Econs Article Assignment by Group One
The objective of the trade summit held in Hong Kong was to determine the extent of expanding trade for agricultural goods in rich developed countries and how far to open the manufacturing and services markets in developing countries.
This trade deal was optimistically thought to be the solution to ending poverty in developing countries, and at the same time, boost the economies of already developed countries due to the widening of their markets abroad. Nevertheless, some countries are protecting their industries due to a variety of reasons. It is basically to protect the welfare of the people. One example of this with reference to the article would be how America refuses to accede to the request of developing countries to lower the high subsidies to cotton farmers in the former. This would be to prevent foreign control of the domestic market through dumping. Countries such as Africa are able to produce cotton in larger quantities at lower prices due to the relative lower cost of labour there, thus possessing a comparative advantage in the production of cotton over America.
The Hong Kong summit has actually failed in its primary aim of carrying out the deal to as the issues of liberating the trade of agricultural, services and manufacturing products have been circumvented. Rather, from what was the initial goal of an eventual global free trade treaty in 2006, the only key development made was the agreement of the gradual phasing out and eventual termination of agricultural and export subsidies by 2013 and allowing the 49 poorest countries in the world to have quota-free and duty-free access to the international market for 97% of their goods.
Some countries are protecting their industries due to a variety of reasons. It is basically to protect the welfare of the people. One example of this with reference to the article would be how America refuses to accede to the request of developing countries to lower the high subsidies to cotton farmers in the former. This would be to prevent foreign control of the domestic market through dumping. Countries such as Africa are able to produce cotton in larger quantities at lower prices due to the relative lower cost of labour there, thus possessing a comparative advantage in the production of cotton over America.
This trade deal was optimistically thought to be the solution to ending poverty in developing countries, and at the same time, boost the economies of already developed countries due to the widening of their markets abroad. Nevertheless, some countries are protecting their industries due to a variety of reasons. It is basically to protect the welfare of the people. One example of this with reference to the article would be how America refuses to accede to the request of developing countries to lower the high subsidies to cotton farmers in the former. This would be to prevent foreign control of the domestic market through dumping. Countries such as Africa are able to produce cotton in larger quantities at lower prices due to the relative lower cost of labour there, thus possessing a comparative advantage in the production of cotton over America.
The Hong Kong summit has actually failed in its primary aim of carrying out the deal to as the issues of liberating the trade of agricultural, services and manufacturing products have been circumvented. Rather, from what was the initial goal of an eventual global free trade treaty in 2006, the only key development made was the agreement of the gradual phasing out and eventual termination of agricultural and export subsidies by 2013 and allowing the 49 poorest countries in the world to have quota-free and duty-free access to the international market for 97% of their goods.
Some countries are protecting their industries due to a variety of reasons. It is basically to protect the welfare of the people. One example of this with reference to the article would be how America refuses to accede to the request of developing countries to lower the high subsidies to cotton farmers in the former. This would be to prevent foreign control of the domestic market through dumping. Countries such as Africa are able to produce cotton in larger quantities at lower prices due to the relative lower cost of labour there, thus possessing a comparative advantage in the production of cotton over America.
posted by EconsRocks! at 10:51 PM
10 Comments:
America is practicing protectionism in their cotton industry. We feel that it will be detromental to the foreign cotton investors because their exports will be less well received by the consumers. this will also be bad for the local cotton farmers as they will lack the incentive to lower their cost of production as they're making substantial profits.
Zhan Jie & Anisha
"the only key development made was the agreement of the gradual phasing out and eventual termination of agricultural and export subsidies by 2013 and allowing the 49 poorest countries in the world to have quota-free and duty-free access to the international market for 97% of their goods"
i think the summit wasn't a faliure. this after all achieves one of the goals, even tho it's gradual. trade restrictions can't be removed overnight, this gradual phasing out is safer.
the real failure is here:
"America refuses to accede to the request of developing countries to lower the high subsidies to cotton farmers in the former"
so much for democracy and free trade.
tash.
Due to lack of caffiene my brain is unable to function.I got the major gist of the article that many people are angry. So the summit was a failure unless the whole point was to promote social unrest.
Steffi
"I believe either we move forward or we risk moving backward toward protectionism that will stunt economic growth and harm the developing world most," he told the conference.
as quoted by US trade representitive Rob Portman.Protectionism may result in complacency among these poorer coutries ,when they should be working towards improving their economy instead of being dependent on policies.
Stacey
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"US is already in the process of eliminating its main cotton export supports."
America as shown, has started cutting down on its export subsidies for cotton in response to some African countries who have been seeking the elimination of subsidies for rich-country cotton farmers.
I do agree that a gradual reduction in the subsidies is a good idea instead of an abrupt change, as the cotton industry would be able to adjust at a more comfortable and less risky pace.
Pam
I feel that the most important thing is that the beneficiaries of whatever outcome should be the people.every country will fight for their own people's benefit.Thats just human nature to protect your own men.
sam.
well, i read somewhere that because of the unwillingness to accede to what is neccesary, the original ambitions of the summit had to be downgraded - it seems then that the powerful countries are simply putting off the changes that do not benefit them as long as possible.
It's not the first time either, that such summits have resulted in insubstantial progress. The same happened during two previous WTO meetings - in Seattle (1999) and Cancun (2003). From this, it might be logical to deduce that the WTO has not been a successful organization in moving towards a mutually beneficial international trade environment; there has been talk among critics that the WTO should disband entirely and start afresh, since after all, it is a relatively new organization being less than 10 years old.
from maketradefair.com:
"The final ministerial declaration contained some minor gains on agriculture, such as setting a 2013 end date for export subsidies, and providing developing countries with extra flexibility to protect their small farmers."
The forementioned changes can be seen as biscuit crumbs to appease the demands of the poor nations because such changes were already being phased in already before the summit itself, I think.
- izyanti
From the article, we can see that the main issue here is that ,farmers of least developed countries such as Africa suffer as a result of the heavy susidies being issued to those in developed coutnries who enjoy the benefits of heavy subsidies and the imposition of tariffs and quotas on similar commodities that may pose as competition to them.
This form of protectionism being carried out by developed countries such as America, besides endangering goods exported from least developed countries, may also divert trade from least developed countries whose goods may be produced much more efficiently than those produced by richer farmers.This may drive producers from least developed countries out of business and thus allow those from developed countries to monopolise some of the biggest markets in the production of goods such as cotton.
Thus, it is necessary for America to gradually eliminate such heavy subsidies being granted to rich farmers.Currently,"US is already in the process of eliminating its main cotton export supports." Thus, the draft agreement is being criticised for not addressing the pressing concerns of the least developed nations as the policies it has proposed is already being carried out and nothing further is being done to improve the current situation.
Dharinni.
firstly erm, the entry posted has an entire repeated paragraph which makes it very confusing.
so far all that we have heard (which may not be true) is that free trade apparently only aids the more developed countries which it impedes the growth of the developing countries, due to dumping and foreign monopoly of domestic markets.
we see that America has chosen to champion the cause of free trade primarily because it will bring in profits for them (similarly 200 years ago Britain was supporting free trade as it was the leading economy in the world then)
David Ricardo's support for free trade and opposition for protectionism was primarily that protectionism would reduce competition amongst domestic producers, but we see that in the case of Africa, it is a matter of protecting local livelihood, allowing local firms to survive rather than be dominated by American foreign firms.
Kaiwen
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