In the past few years, there has been an intensive argument over the sovereignty of a group of islands between Japan and China. Japan owns the uninhabited islands which are also claimed by China. A senior U.S Diplomat said that Washington hopes Japan and China, the world's second and third largest economics, can stay peaceful and develop together if possible. It is perfect to solve this problem by cooperation between Japan and China, but achieving this goal seems like an impossible mission.
Behind the superficially sovereignty and historical issue is the huge amount of fossil fuels in that sea area and several economic values like The Pacific Black Tide and fishery. Actually, the dispute of the islands can be seen as a conflict of fossil fuels because China and Japan are large oil-importing countries. For example, 55.2% of the total oil consumption of China was imported from other countries in 2011. If China can control the fossil fuels of the islands, it can reduce the importation of the oil or reserve the fossil fuels for the future.
As we discussed in class, in Pareto optimality, "it is impossible to make any individual better off without making at least one individual worse off." Decreasing large amount of importation of oil means China is able to save a lot of foreign currency which can be used to consume other internal scarce goods such as iron ore and high-tech products. The internal supply of these goods may increase while the internal price of them may decrease. thus, we have more space to achieve Pareto optimality because people can buy more products with the same money. People who buy these products become better off and no one else becomes worse off due to these deals. It is meaningful for the development of the country's economy
source : http://news.yahoo.com/us-official-urges-dialogues-over-china-sea-dispute-112633924.html
source : http://news.yahoo.com/us-official-urges-dialogues-over-china-sea-dispute-112633924.html
If China were to obtain these islands and they were able to substitute the fossil fuels that would now be available in place of many of those that they normally import, it would make China better off. But, who would it hurt on a global scale? If you look at the link listed at the bottom of the post you can see the different countries China imported crude oil from in 2010. Would the acquisition of these islands make some of these countries worse off? If China reduced their importation of oil, the world supply of oil would go up, theoretically causing the world price of oil to go down, hurting the overall welfare of the oil selling countries.
ReplyDeletehttp://www.theatlantic.com/international/archive/2012/07/dependence-on-middle-eastern-oil-now-its-chinas-problem-too/259947/
The first question i think that needs to be asked is if China has any right to these islands in the first place. I think the answer to that is no since the article makes it quite clear that the islands are currently owned by Japan. However if China were to own the islands there would be a significant economic impact on the world. China has quickly become one of the worlds biggest importers of fossil fuels which has increased the worlds demand for oil leading to higher global prices. If China were to increase the global supply of oil via these islands it would bring the price of oil down and make things better off for individual consumers and China itself. However, there is someone that is hurt by this kind of trade and I agree with what Tyler said about this hurting countries that are big oil exporters.
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