at us. Thanks again Jane Kelsey.

New Zealand seems to have decided to get into bed with China and somehow keep its marriage going too. And suddenly, with dairying in its deep malaise, the old marriage is crucial. But there’s a risk with playing a double game. John Key’s habit of ‘winging it’ isn’t an answer.

I'll expect everybody to come along to the Anti TPPA walks, some of those are on this Saturday, the one in Auckland is on the 15th.
If our 'media' is only starting to report on this now, and internationally we're being seen as 'for' it, it would pay to come out en masse to show both Key and Groser, and the rest of the world, that we're not happy with it, at all.
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Had to snigger at Groser in the herald this morning: he'll win the war, because those who oppose it do so for ideological reasons.
The way this government has been pursuing a trade deal which is not in our best interest, smacks of cultish ideology to me...

All of the above relies upon the NZ Governments being legal.......so I cannot see how any TPPA, FTA or any other agreement for that matter is actually going to stand up anywhere!!!