Monday, July 13, 2020

French fries in the Kiwis - Not a crispy affair!

A classic example of winners and losers in the free trade debate is coming in from New Zealand - and the product is the unlikely french fries!

Due to the lockdown impact in Europe, imports of cheap french fries to New Zealand is causing prices to dip and challenge local growers and makers of french fries. The news reports are found here and here.
Perfect Thin and Crispy French Fries Recipe | Serious Eats

I was surprised to find a website called Potato News Today which traces the potato industry. It reported thus:
Globally, the disruption of supply chains, and particularly sales to hospitality, by virtue of COVID-19 restrictions has led to the complete collapse of potato prices in major production centres, in particular the European Union (EU). 
This will shortly lead to extraordinary price reductions in frozen potato chips from the EU. It’s expected that a similar collapse will be seen in other parts of the northern hemisphere, in particular in North America. The EU currently have approximately 2.6 million tonnes surplus frozen fries. 
If urgent steps are not put in place to prevent it, New Zealand is likely to be swamped by imports of frozen potato chips at those extraordinary prices. That, together with the existing impact of the current pandemic will in turn cause the New Zealand potato-growing and potato-processing industries to suffer severe and prolonged damage.
Familiar points when domestic industry is hit by a surge of imports. The multilateral trade rules do provide for possible action - raising applied tariffs if within bound rates, imposing anti-dumping duties or taking safeguard measures.

However, is the surge of imports a manifestation of the market or a deliberate attempt to off load cheap french fries in the Kiwi market? How do losers in this episode react - do they believe in the virtues of a free trading system based on comparative advantages? Is the fall in prices due to the market, an interplay of demand and supply, or a deliberate attempt to undercut competition?




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