Which came first, the chicken or the competition?

In anticipation of Brexit, the United States has outlined its objectives for a trade agreement with the UK. Among other things, it wants to see access for its agriculture to the UK market. But US agriculture includes products such as chlorinated chicken, banned in the EU. Will the UK let these chickens in, if it “takes back control” and can make its own trade agreements?

For the US, the EU ban on chlorinated chicken is seen as a protectionist measure rather than a health protection measure. The US ambassador to the UK in an angry article in the British newspaper “Daily Telegraph” has attacked the EU approach : “Inflammatory and misleading terms like ‘chlorinated chicken’ and ‘hormone beef’ are deployed to cast American farming in the worst possible light…..It is time the myths are called out for what they really are: a smear campaign from people with their own protectionist agenda.” Even a moderate  US journal such as “The Atlantic”  states that “The European Union banned antimicrobial baths in 1997. That ban created a protected market for European and British chicken producers.” 

In fact, the picture is a good deal more nuanced. In production terms, the EU is self-sufficient in poultry meat: from 2009 onwards production has always exceeded consumption.  But the EU imports lots of chicken from other parts of the world, and exports a lot also. It imports chicken from Brazil, Thailand, the Ukraine, among others, to a total of 786 thousand tonnes in 2018, which is about 5.3 per cent of EU production, and it  exports chicken to Ukraine, Philippines, Ghana, China (Hong Kong) and others, to a total of 12 per cent of EU production.

Looking at these other countries, the UN trade statistics tell us that the EU and the US are both selling them chicken in increasing amounts. Quite frequently, the EU is selling more. The EU outsold the US in Ghana (2015-2017), Japan (2014-2016), South Africa and Ukraine (2014-2017). Only in Hong Kong and the Philippines is the EU clearly behind the US, with sales at 56 per cent and 69 per cent of the US total in 2017. It’s also interesting that the EU chicken sometimes does quite well in price terms also, with the average price per kilo higher than that for the US product in the Hong Kong, Japanese,  and South African markets in 2016 and 2017.

So, in third countries, where the EU and US are head-to-head, the EU chicken seems rather competitive. Which means that if the EU really were protectionist, it wouldn’t need to be.

 

Competitiveness Liga

People like numbers, as long as there are not too many. And people have a broad grasp of rankings: they know the difference between coming first in a race and coming last. From this comes some of the appeal of competitiveness rankings. I understand this appeal: I worked myself in that area for many years, supporting the National Competitiveness Council in Ireland, and also involved in policy benchmarking at EU level and being part of an international competitiveness network. However, in our NCC reports we resisted the temptation to have an aggregate ranking, because we felt that it would conceal more information than it revealed.
Nevertheless, competitiveness rankings are well established. The two big ones, the IMD and the World Economic Forum rankings, are widely quoted and governments and businesses appear to take them seriously enough. Both reports work in the same basic way, gathering indicators of what are believed to be the factors of competitiveness and putting them together in composite sub-rankings which are then combined into a single ranking for those who want an overview. The key results are here:

RankIMD 2017IMD 2018WEF 2017-2018
1Hong Kong USASwitzerland
2SwitzerlandHong Kong SARUSA
3SingaporeSingaporeSingapore
4USANetherlandsNetherlands
5NetherlandsSwitzerlandGermany
6IrelandDenmarkHong Kong SAR
7Denmark UAE Sweden
8Luxembourg Norway UK
9Sweden Sweden Japan
10UAE Canada Finland

 

Clearly there are similarities, but also surprises.  For IMD,  the United Arab Emirates ranks seventh in the world, and, unlike WEF, IMD finds no places in the top ten for large advanced economies such as Germany, the UK and Japan.

The IMD 2018 Report came out in May 2018 and the website gives the rankings for 2017 and rankings and scores for both 2017 and 2018. By scores is meant a composite index prepared in order to provide a ranking. A quick look at these shows three things
1. First of all the top ten doesn’t change very much. As in a football league, two drop out (Ireland and Luxembourg) and two are promoted (Norway and Canada).
2. If we look at all 43 countries covered by IMD, we find that the most competitive countries are most similar. The top ten are closer to each other than lower groups are.
3. These single rankings actually don’t tell us very much: the underlying data is probably far more interesting.

The euro, again

Paul Krugman had a strange piece in the New York Times yesterday. He said that many of Europe’s problems came from the “…disastrous decision, a generation ago, to adopt a single currency. …. And while countries like Iceland that retained their own money were able to quickly regain competitiveness by devaluing their currencies, eurozone nations were forced into a protracted depression.”

There are a lot of things wrong with this kind of thinking, and Krugman is not the first to come up with it. Many US and UK economists think the euro is a bad idea. But to point to Iceland, without ever considering the very specialised nature of its economy and resource endowment, makes little sense. And to talk about exchange rates as the key to competitiveness, without ever mentioning taxation, or skills, or education, or regulation, or infrastructure, or science and technology policy, or telecommunications, or connectivity, or language, or legal systems, or any other factor, is very odd.