Compromise US & India; WTO

A deal over the subdies that India applies to its farmer were taken into consideration by the WTO and it had mostly to deal with the fact that the subdy hurts the farmers of India and this was something that the US did not want to continue. 

As we discussed in class trade may be effected by policies or laws that the home countries does not see as good or morally wrong. The US may see the fact that farmer are losing profits due to a subsidy and there by may not want to trade until they make changes to their laws or policies. Now normally since the US is a large country that may be a large portion of India's export this would be a bad for India, but fortunately their exist the WTO which helps with the rules of trade so that business would be conducted. After the WTO meetings there was a comprise "the Indian subsidies will remain, subject to future negotiations, and a trade facilitation effort will move forward". 

Unfortuantely this does not help with the issue that the US would like to resolve but a comprise to future negotiations may be the next best thing to change India's policy. Although if the WTO would ask who would have more power over the other and ask if the US has any monopsony power that would give it the power to control other countries thru trade? 

Thankyou All for everything and I hope you all have a nice finals week. Good Luck!

Both developed countries and poor countries would get hurt from tariffs.

As the textbook (chapter 8) says, under perfect competition, each country or firm is a price taker in its market. The use of an import quota is a limit on the quantity of a good that can be imported from a foreign country. Past Examples of import quotas in the United States include limits on the imports of agricultural goods, automobiles, and steel. More recently, the United States and Europe have imposed quotas on the imports of textile and steel from China. Here is the example about the deadweight loss due to a tariff with the U.S. steel tariff in place from March 2002 to December 2003.

I think the major reason why the U.S. would do so was the political motivation. We could use small-country model to explain how costly these tariffs were in terms of welfare. Because the U.S. was a large country so it can earn itself by finding its optimal tariffs (sometime), and American prices were falling in the steel industry from 1998 to early 2001. Those losses, along with falling investment and employment, met the condition of ‘serious injury’. So the U.S. was willing to protect the steel industry by setting a tariff of steel to many developing countries. President Bush made other supplier countries including Europe, Mexico and China crazy and stressful. Then, these small countries did not want to stand the deadweight loss (especially the big hurt to native consumption). In response, many European countries pushed tariffs of juices, papers and meats to America, which almost caused the greatest loss and political impact in America in 2002.

In general, I criticize someone sets trade barriers policy on the developing world. Because trade barriers such as taxes on food imports for farmers in poor-country players usually leads to vicious circle, dumping, overproduction on world markets. Thus, we need to support free trade and restrict government right on managing market-oriented economy.

Lessons Learned

Coming into this class I may have had some preformed opinions on international trade, mainly that cheap Chinese goods were going to hurt our economy. However in having Professor Bang for principles i knew i couldn't come into class and blindly argue from this perspective. Keeping as open a mind as possible in this class led me to some completely reversed thinking on several issues. The first of these issues that comes to mind is that overall, countries cannot me made worse off from trade from the Ricardian Model. This theory and others like it that we learned in the class led me to think of the economy in a more global sense. A single country can be as efficient as possible within their own borders but in the global economy we have today, that country will still be negatively impacted by the inefficiency of the other countries. My point is, is that I now look at the global economy and the need for efficiency amongst all countries of the world. How do we make this global economy as efficient as possible? I don't know but i do know/think now that we need to be mindful of the efficiency of the gobal economy and not just individual countries, or individual groups in those countries. I think one point in the class where i realized i needed to re-evaluate my stance occured when I realized I was agreeing with the unions in that we should restrict "cheaper" imports to save American jobs, well unfortunately for them, losing their jobs may be best for global efficiency.
Another valuable lesson I learned this semester was not to jump to conclusions but to realize every effect has a magnifying effect, meaning a change in one thing will cause changes in other things, even if those other things are seemingly unrelated; but its important to slow down and really think things through.

Sufficientarian Liberalism

I was reading an article on Bleeding Heart libertarians about Sufficientarian Liberalism 

. The concept is that government should abolish all barriers to market entry while simultaneously providing a safety net for the poor. We would provide no subsidies, tariffs, state-educations and barrier to immigration. The poor would be the only ones with wealth redistribution. The author Fernando Teson points out the Doctrine of Right by Kant. Which states that the state must be able to provide for those unable to provide for themselves.

            Through more efficient run markets we would see a closer perfect competition be reached over a period of time like we haven’t seen. This would reduce the waste the government spent on subsidies, privileges and other inefficiencies. Big government would be reduced to just programs that were in place to provide a safety net for those unable to provide for themselves. With the decrease to entry into a field the opportunity to create jobs could be enormous and not restrict growth because Crony-Capitalist have congress providing a safety net for their own private gain. With more opportunities and less spending through this deregulation we would see a dramatic shift in improvement in welfare as whole. The author does mention that this is a very open idea where the finer details are yet to be established.

            The thought that deregulation of business and government aid to business could actually improve welfare as a whole is a very interesting concept. Is it possible that this could be a perfect median between Republicans and Liberals where socially the needy are taken care of and the private sector is deregulated? Thoughts?

Agreeing to Disagree?

Before Thanksgiving, I flippantly made the point to the class that "agreeing to disagree is not an equilibrium." This is actually a pretty classic result in game theory, and was originally "proven" in 1976 by Robert Aumann and has become known as "Aumann's agreement theorem." A shorter and slightly more intuitive (read: less topological mathematics) can be found here. 

Here is the basic argument: Two people start with the same "priors" (i.e. would believe the same thing if given the same information), but then receive different information (and therefore have different posterior beliefs). Assume that these beliefs are not represented by single points, but rather by probability distributions taking values over a range of possible "truths."[1] Also assume that the information sets of the agents are "common knowledge" (i.e. each agent knows the other’s opinion and knows that the other agent knows his opinion). If this is the case, then honest agents who exchange information (each had different information at the start) can never disagree.

There is some criticism of the result with respect to the "common knowledge" assumption, but there have been some extensions of the theorem that relax this assumption slightly and still retain the basic result. 
Another interesting point, by Robin Hanson and Tyler Cowen, is that most disagreements are likely to be dishonest because people are deceived into thinking that they are “better arguers” than others. This means that people are not in fact truth-seekers in arguments. They conclude with tips for being more truth-seeking in arguments. They include:

1.     Do not assume that you are more rational than others.

2.     Adopt a moderate opinion (of course, now we can disagree about what constitutes a “moderate” opinion!).

3.     Become aware of signs of self-deception. Signs include: self-interest, emotionality, informality, difficulty articulating arguments, stubbornness, and ignorance of cognitive biases.

I would also add that the greater the degree to which someone is arguing on the basis of conviction rather than fact, the higher the likelihood that they are self deceived. But I suppose that’s an argument for another day.

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[1] It is important to represent the posterior beliefs as probability distributions because the whole point of the theorem is that the agents are honest truth seekers (which implies that they do not believe themselves to know "truth"). More on honesty later.

Tackling China's Pollution Problem

           Pollution is a huge problem for China; there are no doubts about it. Due to the growing environmental concern around the world, not to mention the high spike in adverse health effects, something needs to be done. 

           Is China truly moving into action? They are supposedly trying to cut back on emissions as both domestic and international concern cultivates.  Nonetheless, they are still a long way off. Their Climate Change Performance Index is still poor, demonstrating the need for a greater emphasis to be placed on the issue; their reluctance to fix the issue is startling. 

          What are some ways in which China could confront the issue? For starters, stricter laws must be enacted. Understandably, China is trying to maintain their global appeal for cheap labor/manufacturing. However, the problem at hand needs to be fixed, otherwise countries will begin to reject their services, even at the “lower prices” (the negative environmental externalities could, at some point, outweigh the amount countries are gaining through “lower prices”). 

            Another idea is for other countries to impose import tariffs on those Chinese goods specific to high pollution rates during production. This would, in theory, limit the amount of Chinese goods countries would purchase, establishing an equal playing field for those countries that follow the pollution rules to provide goods at similar prices. This is not an ideal situation; global terms of trade would worsen and the WTO would need to get involved as tariff wars would most likely be a resultant. Additionally, some countries would have game-theory-like incentives to cheat regarding the tariffs. 

            The last idea is that of a carbon tax, as we discussed in class. Countries could write out contracts to propose carbon taxes in each respective country, ensuring enforcement through the United Nations/WTO. The tax collected could go towards lowering other consumer taxes, as consumers would likely get hit with higher prices on goods, thus evening out the losses.

 

The Fear Of European Banana Producers

Recently, European banana producers felt their livelihood at risk because of the increasing presence of bananas from the third countries in the EU.According to the article, there are two  main reasons lead to this situation. First, the EU continued to reduce the import tariffs of bananas from third countries.the world price was increased which lead to large amount of bananas come into European market from the third countries. Also, the bananas from the third countries are able to enter European market in a relative lower price which may damage the internal banana industry. Second, the lack of insistence to the food safety and easing phytosanitary regulation made it possible for bananas from the third countries accessed the EU at much lower price.
As we learnt in the classes, one of the best way to solve this problem is to increase the banana import tariffs. After the rise of tariff, the world price may go down while the internal price may go up. It will hurt consumers because consumers have to pay more money for the same amount of bananas. However, both government and European banana producers are better off due to the increasing internal price of bananas. And the EU's terms of trade will also increase since the import price is decrease. Seemingly, the EU will gain from the increasing tariffs, but it is depended by which part is larger, the loss of consumers or the gain of government and banana producers. In other words, it is depended by how much amount of tariffs that the government will  take. And we can't ignore the impact of the tariffs from the third countries' government.
In my opinion, it is hard to say who is the winner or loser during the trade. Every countries' government will take several trade policies to protect their trade environment. And international organizations will also take measures to keep balance among the member countries. These policies and measures will be changed periodically. so it is meaningful for us to know the original reasons why these policies and measures should be used, so that we are able to be the winner in most time.http://www.freshplaza.com/article/115236/Europe-Reduction-of-banana-import-tariffs-puts-Pl%C3%A1tano-de-Canarias-in-danger

                  WHY IS CHINA ATTRACTIVE IN AFRICA THAN THE WESTERN?
              China has become a very famous and a known investor in the African continent. It has and it is investing in various spheres of human life such as health sectors, social sectors, agriculture sector, and above all and in particular China has immersed in economic sector. In all these sectors not mentioning how China has invested in, I would like only to confirm that it invests a lot of funds not less that $ 200 Million in the sectors. For instance, just to mention a few, in particular is that the trade between China and Africa has grown as quoted from the article "Already trade between Africa and China has grown at a breathtaking pace. It was $10.5 billion in 2000, $40 billion in 2005 and $166 billion in 2011. China is currently Africa’s largest trading partner, having surpassed the US in 2009" This is a total trade involvement of China with Africa.

    Now, in this article, as the title of the post states is to why is China attractive to African continent?Most of the people have said it is because of large population that grows high, or it is because there is high technological advancement and others have gone far that most of the companies that offshore there manufacturing industries have firms over there so it becomes easy for China to look for raw materials for the industries; a thing which might be true. Despite the inequality in trade partnership where by China takes raw materials, but still the countries in Africa import poor products, still they trade with China. Why?
           But, the general secret for China being attractive in the African continent is its neutrality in African politics and other internal social affairs. China has never done anything pertaining to political or social unrest in the region. Whereas other countries involve in business while also ensuring political stability, China has not done such things, but rather sticks on the business and trade partnership and agreement, and not on any political affairs. So, with greedy politicians and other business guys, it becomes easy for them to withstand China than falling in the Western countries which interfere with internal affairs of the particular government. China is lets us do business, and deal with your own problems. But other countries say, we can do business, but be politically stable, be a democratic state. And as I said, with greedy leadership, then it becomes easy to fall to China than to the other Countries particularly the western Countries that emphases democracy and political stability. In this article, good explanations are given to show how this trade is not fair for it neglects other aspects of trade like peace and stability which also involves equal distribution of the wealth.
     So, my questions are,is it fair for having business partnership in one aspect of social life and neglect the other?Should China also deal with political affairs with Africa to reduce poverty as it due to inequality in terms?If not, should the western countries restrict aids to those countries that have trade partnership with China and still no peace in their Countries?

http://www.un.org/africarenewal/magazine/january-2013/china-heart-africa
     

African Women Add to Total Trade

The African trade system is limited.  There are no women allowed to open into the trade sector.  Some women in Africa are in the manufacturing business or agricultural sector.  The agricultural sector is the biggest trade sector between African countries.  Womenare key to trade, they deliver, produce, and provide services.  Women need to develop an even more important role to trade.  They would like to trade, but the countries limit women’s wages and activities.  Many are trying to approve regulations on utilizing women in the trade force.

Accepting women into the trade sector will be similar to migration.  Even if there is no one moving in, the sectors are seeing a very large increase in their labor.  Trading within Africa will change many African inhabitants’ lives.  The benefits for women would include a wage difference in the home and ability to provide better for their family.  Women do assume the risks of not being able to trade with their business.  Wages overall may decrease but for families, the extra income of the mother will help their household.  Capital and land returns will increase.  Especially land in this case because women can join the large agricultural sector.  The extra revenue from having the women help will make a huge impact on each country.  The price of exports will likely decrease because there will be a higher amount to export and the price of imports may increase because the countries will have a greater ability to import so they may import more just in general.  So the home countries will improve the terms of trade.  Are there any other effects by adding women’s efforts into the workforce and trading sectors? Who (home country vs. foreign country/producers vs. consumers) will gain or lose from the increased trading?