Import News: The Dumb Economy

The Dumb Economy

Import News from the Importers Institute

12 June 2001 - The Dumb Economy

Fisher & Paykel used to be held as an example of "the knowledge economy." Finding it hard to compete, it sought - and got - tariff subsidies from government. Welcome to the dumb economy.

Fisher & Paykel (F&P) was once seen as a paragon of kiwi innovation. It makes washing machines, dishwashers and refrigerators. The appliance business made a trading profit of NZ$44 million last year, an increase of 22% over the previous year.

The only problem is that most of that profit (and that from its even more profitable importing activities) was wiped by a non-cash provision for unrealised losses on foreign currency of $64.2 million.

F&P has a large share of the local market. This is, in part, due to a policy of only supplying those retailers that undertake not to sell goods from other companies. The Commerce Commission ruled that this is not anti-competitive.

Some competition remained, most of it from importers of Korean appliances and independent retailers. Competition meant that F&P could not simply increase prices to make up for the foreign exchange losses.

That problem has now been solved. Government agreed to impose very high tariffs under provisions for "anti-dumping."

The price that importers pay will no longer be that freely agreed between them and their suppliers. From now on, it will be a price established by officials in Jim Anderton's Ministry of Economic Development.

The new import prices are carefully calculated to be "non injurious" to F&P, i.e. they will enable the company to increase its own prices to consumers by hobbling the competition. Consumers, as usual, will pay. The importers in question may go out of business. Now, how dumb is that?

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