International Trade And Logistics: Analytical Essay on Agribusiness in Nepal

International Trade And Logistics: Analytical Essay on Agribusiness in Nepal

Executive summary

Agribusiness is an industry in which the farmers are engaged in producing foods, storing them, manufacturing and distributing the product. International trade has brought lots of opportunities in agricultural business however this national business also faces certain challenges and problems in international trade. International trade affects on the culture of Nepalese agriculture and it also affects the productivity of soil so for this agribusiness should make some policies.

Introduction

Agribusiness is an industry in which the farmers are engaged in producing foods, storing them, manufacturing and distributing the product. Agribusiness in Nepal has for some time been founded on subsistence cultivating, especially in the hilly areas where laborers get their living from divided land for cultivation. Agriculture in Nepal is fundamental to the economy of this nation. Almost 80 percent of the populace depends on agribusiness here and there, yet there isn’t sufficient creation to help the populace. There is an interminable issue of kid ailing health and an expected 50 percent of Nepal’s kids are influenced by hindering. This rate is significantly higher in the precipitous areas. Agriculture plays an important role in Nepal’s GDP as most of people of Nepal are engaged in agricultural business.

International trade involves importing and exporting of goods from one country to another.

International trade is considered as a fundamental factor for quickening the way of monetary improvement and most nations are included into outside exchange to make work, raise affinity to spare, increment remote trade acquiring, and raise the efficiency of venture moving from less gainful use to high profitable use (Sharma, December 2005). This report talk about the agribusiness of Nepal as a national business and the goal of owner is international trade considering the opportunities, and strategies. This report will include the opportunities for Nepalese agriculture international trade as well as strategies along with the solutions to overcome the risk in international business. This report concludes with the outcomes and recommendations.

Findings

AgriBusiness in Nepal

According to Gauchan “Agribusiness is key to the vocation of Nepalese individuals, adding to around 36 % of the nation’s GDP and utilizing 66 % of its work power (MoAC, 2007). The significance of farming as the absolute most significant supplier of occupation for two-third of Nepal’s populace infers that the improvement in this division will decisively affect guaranteeing nourishment security and destitution decrease. It is likewise the primary wellspring of fare profit and salary of the least fortunate families (90% of the base utilization quintile). Farming along these lines is the primary source of national economy and the significant motor of professional poor development” (Gauchan, 2008). Nepal got the participation of the World Trade Organization through the arrangement procedure in 2004 and the target of Nepal in accomplishing the enrollment was to broaden its trade and to change the exchange system (GC, 2018). The agricultural products exported from Nepal are floricultural products, tea and coffee, medicinal herbs and oils, and vegetable products and these products are mainly exported in India and China as Nepal’s three sides are surrounded by India and other by china.

Agribusiness Opportunities in International Trade

Nepalese people grow lots of agricultural products so they have lots of opportunities in international trade. Lentils has a high demand on South East Asia so Nepal has an opportunity of exporting high number of lentils that are grown in Terai region of Nepal same as the spices like cinnamon, turmeric, cardamom are grown in Nepal which has high market internally. In beverage Nepal is rich in tea farming which is in Darjeeling and which is considered as one of the best and fresh tea in world. This is exported more in Europe and also has an opportunity to grow its business in other sectors as well. Now a day coffee farming is gaing popularity and the demand for coffee is also high which shows the way for coffee farmer to expand their business nationally and internationally. From the historical period, Nepal is known for its medicinal herbs and in this modern world its difficult to find the fresh and good medicinal herbs so as being rich in such agriculture people have chance to grow their market and enhance their business.

Recently it is also showed that Nepalese have the opportunity of ginger farming. The nation creates the fourth most on the planet, to be precise, and this is following its a whole lot bigger neighbors India and China, just as Indonesia. The new space in Jhapa in eastern Nepal is arranged at the country’s ginger generation focus, and is accessible to neighborhood ranchers who beforehand didn’t approach the measures of water and innovation required to wash their yields or data about better agrarian practices, Presently, they can clean reap of earth and grime, along these lines preparing the valuable roots for trade and, significantly, higher deals costs (Deanna Ramsay, 2019). Many countries are being interested and some has invested also for this business.

The other more opportunities for Nepal by doing international trades are:

  • Chance to do business and be business partner with outside companies
  • Development of institutes like financial and others
  • Development in working pattern from traditional to modern
  • Development of agricultural equipments
  • Export pattern change from crude material to prepared mechanical products
  • Higher focused of specialty items
  • Development living standards of people

Strategies of Agribusiness to enter in International trade

While moving national business to international trade it definitely need to do preparation research about the markets, their culture and other information. Thus the strategies will help national business to cope in international trade and expand their business internationally. Some of the strategies are below:

· Developing AIC(Agribusiness Innovation Centers)

AIC is an instrument to expand the aggressiveness and development of spearheading inventive development situated little or medium agro-handling ventures that can possibly turn into an industry pioneer, These small and medium enterprises would translate item, procedure and plan of action advancement into improved items and bigger piece of the pie in existing markets or section into new markets and improvement of new items for existing or new markets (Shashi Bhattarai, 2013). This will help national business to know more about international trade and helps to overcome the problem.

  • Another strategy is to partner with international company which help them to know better as working with members having knowledge of the international business makes national business easy to understand
  • Tightening the security as focused more on the quality of products and taking feedbacks of local people as well as international customers about the products.
  • Private areas inclusion for the export of value merchandise and market organize, Concentrated on Market situated and aggressive agriculture, focus on extraordinary financial zones for agro-industry improvement Commercial, Organic and Export Areas and High priority on expansion, modernization, commercialization and advancement of farming area these are some other strategies.

Threats of Agribusiness

While expanding business to international market the companies or the business may face some problem and also they may occur risk while trading. Despite of various advantages it also has threats which are pointed out below:

  • Fast changes in the inclination, quality and principles of shoppers likewise represent a danger to Nepalese horticulture. Little and asset poor exports can’t keep pace with the difference in inclination, quality and gauges requested by the buyers of international.
  • Nepalese agriculture is exceptionally reliant on climate conditions, a circumstance which is upheld by the variety in the rural development rate, atmosphere change is the extraordinary exogenous factor compromising the horticultural segment. while moving to international trade this climatic reason can be the threat for agriculture
  • An absence of ‘funnel system’ (concentrated subsidizing component) in agrarian improvement may represent a risk to the achievement of exporting products in time.
  • The horticultural approaches of the neighboring nations additionally undermine Nepal. Substantial appropriations to the ranchers of neighboring nations, straightforwardly hamper the aggressiveness of Nepalese farming.

The above mention is some of the threats Nepal can face while doing international trade. Risk for agriculture in international trade can be unhealthy distribution of the products. For international market more agricultural products should be produced as a result the distribution of products in domestic market can be slow. The quality of soil of farms decreased as lots of product is produced and pesticides are used. While entering the international market it may lose its agribusiness culture and its importance. Nepalese agricultural products may not fulfill the requirements of an international market on time .international trade includes lots of tariffs and exchange rate also keeps on changing which may affect the business.

Problems of agriculture in Nepal

There is a gigantic lack of dispersion, augmentation channel, information, creation and rivalry. Furthermore, there is likewise an absence of appropriate farming foundations like storerooms, advertise focus, streets, media transmission and water system systems. The administration strategies put lacking imperatives on horticulture rehearses which just go to show poor administration. The condition of creation of horticulture is influenced by rare or little preparations, old innovation, absence of homestead administrative abilities, divided and little measured land, strategy level limitations, and above all absence of data administrations.

Possible outcomes of International Agriculture Business

The importing and exporting of the agricultural products like tea, coffee, fruits, ginger, flowers etc in other countries makes the good relationship between two countries. The Nepalese products also get chance to explore more not only nationally but internally. International trade increases the life stlye of Nepalese people and also gave them chance to develop and show their talent. Though there are disadvantages of international trade it can be overcome by making different policies in country and applying different principles. There has also more opportunities for agriculture in this modern era as the new innovative technologies like drones and other machines provide more opportunities for people to do different and something good and new. The capacity of this industry to adjust, improve and structure effective joint efforts will keep on supporting a solid and prosperous country with practical nourishment security.

Recommendation

Based on the challenges and risk faced by the agricultural business some sort of recommendations is:

1)reinforce exchange arrangements, particularly reciprocal; 2) Strengthen the specialized limit of local non-duty boundary (NTB) and different business condition steady foundations; 3) Strengthen the fare limit of ‘Comprehensive’ send out potential merchandise and enterprises; 4) Strengthen the GoN’s ability to organize and oversee Trade-Related Technical Assistance (TRTA) and Aid for Trade (AfT) (Trade and development strategy, 2014). By strengthening these boundaries and fare limits it can overcome its challenges. As the climatic changes is one of the problem for agriculture Nepalese agriculture should adopt the international system as well like growing fruits in managing temperature like greenhouse and others so that it can deliver the products on time. The private sectors or institution should be more concern on export quality and making good relationship with other markets. The marketing networks are also need to increase in order to be good in international trade. The food security of Nepal is less than that of international business so they should improve the food security and government should make policies regarding agriculture. Still the agriculture business in Nepal is traditional so the advanced equipment should be used to increase the productivity of the product and deliver the goods in time.

Conclusion

In conclusion with the above disused point, agribusiness in Nepal has effect more on its economic factor. International trade in agribusiness has changed a lot in Nepal and it also has lots of opportunities due to international trade. To overcome the problems and risk in international trade private sectors should be more focused on quality as well as advanced equipment should be used. Agribusiness has still more opportunities in this modern world.

References

  1. Deanna Ramsay, M.,. (2019). IN NEPAL, TRADE-IN GINGER IS SPICING UP LIVES. Kathmandu: Trade for Development News.
  2. Gauchan, D. (2008). Agricultural Development in Nepal: Contribution to Economic. Socio-Economic Development Panorama, 49-64, vol 1.
  3. Federation of Nepalese Chambers of Commerce and Industry(FNCCI). (2019). Agriculture Opportunities. Retrieved from http://www.fncci.org/agriculture-148.html
  4. GC, A. (2018). Nepali International Trade Before and After the World Trade Organization. vol1.DOI: 10.31015/jaefs.18020
  5. Hibbett, K. (2018). Introduction of agriculture in Nepal. Retrieved from https://borgenproject.org/importance-agriculture-in-nepal/
  6. Piya, S. (2012). Challenges and Opportunities. Retrieved from https://www.researchgate.net/publication/280010462_Agribusiness_in_Nepal_Challenges_and_Opportunities
  7. Startups Nepal. (2018). Agribusiness and Problem facing Agriculture in Nepal. Retrieved from http://startupsnepal.com/stories/entry/agribusiness-and-the-problems-facing-agriculture-in-nepal
  8. Sharma, O. (December 2005). Foreign Trade and Its Effects on Nepalese Economic Development. the journal of Nepalese business studies, vol ii no.1.
  9. Shashi Bhattarai, N. N. (2013). Promoting Agribusiness Innovation In Nepal. Washington, DC: infoDev, Finance and Private Sector Development Department.

Influence of Race and Gender on the Structure of the International Trade Regime

Influence of Race and Gender on the Structure of the International Trade Regime

How do race and gender structure the international trade regime?

Race and gender are two forces which structure the international trade regime. In order to allow for a deeper analysis of the trade regime in consideration to development and neoliberalism this essay will focus on race rather than gender, to suggest these concepts give the regime an inherent racial bias. This is important because to speak of a post-colonial world conjures the inaccurate notion that decolonisation in the 20th century created a system of equal power for all states. However, when the international trade regime is considered, assuming a “decolonization of the world” overlooks continuing racial and colonial-esque hierarchies (Grosfoguel, 2011, p.15.) This essay will use post-colonial critiques to argue that race structures the international trade regime because it is based on Western ideas and therefore reproduces Western power. This will be shown by discussing race in relation to the ideas of development and neoliberalism, institutions and current international trade. Comment by Author: Very clear introduction

The word ‘race’ is used in a broad manner to refer to a historically curated division white West and the non-white rest of the world. Race does not refer to a specific population but rather to an Othering of Non-Western identity into the difference against which the West identifies and positions itself (Keyman,1995, p.74-5.) By recognising that this division of race is Western created it allows us to assume that an attitude of othering was implemented into those regulations and institutions created by Western powers in the post-war era. Comment by Author: Might have benefitted for additional references here

Neoliberalism, Development and Race

The international trade regime is made up of ideas, rules and institutions which shape trade interactions. Two of the most powerful ideas in the current regime are neoliberalism and development. When these ideas are considered, they are shown to favour Western superpowers and be grounded in the racialised ideas of the colonial era. This is important given how the shape the institutions and rules of the international trade regime.

Development is a loaded term. Its roots lie in the paternalistic colonial discourse of a ‘modern’ West and ‘primitive’ Other which requires Western intervention to become modern. Although paternalistic empire did end with mass decolonisation of territories, the idea of a need to modernise remained in the emerging international trade regime. This is seen in the division of industrial, capitalist ‘developed’ countries and ‘developing’ countries with economies based on agriculture and commodities yet to become fully industrialised or capitalist (Weinstein, 2008, p.2.) The idea of the non-Western world as lesser and backwards is part of race discourse which equates modernity with Western countries and positions them – and in this case their economics – as superior. Therefore, the international trade regime came to be structured by race because of the influence of these beliefs which allowed the West to position themselves as the dominant influence upon the global economy. As the post-war international trade regime was formed it was done so with the expectation that newly independent countries would have work towards being ‘developed’ Western style economies, thus maintaining something of the modernisation rhetoric of the colonial era. Comment by Author: More attention to referencing would help support your statements, highlighting the debates in the literature and where your argument is situated Comment by Author: Very good point Comment by Author: This is a very good point. Referencing is lacking.

Since the 1980s and the influence of Regan’s US, neoliberalism as an idea has come to hold influence within the international trade regime. Commonly neoliberalism is thought of as minimising the role of the state and allowing for mass privatisation, liberalisation and deregulation. However, Slobodian suggests that neoliberalism’s aims run deeper than this and that it is concerned with “the meta-¬ economic or extra-¬ economic conditions for safeguarding capitalism at the scale of the entire world” creating institutions which entrench states in a new system of competition after colonisation’s end (2018, p.2.) Accepting this definition means accepting that the post-colonial utopia of cooperation and trade on equal terms cannot be taken at face value. Instead, neoliberalism is a means by which wealthy states maintain control over international trade without colonies, by creating a system which privileges their own economies. It shows a continuing Western hegemony in global economics which believes in the benefits of the free market but does not give full consideration or care for the challenges such competition presents to poorer countries. Neoliberalism’s western bias allows for economic power to remain centred in the old colonial metropoles. Neoliberalism is therefore underpinned by racialised thinking and so too then is the international trade regime that neoliberalism has created. Comment by Author: Referecing needed Comment by Author: Very well argued Comment by Author: The link between the two could have been made more apparent in your writing by summarising what you had discussed above

Both development discourse and neoliberalism are based upon racialised ideas as they show a Western assumption of a need to make the non-West more like themselves. The international trade regime is therefore structured by race because it operates under the assumption that the West’s ideas of development and neoliberalism are necessary to trade by virtue of superiority.

Race and Institutions

This Western superiority and hegemony have been maintained by international institutions which form part of the trade regime. These institutions were formed by Western states and so tend to reflect their values and priorities. Most significantly this has allowed development discourse and neoliberalism to shape international institutions -bringing with them their racial bias. Comment by Author: This could have been made clear earlier in the essay, maybe supporting it with some examples, such as Bretton Woods institutions

The alignment of Western values and the agenda of international institutions is seen in changes to the General Agreement on Tariffs and Trade (GATT) which in the 1980s shifted from focus on embedded liberalism to neoliberalism. The 1986 Uruguay round of negotiations focused less on development as industrialisation and instead pushed trade liberalisation as the main developmental goal. While Michalopoulos suggests that this round saw developing countries engage more than ever before with the GATT and laid grounds for their effective integration, I side with the argument of Mattoo and Subramanian that for the smallest and poorest countries this brought them into a system where they were forced to liberalise important sectors of the economy whilst never gaining any bargaining power (1999, p.117; 2004,p.390.) This serves as evidence of Slobodian’s belief that neoliberalism is a means embedding Western capitalism across the world after colonialism’s end. Old colonial powers use international institutions to promote their economic policies as the only right and valid way to run an economy. They create an international trade regime which pressurises non-Western countries to follow a Western based model. This shows that institutions help uphold colonial power relations by holding Western ideas as unquestionably superior whilst overlooking that they are based on desires to maintain power over the racialised other. Comment by Author: Good empirical support to your argument, well chosen. Referencing to literature on this shift needed Comment by Author: You presented a very strong argument and this sentence is a good way to summarise it and open up to more specifics. Well done!

This expectation of non-Western countries to follow a Western model has been carried into the WTO era by the institution’s ‘built in agenda’ which means negotiations are not undertaken in segmented rounds but rather on a continual basis. This is symptomatic of assumed Western universalism which fails to fully address the potentially negative impacts of perpetual liberalisation on the poorest WTO members. This upholds a trade regime structured on race by pushing Western economics as the only legitimate means of trade. This is highlighted by Rolland who suggests that the rhetoric of allowing Special and Differential Treatment for poorer countries ascending to the WTO, is undermined by assentation packages which demand greater liberalization commitments than other members without transitional periods. She asks, “why insist on the fiction of a one size-fits- all approach to trade liberalization?” (2012, p.88.) One answer I propose, is that the one size fits all approach is the result of the WTO being shaped by Western hegemony. On the one hand, the WTO has failed to be designed with poorer countries in mind because of the influence of neoliberalism and its Western universalism. However, even more importantly when considering how race structures the international trade regime is that the narrative of development is essentially a Western created fiction. Development, while a powerful idea has no real tangible or legal definition (Rolland, 2012, p. 78.) Instead it is a racist ideological ideal which, having been pushed by the West for decades, has been internalised as a norm by poorer countries – namely former colonies – who join the WTO believing it will help them achieve this elusive development. However, as Rolland shows, this only allows for them to be exploited by the terms of assentation. This exposes the reality of the development narrative as a colonial relic which serves only the West who created and control its terms. This means race structures the international trade regime by allowing continued institutionalised unequal trade arrangements between the West and the rest of the world under the faulty guise that it will prove beneficial to all. Comment by Author: Referencing needed Comment by Author: Year of paper needed in this sentence too Comment by Author: Convincing ending. The only suggestion would be that you could have used the world “institutionalised” from the beginning of the essay, as it summarises what you have previously expressed with entire sentences.

Race and Trade

The WTO Doha round was portrayed by as a beneficial to small economies because it looked to place development at the heart of the trade agenda. However, I argue that since its conception the WTO has made neoliberalism the key to the trade regime. As a result, it has created an international trade regime structured along a racial divide. The WTO is based on the neoliberal push towards universal liberalisation and emphasises trading along the lines of comparative advantage (Jansen, 2002, p.176.) This benefits countries with a comparative advantage in producing high value items which tend to be Western nations. By contrast the system of comparative advantage creates difficulties for countries with a comparative advantage in low value, agricultural goods or commodity products. This is true for many former colonies, who then find they must trade more product for low prices in order to access Western produced high value goods. By promoting such a system, the WTO has reinforced race’s role in the international trade regime by deepening the divide between the West and rest of the world through unequal terms of trade. Although the WTO preaches development, in reality it has proved an effective mechanism for implementing neoliberalism in the sense of Slobodian’s system of competition. Competition shows that the regime is structured by race by highlighting that the regime continually favours the West and therefore maintains its economic power while preventing the growth of other countries. This was seen in Doha where the West used settlement on agricultural trade as a bargaining chip to gain access to goods and services markets in poorer countries (Alessandrini, 2009, p.9) This shows that so long as the West holds dominant institutional power racially divided unequal terms of trade will continue as the West pushes the neoliberal agenda and therefore race will remain a structuring factor of the international trade regime. Comment by Author: Definition needed Comment by Author: Referencing is needed here as well. Comment by Author: Keeping the punch of the essay, well done! Comment by Author: This point could be expanded to make it even stronger

Conclusion

What I have sought to argue is best summarised as a three-step process.

  1. Racialised ideas underpin the Western concepts of development and neoliberalism which are important to international trade.
  2. The West have created international trading institutions based on these racialised concepts.
  3. The international trade regime which these institutions facilitate is structured by a racial divide of West and rest – with the West maintaining advantage.

The current international trade regime does not exist in isolation from the colonial era, this was where the West established its global power. The post-colonial era has not brought down this power but rather has changed the mechanisms by which the West maintain it. Economic development and neoliberalism have become the West’s ideological tenants which it seeks to export through the institutions it has created. It is the assumed Western superiority of these ideas and universalist lack of consideration for poorer nations which means they facilitate a racial divide in global economics of West vs. the Rest. The West’s racialised thinking underpins ideas and institutions and therefore race structures the international trade regime because the regime is one based on inequality of West and Rest. That is why it is necessary to understand that race in the international trade regime is not a particular people’s but rather the Other against which the West positions itself. The international trade regime is structured by race because it is based upon the West’s ambitions to remain superior to this other. Comment by Author: Very good to highlight the historical connection between current international trade regimes and past means of gaining and retaining power through colonisation! Comment by Author: A bit of a repetition, but it does convey the point. You had began the essay using the West and its Othering attempts, here you talk about Rest. It’s still easy to understand what you mean, but I recommend consistency as much as possible.

Bibliography

  1. Alessandrini, D. (2009). Making the WTO ‘More Supportive of Development’? The Doha Round and the Political Rationality of the WTO’s Development Mission. Law, Social Justice and Global Development Journal. Volume 1 (13) pp. 1-11. Available at: https://link-gale-com.ezproxy.is.ed.ac.uk/apps/doc/A207350766/AONE?u=ed_itw&sid=AONE&xid=a86bc086 (Accessed 13/10/2019)
  2. Jansen, M. (2002). ‘Defining the Borders of the WTO Agenda.’ in Daunton, M., A. Narlikar ad R. Stern The Oxford Handbook of the World Trade Organization. Oxford: Oxford University Press. pp.161-187. Available at: DOI: 10.1093/oxfordhb/9780199586103.001.0001 (Accessed 13/10/2019)
  3. Mattoo, A. and A. Subramanian. (2004). The WTO and the Poorest Countries: The Stark Reality. World Trade Review. Volume 3 (3). pp.385-407. Available at: DOI : 10.1017/S1474745604001958 (Accessed 05/10/2019)
  4. Michalopoulos, C. (1999) The Developing Countries in the WTO. World Economy. Volume 22 (1). pp.117-143. Available at https://doi-org.ezproxy.is.ed.ac.uk/10.1111/1467-9701.00195 (Accessed: 05/10/2019)
  5. Rolland, S. (2012) Development at the World Trade Organisation. Oxford: Oxford University Press. pp.77 – 88. Available at: https://www-oxfordscholarship-com.ezproxy.is.ed.ac.uk/view/10.1093/acprof:oso/9780199600885.001.0001/acprof-9780199600885 (Accessed 13/10/2019)
  6. Slobodian, Q. (2018). Globalists: The End of Empire and the Birth of Neoliberalism. London: Harvard University Press.
  7. Weinstein, B. (2008). Developing Inequality. The American Historical Review. Volume 113 (1). pp 1-18. Available at: https://www.jstor.org/stable/40007295 (Accessed: 30/09/2019)

Importance of International Trade: Case Study of Emerging Economy of China

Importance of International Trade: Case Study of Emerging Economy of China

Our increasingly globalising world continues to create trade relationships internationally, making factors of production more substantially integrated and reliant on one another. According to Hoskisson et al (2000)Economic growth is an increase in the output capacity of a chosen economy and is an increase in aggregate demand (AD) for which the formula is: AD=Consumption +Investment +Government spending +(Exports-Imports) and when these important concepts increase, it triggers economic growth in an economy. This essay will be looking at China, one of the largest emerging economies that is experiencing especially high rates of gross domestic product (GDP) growth with reoccurring figures of 14% GDP growth in 2017 which is well above UK’s target of 2%, whilst 50 years ago being in negative figures. (The World Bank, 2019) As our global economy becomes more developed, it has given recognition to the growing importance of international trade. In China’s case it is reliant on high domestic demand but is globally infamous for its export-led growth, becoming one of the most influential and powerful economies and therefore International trade and economic growth are expected to go hand in hand. This impacts it socially in the case of the wellbeing of the people, influences on political change and conflicts as well as economic impact including inequality, labour force, balance of payments (BOP), infrastructure whilst considering the environmental impacts on the economy as well. China is one of the most dynamically debated emerging economies as it is one of a kind and therefore it is more difficult to subtract economic lessons for the relationship between international trade and the impact of economic growth.

International trade partnership increase the capability capacity, which is why countries join these international corporations to benefit their trade relationships and achieve beneficial trade deals as well as follow social welfare policies to ensure balanced economic growth. Joining world organisations strengthens the country by creating better capabilities to withstand global crises as well as beneficial trade agreements. WTO accession, which represents a new milestone in China’s trade evolution, enabled China to participate in the world trade under the global framework by improving the multilateral trade system. (Sun & Heshmati, 2010) Corresponding to global framework guarantees a chance of stability for businesses, which with the example of Russia, another emerging economy that has fallen short of international trade agreement commitments has missed out on advantages that global organizations such as the WTO guarantee.

Cieslik & Tarsalewska, (2011) explored the relationship between international trade, FDI and the rate of economic growth. They exaggerate the importance of international trade in organisations. For example, according to the International Monetary Fund (IMF) “the policies toward free trade are among the more important factors promoting economic growth and convergence in developing countries,” while the Organisation for Economic Co-operation and Development (OECD) “more open and outward-oriented economies consistently outperform countries with restrictive trade and foreign investment regimes.” In a similar vein, the World Bank argues that international trade “opens up unprecedented opportunity for growth and development,” while according to the United Nations “foreign direct investment contributes toward financing sustained economic growth over the long term.” (Cieslik & Tarsalewska, 2011) This can’t sum up better the need for international cooperation as it is a requirement for countries who want to join and enjoy the benefits of an international cooperation. Countries who aren’t a part of these international organisations, face a lack of economic growth, corruption and other socio economic issues whilst missing out on the benefits of low tariffs, easier transfer of knowledge and technology transfer.

Technology transfer is as much of a requirement for achieving economic growth as it is being part of world organisations. Every country experiences gaps that it doesn’t have the capacity to cope with. Integration can solve this in many ways. Coe and Helpman (1995), and Coe et al. (1997) found that international R&D spillovers are related to imports. The mere presence of new technology and knowledge in the national economy can be seen as equally important to exports. There is more interest in a country the more it imports and the more secure of a market it creates. Due to China’s size and GDP levels, it has become an attractive long-term trading partner which it has positively taken advantage of to achieve economic growth itself. developing countries can at least expect that trade and investment liberalization will allow them to close at least the part of the development gap with respect to developed economies and to achieve a permanent improvement in the standards of living as measured by per capita income. (Cieslik & Tarsalewska, 2011) The more imports that enter the country, the more its productive capacity increases through technological improvements, and methodological improvements and should increase the production possibility frontier; the maximum output level an economy can achieve and sustainably expand their economy, whilst creating new opportunities for development.

Filling the technology gap that involves technology transfer is necessary for development as it creates opportunities for innovation and a more complex understanding of situations enabling need for new technologies. China focuses on acquiring advanced technology, given its sustainability and opportunity triggers. (Child & Lu, 1996)

The importance of the domestic market consumption must be recognized, as China has been able to rely on it heavily as domestic consumption has been so high. A number of national industries were established to foster economic growth, (Sun & Heshmati, 2010) It is a fear for the Balance of Payments for one or the other being neglected and with China’s excessive export led growth, it has raised issues for domestic consumption.

However, due to lack of competition, the optimization of resource allocation could not be achieved, and the Chinese trade sectors could not enjoy the dynamic benefits from international trade such as competition effects, efficiency effects and technology improvement effects. (Sun & Heshtami, 2010)

However, this comes at the cost of economic-financial crises affecting all countries, some more capable of handling its shock than other and emerging economies at particular risk. The cost of globalisation and international trade integration is the risk of joint crises that with existing trade policies in place, must have good enough methods in place to not suffer substantially from such events, such as the 2008 recession. Smith, (2016) compares the export-led growth of Japan to China’s in his “Is China the next Japan” publication. He recognizes that Japan had substantial infrastructures in place to build a productive economy whilst ensuring savings to protect the country from blows that international trade has a risk of. This suggests that although the impact can be felt, it can also be deterred in a way to cause minimal damage to the economy which may not even be applicable to China in ways as its population and history is extensively unique.

Equally the reason it is an evenly and vigorously debated topic as Brown (1995) wondered who will feed China. Chang (2001) announced the coming collapse of China. Henderson (1999) saw China as on the ‘‘brink”. Whilst on the other hand , Murray (1998) described China as the next superpower. A number of authors view an all-powerful China as a threat (Gertz, 2000, or Timperlake et al., 2002).(Holz, 2008) These arguments suggest China’s utter complexity which has to be acknowledged when looking at its economic impact from international trade making one thing certain, that it is constantly developing creating opportunities to be perceived as a threat due to its power as well as concerns due to the countries widespread influence. Similarly to Japan therefore it is expected to deter any major failures that economic growth persists due to its constant development filling such gaps. In the case of Japan, a large exporter of oil, found ways to reduce its energy consumption during its 1973 collapse from the Yom Kippur War, and save by moving up the technology curve and becoming more high tech from textiles to computers. Smith, (2016) suggests this as inevitable and that sufficient technology transfer, and heading in the right path of high-tech trade focus means that negative impacts from economic growth can in fact be controlled and China, given its economies size, is expected to overcome this without substantial difficulties following the case of Japan.

Wu and Yao (2015) found econometric evidence suggesting that although the government attempts to balance the three goals of growth, equality, and state ownership in the short run, stubborn state ownership as well as lopsided growth patterns jeopardize equality in the long run and have therefore delayed the turning point in the inverted U-shaped Kuznets curve for China. This can be blamed on its struggles to leave behind communist ideology as well as corruption that followed the Mao era. The Kuznets curve is a hypothesis shown on a graph that economic development ultimately leads to short run benefits of improved standards of living to decreasing economic equality in the long run. This suggests that negative impact on inequality is inevitable unless further political and economic reform including reducing state ownership. For a country with a population so large, inequality can have detrimental effects on society that remind us of governmental policies introduced by China that caused nationwide spread famine and poverty which international trade encourages to avoid. Unfortunately China’s labour force population has fallen victim to the Kuznets theory. China’s traditional growth engines, capital investment and net export, is the massive labor migration from the lower-productivity countryside to higher-productivity cities, which, together with a consumption-repressing income distribution, has expanded income disparity between the rural and urban areas and lowered the economic status of the low-income population in the entire income spectrum (Kuijs and Wang 2006).

Political changes involving ideology changes or policies are a crucial explanation when analyzing the effect of international trade on economic growth. Previously mentioned and as explained by Hoskisson et al, (2000) emerging economies can be split into two groups: developing countries in Asia, Latin America, Africa and the Middle East and the other being transition economies in the former Soviet Union and China. The latter were both suffering economic decline after the collapse of communism which makes up a large part of the group of countries that can be described as ‘emerging economies’. This significant shift in political ideology is important to understand the need for political shifts to economic liberalization that Sun & Heshmati (2010) found to be true involving various trade policies with an outward oriented approach. Trade liberalization encourages the openness to trade and increasing production capacity by lowering barriers to entry and acting upon attracting foreign investment. There’s an increasing number of liberalized markets on a global scale (Hill, 2010) According to Sun & Heshmati (2010) it also increases opportunities and effectiveness of comparative advantage, which China is successful in doing with its intensive focus on labour-intensive industries. With trade liberalization leading to comparative advantage it can be seen as a positive impact on economic growth as it is constantly encouraging growth.

This can however create environmental issues which again is infamous in China where the pollution levels were the worst in Olympic history. Despite Chinese Government measures to reduce pollution around their capital city by shutting down factories, restricting car usage and slowing down construction, high levels of pollutants persisted, at times so bad that the sun was blotted out. (Telegraph, 2009) This has many health related implications that affect a wide range of people, those healthy, with asthma or heart problems. Being so harmful to the human body, it persists through nature which although has attracted global attention to the levels of CO2 emissions, is a less understood sensitive issue of the irreversible environmental damage that occurs along with economic growth.

This is also the case for the reliance on institutions to facilitate sustainable economic growth from international trade. To maximize results, sufficient and flexible stable legal framework must be in place to prevent bribery and corruption and poor property rights issues. This is a development usually not achieved to a satisfactory level and remain seen as unstable and risky for trade or investment. Xu (2015) argued that although the size of China’s economy is extremely important in terms of its impact on the global economy, it is misleading to ignore political and economic institutions as he suggests that the successful outcome relies on institutions. North (1990) also provided empirical evidence indicating constitutionalism to be part of the determining factors of long term growth, which suggests that if China hadn’t faced such drastic political changes and remained in the situation it was under communist rule of Mao Zedong, it is unlikely to have experienced sustainable economic growth. Under communism, there have been a substantial amount of institutions put in place since they were run by the government, however more constitutional institutions need to be in place, such as scrapping of entry barriers for private firms that have proven to cause a decline in household savings. One of the biggest challenges for China’s leaders is to limit the power of government by adhering to a genuine constitutionalism and rule of law. ( Xu, 2015)This is especially important when trying to avoid the downward spiral a lack of international trade can show such as becoming less attractive politically. A lack of political sympathy can lead to a “clash of civilizations” as described by political scientist Huntington (1996) who blamed conflict on cultural issues over economic, political and social ones, emphasizing the need to avoid this by creating an international rule of law that is neutral and compelling to all. Therefore, it is important to encourage political neutrality so that they can enjoy the benefits of being a part of the largest economic development groups in the world.

The issue of low cost labour producing for an export led growth country like China, means that the high value-added high-tech products exported by China are attributed to its abundance in low-cost labor. (Sun & Heshmati, 2010) China is infamous for its rapid population growth and urban migration and given its history, it faced a lack of welfare for workers including job security and healthcare. The weight of low cost manufacturing is therefore felt socially with low minimum wages, lack employee welfare and high risk jobs. The countries heavy reliance on the international market has accelerated this as well as migration to urban and coastal regions has increased inequality with a lack of social welfare attention by the government. This can disrupt economic growth through a decrease in national consumption as well as political instability and dissatisfaction. It has also been noticed that due to international trade and companies locating themselves in countries across the world, outward migration in China has also been increasing, especially with its interest in Africa, e.g. Nigeria, where alot of migrant workers went to fill labour shortages in mining and oil extraction. This can be fixed by globalisation to fill labour shortages. Although, this deprives other places of skilled labour in an inevitable cycle, considering this its social and economic impact on labour markets is a less significant impact of economic growth as it is more of a national legal framework and constitutionalist issue, rather than an issue created by international trade and economic growth.

A further social issue includes cultural clashes that can significantly slow down business and withhold aggregate supply as well as aggregate demand as integration between cultures can create problems in international business. Child and Lu (1996) have made the effort in several areas to explain the difficulties facing western investors within their joint venture operations in China. They compare the major differences between Chinese and western approaches to management. They indicate cultural collisions in management and differences in methods that can cause difficulty in communication internationally and slow productivity and thus, economic growth. This indicates that the impact is specific to a place due to their cultural certainties. The probability of issues arising culturally increases as international trade increases.

To conclude, the impacts of economic growth are more positive than negative due to the scale of of the successes that China is experiencing. International trade and their adoption of trade liberalization through the ‘open door policy’ has enabled opportunities to expand factors of production overseas, whilst attracting FDI as well as other investments into the export led growth production of the country. There are social welfare concerns for workers’ rights and other job securities that create questions over economic growth. However, these face limitations including deterring it from international trade to an issue created internally, such as China’s insufficient infrastructure or legal framework in place to support sustainable businesses and their output. China has remained at a high advantage from international trade and its previous oppressed and closed historical background proves that without this openness to the rest of the world, economic growth would be significantly smaller. China has defied and overstepped the negatives of economic growth by being so economically consistent that in its own way, it has successfully managed.

Impact of International Trade on Economic Growth in the World: Analytical Essay

Impact of International Trade on Economic Growth in the World: Analytical Essay

Introduction

International trade plays a significant role in economic growth of a country and in current financial system both worldwide trade and economic growth are the most popular concepts. The term international trade is used to indicate the buying and selling of goods and services between countries for pleasing the needs of its population. International trade enables the countries to sell their domestically produced items and services to other countries. Economic growth helps to extend the actual per capital income of a population of the country which can be sustained over a long period of time. Equally essential are the roles of the regional and international specialization. Regional specialization means that a number of areas or areas in a country specialize themselves in the manufacturing of different products. International specialization means that different countries of the world specialize in producing different goods. Factors which decide regional specialization are more or less the same as those which determine worldwide specialization. A country which produces surplus of a good, produces more than its requirements, will export it to other countries in exchange for the surplus produces of those countries.

Objectives of the study

The objectives of the study are:

  • To determine the impact of international trade on economic growth in the world.
  • To determine the relationship between international trade and economic growth.
  • To determine the disadvantages of International Trade
  • To determine the opportunity of international trade in Bangladesh.

The need of international trade?

International trade is needed so that all countries can avail themselves of the things that they need (and want), and that are not available in their own country. The most common example is oil, which is needed throughout the world, but it is limited to particular areas, and so is traded internationally.

International trade accounts for a huge part of a country’s gross domestic product (GDP) and is a vital source of revenue for all countries, particularly those that are developing, though it is the nations that have the strongest international trade, and who have prospered by it, that have become the driving force behind world economy.

It is usually accepted that the benefits of international trade, and therefore, the reasons why it is needed are: It enhances domestic competiveness; it increases sales and profits; it takes advantage of international trade technology; it extends the sales potential of existing products; it maintains cost competiveness in the domestic market; it increases the potential for business expansion; it achieves a global market share; it reduces the dependency on markets that already exist; and it stabilizes seasonal market fluctuations.

The importance of international trade:

International trade between different countries is an important factor in raising living standards, providing employment and enabling consumers to enjoy a greater variety of goods. International trade has occurred since the earliest civilizations began trading, but in recent years’ international trade has become increasingly important with a larger share of GDP devoted to exports and imports.

World Bank stats show how world exports as a % of GDP have increased from 12% in 1960 to around 30% in 2015.With an increased importance of trade, there have also been growing concerns about the potential negative effects of trade – in particular, the unbalanced benefits with some losing out, despite overall net gains.

Importance of trade

1. Make use of abundant raw materials

Some countries are naturally abundant in raw materials – oil (Qatar), metals, fish (Iceland), Congo (diamonds) Butter (New Zealand). Without trade, these countries would not benefit from the natural endowments of raw materials.

2. Comparative advantage

The theory of comparative advantage states that countries should specialize in those goods where they have a relatively lower opportunity cost. Even if one country can produce two goods at a lower absolute cost – doesn’t mean they should produce everything. India, with lower labor costs, may have a comparative advantage in labor-intensive production (e.g. call centres, clothing manufacture). Therefore, it would be efficient for India to export these services and goods. While an economy like the UK may have a comparative advantage in education and video game production. Trade allows countries to specialize. More details on how comparative advantage can increase economic welfare. The theory of comparative advantage has limitations, but it explains at least some aspects of international trade.

3. Greater choice for consumers

New trade theory places less emphasis on comparative advantage and relative input costs. New trade theory states that in the real world, a driving factor behind the trade is giving consumers greater choice of differentiated products. We import BMW cars from Germany, not because they are the cheapest but because of the quality and brand image. Regarding music and film, trade enables the widest choice of music and film to appeal to different tastes. When the Beatles went on tour to the US in the 1960s, it was exporting British music – relative labor costs were unimportant. Perhaps the best example is with goods like clothing. Some clothing (e.g. value clothes from Primark – price is very important and they are likely to be imported from low-labor cost countries like Bangladesh. However, we also import fashion labels Gucci (Italy) Chanel (France). Here consumers are benefitting from choice, rather than the lowest price. Economists argue that international trade often fits the model of monopolistic competition. In this model, the important aspect is brand differentiation. For many goods, we want to buy goods with strong brands and reputations. e.g. popularity of Coca-Cola, Nike, Addidas, McDonalds etc.

4. Specialization and economies of scale – greater efficiency

Another aspect of new trade theory is that it doesn’t really matter what countries specialize in, the important thing is to pursue specialization and this enables companies to benefit from economies of scale which outweigh most other factors. Sometimes, countries may specialize in particular industries for no over-riding reason – it may just be a historical accident. But, that specialization enables improved efficiency. For high value-added products, multinationals often split the production process into a global production system. For example, Apple designs their computers in the US but contract the production to Asian factories. Trade enables a product to have multiple country sources. With car production, the productive process is often even more global with engines, tyres, design and marketing all potentially coming from different countries.

5. Service sector trade

Trade tends to conjure images of physical goods import bananas, export cars. But, increasingly the service sector economy means more trade is of invisibles – services, such as insurance, IT services and banking. Even in making this website, I sometimes outsource IT services to developers in other countries. It may be for jobs as small as $50. Furthermore, I may export a revision guide for £7.49 to countries all around the world. A global economy with modern communications enables many micro trades, which wouldn’t have been as possible in a pre-internet age.

6. Global growth and economic development

International trade has been an important factor in promoting economic growth. This growth has led to a reduction in absolute poverty levels – especially in south east Asia which has seen high rates of growth since the 1980s.

Role of international trade in economic development

International trade is now not a new idea among different countries. In the past, there had been a number of considerable cases of global trade. In 14th and fifteenth century traders used to transport silk and spices via silk route. In the 1700s fast cursing ships used to transport tea from China to different European countries. Foreign exchange also has a large effect on financial development.

The role of foreign trade can be judged by means of the following facts:

  • Foreign trade and economic development

All the nations export a lot of agricultural product to different nations and import capital goods. Hence, it the economic development of united states especially relies upon of overseas trade.

  • Foreign trade earning

Foreign trade provides overseas trade that is used to eliminate poverty and for different productive purposes.

  • Market expansion

International trade plays a vital function in growing the production of any country. The overseas exchange is a great element in increasing the market and encouraging producers. In nations where the domestic market is restricted it is crucial to promote the product in other countries.

  • Increase in investment

Foreign trade encourages the businessmen to extend the investment to produce extra goods. So the rate of funding increases.

  • Foreign investment

Foreign trade gives incentives for the overseas investors, besides nearby investment, to make investments in these nations the place there is a lack of investment.

The importance of global trade on economic, political, and social conditions has been theorized in the Industrial Age also. It is vital for the boom of globalization

Is International Trade Good or Bad?

What is international trade?

International trade is the exchange of products and services throughout borders. Since the sunrise of civilization, humans have been concerned with trading. Earliest recognized trades were barter based, and after the invention of money, items would change hands in return for valuable metals or different types of capital. Export refers to sending products or services from your country to different countries, and the vendor is referred to as an exporter. Import, on the other hand, refers to a good or service that is added into your country from the backyard and the entity bringing the trade in is known as the importer.

Pros of international trade

  1. International trade permits agencies to increase their commercial enterprise in unexplored markets and territories.
  2. Gives a probability to groups and nations to earn and bring in overseas reserves.
  3. It affords the energy of choice to the customer and will increase market opposition main to higher quality and lesser costs for the consumers.
  4. It helps nations develop via focusing on producing goods and services for which they have assets (land, labor, capital or technology) domestically available. As an example, India emerged as a enormous exporter of Information Technology services over the previous couple of many years due to a massive resource pool of engineering graduates and English-speaking capability.
  5. International trade additionally throws open the doors for Foreign direct investments, which means that you may want to make investments capital in a corporation primarily based in any other country.
  6. It creates extra jobs domestically if you are exporting goods or services.
  7. Being capable to ship your goods or services into different markets gives hazard mitigation to your business.

Cons of international trade

While international trade has its set of advantages, it really does come with an equal quantity of pitfalls some of which are listed below:

  1. While free trade is right for developed nations, it might also not be so for growing nations that are flooded with cheaper good from different countries, consequently harming the local industry. Such imbalance leads to protectionism and trade restriction (tariffs, subsidies, and quotas)
  2. People in some international locations lose jobs because jobs pass to areas the place the team of workers and the price of dwelling are low. A traditional example is IT and ITES (call centers) outsourcing.
  3. If nations import greater than they export, it leads to a trade deficit which might also construct up over the years. The current escalating trade conflict between US, China, and different countries is the result of developing trade deficit and flooding of low cost good by China in the US (and different countries) over the last couple of decades.
  4. International trade poses a political risk to nearby governments which might also have to face extended interference in home things leading to altering geopolitical landscape. Chinese effect and interference in Pakistan, Maldives, and many African nations reflect the pitfalls of such trading ties.
  5. In current times there have been situations of information theft through unethical means main to security risks for many countries. Snooping is feasible with the aid of shipping gadgets (like mobile phones, tablets, and printers) with spy software. China is accused via many international locations of espionage.
  6. Dumping of low-cost and out of date products (like old non-conforming vehicle models) has a dangerous effect on the environment of terrible recipient countries.
  7. Credit risk unless properly managed can affect a company’s funds and future severely.

Problems arising from free trade

Given the importance of free trade to an economy, it is unsurprising that people are concerned about the potential negative impacts.

  • Infant industry argument. The fear is that ‘free trade’ can cause countries to specialize in primary products – goods which have volatile prices and low-income elasticity of demand. To develop, economies may need to restrict imports and diversify the economy. This isn’t an argument against trade per se, but an awareness trade may need to be ‘managed’ rather than just rely on free markets. See more at Infant Industry Argument.
  • Trade can lead to cultural homogenization. Some fear trade gives an advantage to multinational brands and this can negatively impact local produce and traditions. Supporters argue that if local products are good, they should be able to create a niche than global brands cannot.
  • Displacement effects. Free trade can cause uncompetitive domestic industries to close down, leading to structural unemployment. The problem with free trade is that there are many winners, but the losers do not gain any compensation. However, free-market economists may counter that some degree of creative destruction is inevitable in an economy and we can’t turn back to a static closed economy. On the upside, if the uncompetitive firms close down, ultimately new jobs will be created in different industries.

Theories Justifying International Trade

Theories Justifying International Trade

International trade emerged as a controversial concept that led to the creation of various theories to justify the adoption of the practice. International trade theories explain the exchange of goods and services between entities or people from two different nations. The trade between individuals and entities results from the belief in the possibilities of benefiting from exchanging goods and services (Viner, 2016). International trade constitutes a significant number of theories, business strategies, and policies. Comparative advantage is one of the most important theories alongside absolute advantage. Other recent theories, as well as traditional ones like mercantilism, also justifies the need for embracing international trade. Thus, this essay focuses on describing theories that justify international trade. It will focus on absolute advantage, comparative advantage, and mercantilism theories.

First, absolute advantage is one of the classical theories that justify international trade. The theory emerged as a result of questions that Adam Smith raised in ‘The Wealth of Nations’ regarding mercantilism, which was the leading theory at the time. Economists and scholars have since edited the recent versions of absolute advantage theory (Chacholiades, 2017). Absolute theory is a new school of thought offered by Smith, and it focuses on a country’s ability to take part in the inefficient production of goods than other nations. In his reasoning, Smith deduced that there is no need for governments to intervene and set policies that restrict or regulate international trade. The theory thus suggests that there should be a natural flow of international trade, and it’s market forces should be the only form of regulation in that respect.

Smith used a hypothesis of a world comprising of two countries, namely country A and country B. If there are possibilities of getting cheap products from country A or at a fast rate (or both) as compared to country B, then it would imply that country A had the advantage. As a result, it would be for it to focus on specializing in the production of that product. A similar case applies if country B stands out as a better producer of a given product as it would need to focus and specialize on its strengths. The specialization approach would enable countries to generate efficiencies due to the skills that their labor force may learn from performing the same tasks (Viner, 2016). Also, the approach would improve the efficiency of the country since the country would have an incentive for creating better and faster methods of production to enhance its specialization.

The absolute theory provides reasoning that Smith puts across, suggesting that there is a need for encouraging international trade between the two countries since it would benefit citizens of both nations. The increased efficiency is the significant aspect that facilitates many benefits that the two nations may gain by engaging in international trade. Thus, Smith stated that there is no need for judging the wealth of any nation based on how much silver and gold it possessed previously. Instead, one needs to look at the standards of living of the people of such nations (Chacholiades, 2017).

Second, comparative advantage is the second theory that justifies international trade. It emerged as a result of challenges that emerged with the absolute advantage theory. Absolute advantage principle failed to consider the possibilities of some nations turning out to be good at the production of both goods, thus giving them an advantage in several sectors. Contrarily, another nation may fail to possess even a single absolute advantage. As a result, David Ricardo who was an English economist, came up with the comparative advantage theory in 1817 (Chacholiades, 2017). According to Ricardo, there are still high chances of trade and specialization to take place between the two nations even if country A enjoyed the absolute advantage of producing both products.

Comparative advantage refers to a situation where a country is not at a position of producing products efficiently as compared to the other nation; however, the country can produce the product in question more efficiently and using a better approach as compared to its p[roduction of other products. Thus, there is a subtle difference between the two theories. A comparative advantage aims at the differences between the relative productivity of the two nations, while absolute advantage focuses on absolute productivity (Chacholiades, 2017).

Mercantilism is a historical principle that justifies international trade as well. The theory became one of the guiding international trade principles of the sixteenth century. Mercantilism suggests that the amount of silver and gold holdings of a country determines its wealth (Magnusson, 2019). The simplest sense of the theory is that a country should ensure that it increases its silver and gold holdings by discouraging importation while encouraging the export of goods and services. Hence, this theory implied that if citizens from other nations purchase more products from a given country (exports) than the goods it sells (import) at that point, the country may have to use silver and gold in paying the difference. Each country had an objective of trading surplus, as well as a circumstance in which the value of goods being exported exceeds the value that the country imports (Magnusson, 2019). Also, the nations avoid trade deficit, which refers to circumstances where imports may be of greater value than exports.

The flourishing of Mercantilism resulted from the favorable historical environment of the 1500s to 1800s. The new nation-states started rising in the 1500s, and their rulers were striving to strengthen them by building larger national institutions and armies (Magnusson, 2019). The rulers increased trade and export to enable them to acquire more wealth and gold for their nations. Such countries imposed various limits on imports as one of the ways of promoting their exports through a strategy that they referred to as protectionism. Protectionism is a system that several nations still use to date.

Finally, the modern international trade theories like the principle of country similarity, also serve as one of the theories justifying international trade. In 1961, Steffan Linder who is a Swedish economist, formulated the theory of country similarity to help in explaining the Intra-industry trade concept. The principle suggests that consumers from nations in the same level of development have higher chances of sharing their preferences. The theory suggests that the first aim of companies is always to manufacture products to be consumed domestically (Viner, 2016). The countries end up finding markets that are similar to their domestic ones upon venturing in the export sector.

The European Union Benefit from the Chinese One Belt One Road Initiative

The European Union Benefit from the Chinese One Belt One Road Initiative

The One Belt One Road initiative is a project started by China in 2013 and that focuses on improving the connectivity and cooperation between China and several other countries in Asia, Africa and Europe to improve the trade relations worldwide. The focus of the initiative is energy, improve the infrastructure and improve transportation (Ma, 2018). However, experts see it also as a strategy to push for worldwide Chinese dominance. Two major trade routes from and to China will be built.

The initiative will have a positive as well as a negative impact on the globe. On the one hand, it will lower the trade costs and therefore stimulate trade relations between countries. OBOR will also attract investment to Europe and its companies. On the other hand, China could be manipulating the world and trying to implement Chinese culture, policies and values in Europe.

The positive arguments and the possible positive consequences of the initiative are meaningful. Differently, all the arguments supporting the negative impact of the OBOR on the world are based on conspiratory theories. Since it is not possible to know if China really has bad intentions with its initiative, the results of the essay state that Europe will benefit of the One Road One Belt project.

Introduction

Xi Jinping, the General Secretary of the Chinese Communist Party and the President of China, has changed the country’s foreign policy strategy since he took up his mandate. The country has made a transition from the ‘Tao Guang Yang Hui’ (“hide capabilities and keep a low profile”) implemented by Deng Xiaoping in the early 90s, to the ‘Fen Fa You Wei’ (‘striving for achievement’) strategy and the consequent creation of the concept ‘Chinese Dream’. Because of this, new actions and new international projects to reinforce China´s power internationally, such as the One Belt One Road (OBOR) initiative, have been implemented (Sorensen, 2015).

The OBOR initiative is the general term for the major programs of building a Silk Road Economic Belt, that connects China to Europe, the Mediterranean, the Persian Gulf and the Indian Ocean, and a 21st Century Maritime Silk Road, that connects China via waterways to Southeast Asia, Oceania, the Indian Ocean and East Africa (Sarker, Hossin, Yin, & Sarkar, 2018).

Research Question, Methodology and Sources

The research question of this paper is: “Will the European Union benefit from the Chinese One Belt One Road initiative?”. China launched the initiative One Belt One Road to improve trade within countries and to improve global connectivity. The project aims at creating networks and alliances that will lead to a better free flow of trade and to better integration of the different markets (LehmanBrown International Accountants, 2018). However, it will not only have positive impacts, but also negative ones. This topic is relevant for the course because it tackles different aspects of global alliances and economic integrations between China and partner countries. It also focuses on politics and international trade. The research will target the European Union and will balance the pros and cons that affect the EU region. To answer this question, first general information regarding the OBOR initiative, its causes and its consequences on a global, as well as on a European level, will be provided. Later, an analysis of the consequences will be made to reach an answer. The research methodology of the paper is the theoretical research. It will be qualitative since the research will be descriptive, non-numerical and exploratory. The sources used for this paper will be as recent as possible and mainly secondary sources, however primary ones will also be referenced. Data has been taken from objective peer-reviewed journals, official reports or from expert interviews. Finally, data will be analysed from a European perspective.

One Belt One Road Initiative

China´s OBOR initiative started in 2013 with president Xi Jinping. This is a revival of the old Silk Road, an ancient network of trade routes that connected the eastern and the western part of the world (Mark, 2018). The initiative includes two major projects that will build trade routes from China to almost the whole world.

The OBOR initiative already includes 71 countries, that altogether account for 50% of the world´s populations and a quarter of global GDP. The initiative is expected to have a cost of more than 1 trillion USD, although it is not clear how much money has been already spent (Kuo & Kommenda, 2018).

To reach that money, many private, but also public Chinese government funding bodies are involving in the initiative. Including these, the Asian Infrastructure Investment Bank was launched in 2014 just to support financial matters of OBOR (Sarker, Hossin, Yin, & Sarkar, 2018)

The aim is to strengthen the infrastructure, trade and investments between China and the cooperating belt countries (Freund & Ruta, 2018). This was one of the forms that the countries Go West policy acquired. The initiative provides a plan for the integration of China into the worldwide economy and shows the commitment of the government in China for a more open economy (Du & Zhang, 2017). Furthermore, OBOR wants to achieve policy coordination between partners, improve the infrastructure for better the connectivity, promote the trades, motivate financial integration and improve the relationships among partner countries population. The initiative also focuses on improving existing routes of transportation like ports, railways, seaways and pipelines of oil and gas. Also, telecommunication for enabling better connectivity among partner countries is improved (Sarker, Hossin, Yin, & Sarkar, 2018).

Reasons for This Project

China has several reasons for starting this project. A reason for starting the OBOR project was that Chinas economic growth was starting to slow down, and therefore the country aimed to promote the economy by creating a large market across the world. Reasons for the slow down were that Chinas strategy of offering cheap and good manufacturing for capturing international market was not working anymore (Sarker, Hossin, Yin, & Sarkar, 2018). Furthermore, the overseas direct investment of the country has increased in the last years and therefore, the initiative is seen as a way of expanding the reach of the Chinese companies in the economy, especially in the belt road countries (Du & Zhang, 2017).

The country also aims to promote companies to do more investments overseas. Firstly, the massive investment in infrastructure will improve the availability and the quality of logistics in the partnering countries, which will increase the foreign direct investment inflow coming from China. Secondly, Chinese companies that go abroad can benefit from reducing their host country policy uncertainty and political risks due to an increase in international political, policy and government support coordination (Du & Zhang, 2017). Thus, the promotion for overseas investments has led to an increase in acquisitions of Chinese companies of other companies in the belt-road countries following the announcement of the OBOR initiative (Du & Zhang, 2017).

Analysis

Impact on a Global Level

The OBOR initiative is having and will have in the future an impact on a global level. On the one hand, it will bring new opportunities like offering better trade connections and lower costs of trade. If the trade costs get diminished to the half, it is expected that the trade between the belt-countries will increase by 12%. The costs have always represented a barrier for trade since the distance between the trading partners, the available transport options, the logistics efficiency, the border processes and other factors have influenced the costs and maintained them high. The building of railway services from China to the world will lower the costs of trade for many countries. The lowering of the barriers with this initiative will facilitate trade. This will stimulate the trade relations of the smaller economies in the world that belong to the belt-countries (ING, 2018).

On the other hand, the initiative also involves risks for some countries. Countries like Malaysia and Pakistan are starting to rethink the costs that the OBOR project will cause them. According to the Centre of Global Development, there are 8 belt countries more that have the risk of not being able to repay their loans. These countries are many of the poorest in their regions like Djibouti, Laos and Mongolia. These nations will owe more than 50% of their total foreign debt to China (Kuo & Kommenda, 2018).

Impact on a European Level

Asian-European trade accounts for 28% of the worldwide trade, therefore, creating cooperation with European countries like they did with many in the eastern part of the continent is very important for China (ING, 2018). 16.6% of the EU imports are from China and 11.7% of the Chinese imports come from Europe (Picciau, 2016).

Therefore, lately during EU-China Summits, China and Europe discussed the mutual benefits that could arise from synergies together and from a common strategy during the implementing of the OBOR (Picciau, 2016).

Eastern Europe represents the first touchpoint that China must address when reaching for Europe. Therefore, it is focusing its attention into countries located in the eastern part of Europe like Poland, Ukraine, Moldova, Romania, Macedonia, Albania, Hungary and the Czech Republic. We will focus on the most important partnerships like the ones with Poland and Hungary. Poland was the first eastern European destination with the inauguration in 2013 of the China-Poland railway. Since then, governments are exploring new ways of collaborating and even looking at the opportunity of enhancing the most important seaports in the Polish nation. In 2015, Hungary signed an agreement of cooperation with China within the OBOR context. Therefore, the European country was the first EU member to initiate a Chinese high-speed railway project. Also, many Hungarian companies in the automotive and in the airline industry have received Chinese financing (The Economist, 2016).

The OBOR initiative will bring new opportunities for the European continent. Not only Poland and Hungary will profit from the enhancing of rail transport, but also most parts of Europe. As it gets more accessible, importers and exporters can use this way of faster transport instead of the previously used and slower ones through air or sea. The speed of transport is a key aspect in the EU-China trade. Many time-sensitive goods like the components for cars, computers and phones that are part of a supply chain going through several countries and finished products like seasonal clothing, need fast delivery. These types of goods account for ¾ of the value of Chinas exports to Europe and for over 60% of the exports in the opposite direction. This enhancement of rail transport in Europe will stimulate the economies of countries in Europe, many of them in a development stage (ING, 2018).

The initiative is also bringing a lot of investments to Europe. Chinese direct investment in Europe is growing and many acquisitions of European companies are happening. An example is the purchase of the Piraeus port, the biggest port in Greece, by the China Ocean Shipping Company for 369 million euros. These strategic investments of capital in Europe not only help European economies that are going through stagnation and are stifled by debt but also gives China a strategic entry door into Europe by sea.

Analysis of Negative Impact on Europe

Many experts believe that the OBOR initiative can have a negative impact on Europe. China could use the OBOR initiative to create big debts for poorer European countries. This means that a country like Montenegro would owe more than 50% of their foreign debt to China. This activity, during which China lends into high-risk environments make people think that Chinas motives are not only positive and have a hidden purpose. In 2011 for example, the Chinese government wrote of an unpaid debt owed by Tajikistan in exchange of more than 1000 square kilometres of territory (Kuo & Kommenda, 2018).

Another concern with the OBOR project is that Chinas expansion can be a form of economic imperialism that gives China too much power over often smaller and poorer countries. Jana Golley, a professor at the Australian National University, says that rather starting the project to win friends, it seems as they have distributed more fear that it all is about influencing the rest of the world. Moreover, experts also worry that Chinas commercial presence worldwide could also lead to a more expanded military presence. The most concerned experts say that all the ports and other transport infrastructure built can be used for commercial as well as for military purposes (Kuo & Kommenda, 2018). Furthermore, a Bloomberg columnist compared the Chinese government to an octopus extending its tentacles to Europe to gain global influence over the government and a researcher from Princeton University, Sophie Meunier, believes that China´s investments could become a Trojan horse to bring Chinese culture, policies and values into Europe (Müller-Markus, 2016).

Another negative impact is that the initiative puts the unity of Europe at risk. Several countries among the EU are desperate for attracting investments from China to improve their decaying infrastructure, whereas others are still sceptical about Chinas plans (Martin, 2018). Countries like Greece and Hungary have shown in the past, that they are vulnerable to the pressure coming from China (Heide, Hoppe, Scheuer, & Stratmann, 2018).

27 of the 28 EU ambassadors to Beijing, have also written a report where they criticise the One Belt, One Road project denouncing that it is designed to give advantages to Chinese companies and to prevent free trade, which pushes the power to the subsidized Chinese companies. China is also accused of only following their own interests and of not wanting to follow European principles of transparency as well as social and environmental standards. This could prevent European companies of locking up good contracts (Heide, Hoppe, Scheuer, & Stratmann, 2018).

Conclusion & Limitations

After having analysed the OBOR initiative, it is possible to conclude that the impact on the globe and especially on Europe will be positive if the real intentions of the Chinese government are those that they are presenting, and no hidden purposes are available. The arguments that Europe will benefit from the project are stronger since all the negative impacts that the initiative could have and that were mentioned before are relying on the theory of a Chinese conspiracy.

Many people agree that China is trying to manipulate the world and that the initiative can be dangerous and can make China a too big power in the world. These accusations will not stop, since the Communist Party of China has eliminated term limits for the presidency. This means that President Xi can continue as long as he wants to exercise his power and applying his plans while refusing to offer more transparency of his deal. Also, in May 2017, the German Economics Minister Brigitte Zypries together with EU officials were meant to sign a joint declaration with the government in China. However, this did not happen since the EU officials wanted to incorporate some amendments and change some wording to provide equal opportunities for all the countries. But China refused (Heide, Hoppe, Scheuer, & Stratmann, 2018).

There is no doubt that Europe will benefit economically and politically from the One Belt, One Road initiative. However, to do so China must end uncertainty with this project, make sure that all countries are able to fulfil their interests and stick to the five principles of Peaceful Coexistence as the fundamental values for the project. These are: “(1) mutual respect for each other’s sovereignty and territorial integrity; (2) mutual non-aggression; (3) non-interference in each other’s internal affairs; (4) equality and mutual benefit; (5) peaceful co-existence” (Müller-Markus, 2016).

There are a few limitations in this essay. The essay is almost purely qualitative and not many official numbers were stated. This is one of the main limitations. It is very difficult to find reliable data since most of the research is based on assumptions of how the initiative will develop. Also, the Chinese government is not willing to publish too many data. Moreover, the initiative only started 5 years ago, and not much historical data is available. A lot has been done since then, however, it is not sufficient to see the real impact on Europe. Furthermore, the research has not looked at the influence that one of the biggest external factors could have on the initiative, the USA. The country is the biggest economy in the world and is situated exactly ahead of China. It is still needed to see what the US will do to battle against China.

To conclude, it is important to mention that only in the future the world will see if all the countries will benefit of the OBOR initiative or if China will become the biggest economic power in the world.

References

  1. Du, J., & Zhang, Y. (2017). Does One Belt One Road initiative promote Chinese overseas direct investment? Elsevier, 189-205.
  2. Freund, C., & Ruta, M. (2018). Belt and Road Initiative. The World Bank.
  3. Heide, D., Hoppe, T., Scheuer, S., & Stratmann, K. (2018, April 17). EU ambassadors band together against Silk Road. Handelsblatt.
  4. ING. (2018). Trade impacts of the Belt and Road Initiative. ING.
  5. Kuo, L., & Kommenda, N. (2018). What is China’s Belt and Road Initiative? The Guardian.
  6. LehmanBrown International Accountants. (2018). The Belt and Road Initiative. LehmanBrown International Accountants.
  7. Mark, J. J. (2018). Silk Road. Retrieved from Ancient History Encyclopedia: https://www.ancient.eu/Silk_Road/
  8. Martin, N. (2018). Report: EU countries to be straitjacketed by China´s New Silk Road.
  9. Müller-Markus, C. (2016). One Belt, One Road: the Chinese Dream ad its impact on Europe. CIDOB.
  10. Picciau, S. (2016). The ‘One Belt One Road’ strategy between opportunities & fears: a new stage in EU-China relations? IndraStra Global.
  11. Sarker, M., Hossin, M., Yin, X., & Sarkar, M. (2018). One Belt One Road Initiative of China: Implication for Future of Global Development. Modern Economy, 623-638.
  12. Sørensen, C. T. (2015). The Significance of Xi Jinping’s “Chinese Dream” for Chinese Foreign Policy:From “Tao Guang Yang Hui” to “Fen Fa You Wei”. Journal of China and International Relations.
  13. The Economist. (2016). ‘One Belt, One Road’: An Economic Roadmap. The Economist.
  14. The Economist. (2017). Western firms are coining it along China´s One Belt, One Road. The Economist.

The Silk Road as Past and Future for China

The Silk Road as Past and Future for China

More than 2,000 years ago, traders opened the transcontinental passage that connects Asia, Europe and Africa, nowadays known as the Silk Road. Trading ships created sea routes connecting the East with the West, forming the maritime Silk Road. These ancient silk routes opened windows of dialogue between peoples and nations. The modern China of the beginning second millennium A.D. under the leadership of Xi Jinping sees much more in the Silk Road than just ancient history. For China, the Silk Road is both past and future.

In 2013, China introduced the Belt and Road Initiative (also called One Belt, One Road Initiative “OBOR”), which aims to create a new Silk Road geared to the global needs of the 21st century. With an estimated investment volume of almost a quadrillion US dollars, it is the largest development program since the Marshall Plan, with which the USA helped the destroyed Western Europe back on its feet after the Second World War (Spiegel). Based on the Historic Silk Roads, OBOR focuses on large areas of Asia, Africa and Europe. The systematic expansion of infrastructure is intended to create opportunities to intensify trade and international cooperation. However, the program will have far-reaching consequences and will have an enormous impact on the economy of the countries involved. Alongside other European countries, Germany also plays an important role in Beijing’s plans. This paper will deal with the question whether the Chinese initiative can have a clearly positive influence on the German economy or not.

China’s perspectives

For almost 30 years now, China has been experiencing an incredible period of development and economic growth. Between 1990 and 2017, the nominal GDP rose to a good USD 12 trillion, making the country the world’s second largest economy after the USA (worldbank). This immense economic upswing was the result of various economic reforms introduced by the party leadership in Beijing. For example, special economic zones have been created and citizens were encouraged to start their own, albeit not free from political influence, businesses.

Since the introduction of economic reforms, China’s economy has grown substantially faster than during the pre-reform period. However, the global economic slowdown commencing in 2008 had a significant impact on China as export partners struggled with production and consumption. Although the GDP continued to grow, the crisis led to a significant slowdown in growth rates. This had not been the case for many years, as the country always seemed to be heading in one direction, namely upwards.

In the meantime, China has earned itself a reputation as the ‘workbench of the world’. Yet in China there is a different understanding of the country’s position. To a certain extent, this is correct since the economic growth of recent years has been accompanied by steadily rising wages and an incipient structural change away from mere production towards high technology and innovation. Many jobs, especially in the textile industry, are migrating to cheaper regions of the world (forbes zu teuer). Therefore, China no longer sees itself as an emerging force, but tries to demonstrate strength and influence in various ways. Nonetheless, China continues to flood the world market with (low-priced) mass-produced goods and is therefore also the world’s largest exporter of goods.

For many years, the strong economic growth has also been fueled by huge domestic infrastructure projects. Between summer 2008 and summer 2018, for example, almost 28,000km of high-speed train lines (speed >200km/h) were opened, so that two thirds of the world’s high-speed rail network are now in China (zug).

In order to counteract economic downturn and to additionally ensure that China continues to play a leading role in international trade, the OBOR initiative comes into the game. With infrastructure projects and new trade and sales opportunities, it secures China’s economic prosperity. Through enormous investments, however, China also makes quite a few countries dependent on the Middle Kingdom. For China, OBOR is therefore a means to an end: Intensifying economic activities and not only strengthening its position as a global power but expanding it to a whole new level.

Germany and the Belt and Road Initiative

Germany plays a significant role in China’s BRI. However, the role assignment has to be considered in a differentiated way. Some countries need major foreign investments in companies and infrastructure in order to generate substantial economic growth and prosperity at all. In these countries the Chinese are not necessarily celebrated as saviors, but it is relatively easy to strengthen one’s position there with investments and to open up new sales markets or new sources of resources.

A simple example of this is Pakistan. China and the Pakistani government founded the China-Pakistan Economic Corridor (CPEC). What does this mean in plain language? Pakistan allows the Chinese to build thousands of kilometers of motorways, railways and gas pipelines in their own country.

All this is not possible in Germany in this form. Germany is one of the world’s largest economies. The country is not dependent on Chinese investments in infrastructure and similar large-scale projects. On the contrary, Germany even exports many of its own achievements worldwide.

A particular argument for this is that the above-mentioned development of high-speed trains in China was only possible with the help of German, French and Japanese technology. With the purchase of foreign technology, the development of the Chinese railway industry exploded and meanwhile the Chinese also produce their own high-speed trains. But if you look at it soberly, you could also describe the sudden boost in development that way: The Chinese bought the world’s leading technologies and tested them for some time. Subsequently, the respective advantages were used to create their own ‘newly developed’ trains and railway technology.

As a result, China has recognized that influence in Germany can only be gained by other means. Germany is a serious partner whose own products enjoy a very good reputation, especially in China.

Regarding OBOR, the Chinese have recognized that Germany has a very central location in Europe, which enables the country to develop as a transshipment point for its goods.

This is exactly where the city of Duisburg comes into play. It lies not only in the heart of North Rhine-Westphalia, the economically most important and most populated German state, but also in the heart of the blue banana. In addition, the city is perfectly connected to the infrastructure. In the Chinese plans, the city is therefore currently the most important German location. So important, in fact, that President Xi Jinping travelled to Duisburg especially for the opening of the railway line to Chongqing.

From a German point of view, it is of course not as easy as the Chinese might think. The German government welcomes the Chinese project externally, as did State Secretary Markus Ederer during his speech at the ‘OBOR Inventory’ event in February 2016: “We welcome the resolution and effectiveness with which China is putting its vision of Eurasia into practice”. At first Chancellor Angela Merkel also welcomed the initiative as an opportunity for exchange, job creation and further networking. These statements were initially positive because it was not possible to classify exactly what the Chinese really intended. Or one did not want to burden the bilateral relationship, because the economic interdependencies are too close.

However, it is now increasingly clear what the Chinese mean by intensified cooperation between Germany and China: Billions of euros are being used to buy into up-and-coming and future-proof companies, or even better, to take them over completely. For example, the Chinese bought Augsburg-based robot manufacturer KUKA. In 2018, Chinese investors also took over 10% of Daimler shares.

In addition, the Chinese want to ensure that they can have an increasing influence on logistics between China and Germany, which is why important German infrastructures such as ports and airports are also on Beijing’s shopping list.

For example, various Chinese shipping companies have been trying for years (in vain so far) to buy themselves into the largest German port in Hamburg. Furthermore, in 2017, Chinese investors took over 82.5% of the shares of Hahn airport, an important air freight hub.

In the meantime, there is a widespread opinion in government and expert circles that Germany is selling its expertise and thus its future economic basis. However, according to the Institute of the German Economy, Chinese activities are still low compared to other foreign investments and takeovers in Germany. The Chinese share for 2017 is estimated at only around 6.6%. The largest share of investors, 22.3%, came from the USA.

Conclusion

The Chinese have arrived, and they have come to stay. But of course, it should be clear to everyone that they can’t and shouldn’t necessarily be regarded as saviours. They pursue their own interests, which are not always congruent with the Germans. From current trends, however, it is also the case that the Chinese investments have not had any negative effects. Ultimately, Germany should be prepared to come to terms with the Chinese if it wants to remain a globally important economic power. Together it is easier for both sides to achieve a win-win situation.

It remains to be seen to what extent OBOR will influence Germany’s economy. Decisions by the government that will either further open or close the market for major Chinese investments will be essential for the positive or negative outcome for Germany. Provided there are no changes in the general conditions, it can be assumed that OBOR will have a clearly positive impact on the German economy. Because the efforts of the Chinese are opening up completely new sales markets and channels. With the Chinese investments in other countries, additional sales markets could also be created for German products, markets which are not located in Germany or China, but for example in Kazakhstan. Ultimately, all this leads to better economic conditions for Germany, combined with increasingly peaceful global networking of countries and cultures.

The Impact of the Exchange with China on US Trade with Neighbors

The Impact of the Exchange with China on US Trade with Neighbors

Financial experts argue that mainly two different factors: one of them is how trade strengthening economy that contributes to get benefits for winners who conqueror to current market, another assumption is occurred by the tremendous results for losers who suffer from losing exchange value in challenge with foreigners. It is crystal clear that the universal exchange and venture have been crumpled by macroeconomic factors such as technological issues, political and business borders around the world over in recent years. The most of trade companies and universal foundations are faced with difficulties between countries during trading, for instance, the framework of trading is restricted by especially some code tariffs that U.S. established for foreign countries.

Financial experts to a great extent concur that NAFTA has given advantages toward the North American economies. Regional trade increased sharply over the treaty’s first two decades, from roughly $290 billion in 1993 to more than $1.1 trillion in 2016 (McBride, and Sergie). Cross-border investment has also surged, with U.S. foreign direct investment (FDI) stock in Mexico increasing in that period from $15 billion to more than $100 billion (McBride, and Sergie). But experts also say that it has proven difficult to tease out the deal’s direct effects from other factors, including rapid technological change, expanded trade with other countries such as China, and unrelated domestic developments in each of the countries. Debate persists regarding NAFTA’s legacy on employment and wages, with some workers and industries facing painful disruptions as they lose market share due to increased competition, and others gaining from the new market opportunities that were created.

According to Robert Lighthizer who a trade representative has announced that contract needs to be improved until the agreement could be done, during he was questioned by reaching out the decision (Hine). With implementing some negotiations with China and then getting some deals are given a promise in affordable prices and to fulfill commitments can be successful and convenience for world economy also. Moreover, the Trump Administration declared a deferral in the extra taxes, proposing an arrangement with China is meeting up; however, concerns have since a long time ago appeared that the organization may agree to prominent spot offers of U.S. items while viably giving auxiliary obstacles and China’s modern arrangements a chance to proceed.

NAFTA agreement classifies in 6 new ways which has an influence in U.S. – China trade contract. To begin with, Canada, Mexico, or the United States supplements are consisting of 75 percent which was rocketing up from 62.5 percent about manufacturing automobiles (AMADEO). For first arrangement implies the goals of improving production has to meet with deal that spread investment on car industry in United States. The considerable side of U.S. vehicle taxes should be accountable between Canada and Mexico, although car manufacturing does not recognize these prerequisites yet. The mission was resulted with a failure about selling cars to China due to higher costs while it was supposed to open new workplaces for U.S. employees in foreign country.

The second key point illustrates information about export which American farmers are demanded to sell their dairy goods such as milk powder, cheese, and other farms’ products in Canadian markets. In the terms of new trade agreement of Mexico and United States put their efforts keeping on price stable and get the entries to trade rural products among them. Moreover, sparing sales of milk production in overseas make Canada processing to commit the transportation costs and charges for the largest amount of volumes in the terms of contract of verge countries. One of the top priorities refers to agricultural biotechnology that provides bizarre innovations in modern world. In regards of strongest trade agreement between two countries was established by facilitating agricultural products and improving the better quality to get checkup license.

The third option is talking about successful side of Mexico when its trucks pass the border with U.S. must be checked to security standards. U.S. Parliament’s decision was implemented creating some Mexican employee groups who have license and accessibility to get in U.S. easily in the terms of trade law.

Next requirement is giving more assurance to trademarks and licenses that receive a larger number of rights having protected innovation consulted in the Trans – Pacific Partnership depraved by Trump Administration.

NAFTA was enabling U.S. medication companies export their products to Canada and it could face with universal challenge.

Sixth one is organizations can never again use Chapter 11 to purpose question with governments (AMADEO). The main special cases are U.S. oil organizations which are worried about Mexico could try to occupy whole oil trade. Be that as it may, the Chapter 19 debates settlement prevailed. So, this treatment rules have a bias evaluating accomplice’s abroad speculations (AMADEO). The U.S. Constitution is responsible to keep up those rights and panels for U.S. companies.

Between different countries which have presence in contemporary macroeconomic environment, there is no motivation behind why the exchange balance for any one nation would be connected efficiently to that for some other nation. Although, the U.S. dollar works as worldwide hold money, China’s monstrous net capital outflows have been related with net outside buys of dollar-named resources.

With the adjusted exchange, development in China’s fares is coordinated by development in its imports. More prominent import is recognized by the United States can be a rivalry in certain businesses, it additionally observes extended fares somewhere else in assembling and in other exchanged segments. China’s ascent may cause U.S. laborers to reallocate starting with one exchanged industry then onto the next however it would not cause them essentially to leave the exchanged area through that.

The United States’ exchange shortage in merchandise with the whole world rocketed up to its peak abnormal amount in history and the imported products including from China were expanding its shortfall to $ 891.3 billion and conveying a misfortune to Mr. President’s objective of narrowing the whole hole (Tankersley, and Swanson). Sooner, Chinese investment funds would be required to fall and utilization to ascend, as China’s net fares turned negative and U.S. net fares turned positive. The U.S. exchanged yield and work would grow, and the United States would start to compensate China for its prior acquiring. China’s rising near preferred standpoint would produce long-run work misfortunes in the U.S. exchanged enterprises in which China delighted in a long-run near favorable position in this long run situation, while exchange lopsided characteristics cause extra short-run U.S. business misfortunes interfered enterprises pushed incidentally into constriction. The expansion was driven by certain variables outside Mr. Trump’s control, similar to a worldwide monetary log jam and the general quality of the United States dollar, the two of which debilitated abroad interest for American products. The broadening hole was additionally exacerbated already by Mr. Trump’s $1.5 trillion tax reduction, which has been generally financed by government and it made him to height the exchange war a year ago (Tankersley, and Swanson).

During recent three years, China has fundamentally changed its monetary and exchange routines, it has as of late forced or keeping up various state-coordinated approaches that seem to misshape exchange and venture streams and may present huge dangers to financial and national security. These incorporate techniques, for example:

  1. Strategy intercessions to influence the estimation of its money.
  2. Broad utilization of endowments, speculation hindrances, obtainment inclinations, and other modern approaches to support certain organizations and enterprises, including state backing to contend in abroad markets.
  3. Moderately inadequate implementation of licensed innovation rights.
  4. Constrained innovation exchange as conditions for market access or speculation, including creation for fare back to the United States.
  5. The U.S. companies, associations, and others for monetary reasons face with cyber-attack.

To put in the nutshell, distinguishing the effect of exchange with China on U.S. neighborhood work advertise results requires a substantial instrumental variable or, all the more comprehensively, a wellspring of conceivably exogenous variation for local presentation to import rivalry, controls for territorial introduction to innovative change, and acknowledgment that the assessed decreased structure effect might be lessened by work movement between areas.

Works Cited

  1. AMADEO, KIMBERLY. ‘6 Ways Trump Changed NAFTA’. The Balance, 2019, https://www.thebalance.com/donald-trump-nafta-4111368.
  2. McBride, James, and Mohammed Aly Sergie. ‘NAFTA’s Economic Impact’. Council On Foreign Relations, 2018, https://www.cfr.org/backgrounder/naftas-economic-impact.
  3. Hine, Thompson. ‘Mexico | Trump And Trade’. Trump And Trade, 2019, https://www.trumpandtrade.com/category/mexico/.
  4. Tankersley, Jim, and Ana Swanson. ‘In Blow To Trump, America’S Trade Deficit In Goods Hits Record $891 Billion’. Nytimes.Com, 2019, https://www.nytimes.com/2019/03/06/us/politics/us-trade-deficit.html.

Is Rice Tariffication Law a Good Solution to the Philippines? Essay

Is Rice Tariffication Law a Good Solution to the Philippines? Essay

The rice tariffication law, or RTL, is a law that was signed by Philippine President Rodrigo Roa Duterte in February 2019. It is said that the law would lower the tariff of the imported goods produced by foreign investors so that they would be able to import their goods at a lower price which would result to a lower marketing price. This law is made to help with regards to the shortage of rice which is why the tariff is lower in order for the imported goods to be much cheaper in the market so that even the poor people would be able to buy rice that has good quality since it is coming from other countries. Now, in regards to this law, is it really a good solution for the country since the price would be cheaper or would it have a bad effect to our own economy?

Due to the fact that the RTL lowers the tax of the imported rice, it would be cheaper than the local rice that is being planted by our farmers here in our country. The consumers would much more prefer to buy the imported rice since it would be cheaper and would have a high-quality grade due to the milling machines being much better than those that are being used here in our country. As a result of the consumers buying the imported goods, the local goods would be low in demand resulting to a much higher price and lower quality. This is also the reason why many of our farmers are having troubles due to the demand being low which results to less income. This is the reason why I disagree that the rice tariffication law would be the solution that would help our country. Why is that so? Well, since we would be supporting mostly the goods that are being imported to our country, the farmers will become poor and in the worst-case scenario, they wouldn’t have a job resulting to the down fall of our economy. Now, let’s think of what may happen in the future. Let’s say that the country that is importing goods to our country were to have a higher population due to the increase of birth rate, those countries would stop importing those goods since they would be having a shortage due to rise of their population. If that would be the case, what do you think would happen to our country? Our country would experience great famine since we would have a shortage of supplies due to the lessening of imported goods.

Therefore, I strongly disagree that the rice tariffication law is a good solution that would help our country because our own farmers are having a crisis due to less income because the consumers would prefer to buy the imported goods because not only would they be having a much higher quality, it is also cheaper than our local goods.

Side Effects of Rice Importation

Side Effects of Rice Importation

Rice imports are the number of metric tons pertaining to rice products entering a country’s borders in a given year. Rice has been a major food for us. Here in our country, there are a lot of convenience food chains that offer ‘unli rice’ to people who love to eat rice. We export rice to other countries to continue the flow of dollar in our country and be able to have connections to other countries to supply our needs.

I chose this topic because I see the issues regarding the overpricing of rice, and the beyond reasonable payment to the farmers. The exporting of products has suddenly tightened because of the issue regarding the overpricing of products specifically rice. The Rice Tariffication Law ensures food security by liberalizing rice imports and making farming globally competitive. According to Jire Carreon from Rappler, “the oversupply of rice in the market already means prices should drop”. However, Co noted that retail rice prices are still somewhat high. People are too greedy when it comes to money that even though they have received too much supply instead of decreasing the price they tend to increase it even higher. Now we cannot export rice easily because how can we help others if we are the one who is in need of help.

The Rice Tariffication Law is the reason why our local farmers have low salaries. This law makes all the imported rice cheaper because it causes the other countries to pay tariff tax when want to export their rice to our country. For Southeast Asian Countries they pay 35% tariff while non-ASEAN members pay 50% tariff or the tariff dictated by the World Trade Organization. According to Arida, “The results revealed that common problems encountered by rice farmers were: the high cost of inputs, low price of palay, lack of capital, labor problem, lack of post-harvest facilities, pest and diseases, and irrigation system”. The farmers are obligated to sell their palay to the businessman at a low cost simply because they need the money to supply their need and to pay their debts. Now the farmers are the one who is starving because of the high cost of inputs, and the low price of palay. The government does not make any necessary action regarding this issue Instead, they are arguing about non-sense things. The farmers need a lot of support from the government because of the things that they need that they cannot afford.

In order to solve this problem, the government should remove the Rice Tariffication Law and focus more on our local farmers instead of being busy on how to make imported rice affordable. With the imported rice being cheaper the consumers will buy the cheaper rice instead because they need to pay a lot of bills, and in order to save money, they will buy the cheaper one because it is affordable. And no one will buy our local rice. But as a consumer, and as a Filipino, in order to help our local rice farmers, we need to tell the government units that instead of buying imported rice, they should buy rice in our local farmers. Having more markets that sell local rice can also help. With the power of media, the information about the problems and situation that deals with our local farmers are in need to be spread so that other media users can have an idea or knowledge about the situation that our country is dealing with. Asking fast food companies to buy local rice will be extremely helpful since many Filipinos eat at fast food chains.

Rice importations have some benefits and side effects in our country. It increases our rice stocks and helps consumers because of cheaper rice but our local farmers are the ones who are not getting any benefits to it. In conclusion, we should not be relying on other countries to get some huge amounts of rice because our local farmers are the one that is being most affected by it, instead we should appreciate more and give more attention to our farmers because they are the one who is suffering to this kind of situation.

As students we can help our local rice farmers that are facing this crisis by using modern technologies, with the use of technology these days spreading the information to other people about the crisis of our local farmers can be an easy task for everyone. The other people who get to know about the situation will also be encouraged not by just spreading the news but also making action to it. We can also help them by asking the government to focus more on our local farmers instead of how can we import rice. We know that with the power of youth our government will listen to us.