Monday, February 22, 2016
Bureaucracy and canned tomatoes
I initially thought this story was too trivial to be worth mentioning but it is such an hilarious example of bureaucracy in action that I thought I should mention it after all. The story concerns Australia but the lessons about bureaucracy are universal.
I first noticed the story because I do buy canned tomatoes. I tip a can of them into my crockpot as the first step towards making a curry. And I had noticed the odd price disparity between different brands. The "Home" brand I buy from Woolworths costs me only 59c whereas other brands cost as much as $1.40 per can. And the 59c cans come all the way from Italy -- something I have mentioned before.
And the first sentence from the Fairfax news report below is misleading. The bureaucracy has indeed laboured mightily but the assertion that "The days of cheap tinned tomatoes are over" is nonsense. The duties recently imposed range between 4% and 8% and they will be levied on the wholesale price. So say Woolworths buy my 59c can for 50c (it's probably less). So Woolworths will now have to pay how much extra to put that can on their shelves? 4c. So now I will have to pay about 65c for my tomatoes. Why bother? A 65c can of Italian tomatoes is still going to be hugely competitive with a $1.40 can of Australian-grown tomatoes. I can't see the price rise influencing any purchasing decisions at all.
So how come the bureaucracy has laboured and brought forth a nullity? Because it is a rule-following organism. The duty imposed was a dumping duty -- meaning the Italians sell their product for export at a lower prices than they charge local Italian shopkeepers. They do it because they still have some profit at the lower price and some profit is better than none. It keeps their volumes and market share up.
And dumping duty is calculated according to strict rules. You subtract the price to Australia from the price to Italy and express it as a percentage. You then add that percentage to the Australian price in the form of an import duty. So, as it happened, the Italian canners were selling us their tomatoes only a touch more cheaply than they charge Italian customers. The export discount was minor so the dumping duty was minor. A bureaucrat with a brain would have said "This is not worth bothering about". But a bureaucrat is not paid to think. He is paid to follow rules. And our lot did exactly that.
But that is not the only absurdity. The big market for tomatoes is for fresh tomatoes. As little as 2% of Australian-grown tomatoes end up in cans. So if Italian canned tomatoes took over completely, it would make no important difference to Australian tomato farming. The growers would continue growing as before. The main existing canners are owned by Coca Cola so sympathy for them is probably not large -- and they can lots of other fruit so their production lines would not be likely to lie idle.
So we see yet again why conservatives dislike bureaucracy and why Leftists love it. Leftists hate the society they live in so much that imposing anything inefficient, costly and wasteful on their society seems great to them.
And it is bureaucracy that created the problem in the first place -- the EU bureaucracy. EU farmers -- particularly French ones -- are prone to huge tantrums if they are not making enough money. They blockade things, burn things and generally create havoc. So to placate them, the EU bureaucracy pays them big subsidies. That 50c can of tomatoes probably cost $1 to produce -- with the EU taxpayer supplying the other 50c
Ain't government wonderful?
The days of cheap tinned tomatoes are over, with the federal government backing a decision to slap anti-dumping measures on two Italian giants that account for half of imported tinned tomatoes in Australia.
The Anti-Dumping Commission found exporters La Doria and Feger di Gerardo Ferraioli guilty of dumping - selling product for less than they sell for in their own country - and causing "material damage" to the local industry.
Industry Minister Christopher Pyne said the government would impose dumping duties on the two players: 8.4 per cent to Feger tomato products and 4.5 per cent to La Doria imports.
"This ruling will ensure that Australia's only canned tomato producer, SPC Ardmona, can now compete equally in Australian stores and supermarkets," he said.
The decision means all 105 canned tomato exporters from Italy will now be affected by dumping duties. An earlier ruling saw Feger and La Doria escape penalty for dumping.
With the price of a 400 gram tin of Italian tomatoes as low as 60 cents on shelves, consumers should expect overall prices to rise. A similar SPC tin is $1.40.
But Coca-Cola Amatil-owned SPC, which has suffered a loss of 40 per cent of volume and reduced profitability during its fight, urged consumers to consider "the quality, value, ethics and food miles" of Australian-grown products.
"This is a win for SPC and our growers, and for Australian industry, which faces daily pressure to compete with cheap imports and those cutting corners and putting slavery in a can," said SPC's managing director Reg Weine.
Mr Weine's "slavery in a can" remark refers to claims that Italian growers use poorly paid illegal immigrants from Muslim lands to do much of their harvesting. They probably do. Americans would understand
This Government Agency Offends the Constitution and Needs to Be Eliminated
A little-known federal government agency, the Consumer Financial Protection Bureau, imposes enormous costs on consumers and financial service providers through costly and unwarranted command-and-control regulation.
What’s more, the Consumer Financial Protection Bureau runs afoul of the constitutionally mandated separation of powers. Thus, both economic and constitutional concerns indicate that it is time for Congress to abolish the Consumer Financial Protection Bureau and reallocate those of its functions that merit being retained to other existing federal regulatory agencies.
Creation of the Consumer Financial Protection Bureau was a key feature of the Dodd-Frank Act of 2010, which, as Heritage scholars have explained, represents a failed attempt to address the causes of the 2008 financial crisis (in fact, it makes future financial crises and bailouts more likely).
The Consumer Financial Protection Bureau is given broad authority, through rulemaking and enforcement actions, “to implement and, where applicable, enforce Federal consumer financial law consistently for the purpose of ensuring that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent, and competitive.”
Despite these lofty goals, the Consumer Financial Protection Bureau has imposed high costs on the finance sector and consumers while reducing the choice of products and services—and thus competition and innovation within the consumer financial marketplace.
In enacting Dodd-Frank, Congress went out of its way to shield the Consumer Financial Protection Bureau from the normal forms of congressional oversight that hold government agencies accountable to the people’s elected representatives. Dodd-Frank allows the agency to obtain the budget it desires directly from the Federal Reserve Board, free from congressional appropriations oversight and budgetary review. That means Congress cannot effectively question Consumer Financial Protection Bureau policies.
Moreover, the Consumer Financial Protection Bureau is free from presidential oversight and from effective Federal Reserve Board management control. More than any other federal agency, it is a power unto itself, able to impose its regulatory will on individual Americans without political accountability.
This is at odds with the importance the Framers of the Constitution placed on effective congressional and executive oversight to the legitimacy of government action.
Specifically, in Federalist 58, James Madison explained that the congressional “power of the purse may … be regarded as the most complete and effectual weapon with which any constitution can arm the immediate representatives of the people, for obtaining a redress of every grievance, and for carrying into effect every just and salutary measure.”
Congress, however, cannot employ this “effectual weapon” with respect to the Consumer Financial Protection Bureau, since it does not appropriate funds for the agency and may not even review the bureau’s budget.
The Consumer Financial Protection Bureau has praised this freedom from accountability to Congress, stating that its “funding outside the congressional appropriations process” ensures its “full independence” from Congress.
And in Federalist 72, Alexander Hamilton explained that with respect to the execution of the laws, the people look to the president to guide the “assistants or deputies … subject to his superintendence.”
Hamilton added in Federalist 70 that absent a clear chain of command, the public cannot “determine on whom the blame or the punishment of a pernicious measure, or series of pernicious measures ought really to fall.”
For that reason, as James Madison explained to the First Congress, the Constitution sought to ensure that “those who are employed in the execution of the law will be in their proper situation, and the chain of dependence be preserved; the lowest officers, the middle grade, and the highest, will depend, as they ought, on the president, and the president on the community.”
The Consumer Financial Protection Bureau insulation from presidential control means that there is no “chain of dependence” linking the bureau to presidential oversight and no presidential “superintendence” of Consumer Financial Protection Bureau activities.
Despite the principled case for the Consumer Financial Protection Bureau’s unconstitutionality, however, lawsuits challenging it are time-consuming, uncertain, and of questionable utility in reining in the bureau. The federal courts have been reluctant to invoke constitutional “first principles” to second-guess congressional decisions regarding agency structure and broad delegations of authority. Accordingly, congressional action is needed.
Specifically, Congress should identify the consumer protections currently assigned to the bureau. Given the broad sweep of the Consumer Financial Protection Bureau’s authority and the harm it has imposed through its regulatory actions, some of those responsibilities merit being eliminated or, if not, substantially curtailed.
Congress should repeal all Consumer Financial Protection Bureau-related statutory provisions and restore the authority of more constitutionally accountable federal agencies—the Federal Trade Commission and the traditional federal financial institution regulators —over consumer protection with respect to financial services.
Congress should review existing federal financial services regulatory statutes with an eye to eliminating programs that are excessively burdensome and harmful to the American economy and consider ways to harmonize the application of financial institution regulatory standards.
Also, as Heritage Foundation scholars have recommended, Congress should consider enacting additional regulatory reform legislation, such as requiring congressional approval of new major regulations issued by agencies (including financial services regulators) and subjecting “independent” agencies (including financial services agencies) to executive branch regulatory review.
Carried out appropriately, this legislative reform agenda would inure to the benefit of the American economy and further the cause of sound, constitutionally accountable government.
NOTE: For the last week or so I have been doing a bit of work on my side-column. I think I have got it how I want it now so readers might find a few thoughts in it that are new.
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Posted by JR at 1:34 AM