CHINA AND TANZANIA ON ECONOMIC AND TRADE RELATIONS
Countries engaging in trade have both to benefit in relation to what their trade terms state. All the countries have to benefit in as much as they are able to deliver the required trade products, be it technology or products. Tanzania and China signed many trade agreements on trade and technological cooperation and these include; foreign aid from China direct to Tanzania including technological aid, and funding of many other projects. All this in fact have trade compositions that Tanzanian has to agree in the terms. we see also how Tanzania and China share trade benefit of about $290 million and each country benefits on the maximum of its contribution.
In fact, there is one member in the terms that gains much, and the other gains less depending on what is requires for the Country. China exports about $million to Tanzania and imports $110 million from Tanzania. Tanzania is not also passive in the trade, it contributes for the imports that go to China in the amount mentioned above and this trade, where both of the players do not lose completely but in one way or the other they gain.
When we speak opening to international trade or avoiding no-trade policy, we speak of the ability to consume outside the PPF though producing on the along it. So, now Tanzania has the chance to export things that would only be consumed in the country and also not being able to produce them if it was not open to the international economic and technological agreements. Agreements are always to bind the two partners to fulfill their obligations.
When we come to relate this with our class materials, especially on both Models, Ricardian and Heckscher we find the truth underlying the type of trade partnership between Tanzania and China. Regarding Ricardian model, we see that China has technological comparative advantage over Tanzania especially when we look on the things that are made in Tanzania and those made in China, and also looking at what China exports, we see includes also technology
Looking on Hecksche-Ohlin model, we see both of the countries offer the products which are not available in the other partners area. The two countries offer different products due to different resources, for instance, Tanzania exports products such as dry sea foods, raw leather, log,, course copper and wooden crafts which are available in the country. China in turn offers, chemical equipment, electrical suppliers, and steel which not only have a presence in China but also have elements of technological advantage. The article in fact gives a hint that, trade is always between two or more partners and it does not count how one gains or loses but the way the economic principle will guide the course of agreement. Therefore, all the partners in trade have to know that, there must be a loss and gains when we engage in trade, or not all will benefit in the same way as we see China gaining $million and Tanzania gaining $110 million. We saw also that, a country that donates to a foreign country, benefits more that the country that receives a donation. It is now what we see between Tanzania and China.
The question is, will Tanzania gain more than that if it rejects steels, foodstuff,light industrial products, and other products which it possess as resources?The second question is, if China retaliates by stopping foreign aid in technological form, will it be affected by the decision done?And what is the function of the foreign aid to Tanzania?
Source:http://tz.china-embassy.org/eng/ztgx/jj/t421433.htm
As you have made apparent, Tanzania and China both benefit from the trade agreements they have engaged in throughout recent history. You mention the Hecksche-Ohlin model, but I think it is important that along with this model it needs to be specified which is the relatively capital-abundant country and which is the labor-abundant. This scenario is quite interesting regarding these two countries. First of all because China is often thought of as having a very large population with an abundance of low-skilled workers (who accordingly work for low wages). However, between these two countries it seems to be that China is the relatively more capital-abundant country and Tanzania is the more labor-abundant country (as they lack the amount of available capital). Therefore, China is relatively capital-intensive in this agreement, exporting foodstuff, vehicles, textiles, light industrial products, chemical products, mechanical equipment, electric appliances and steel". On the other hand, Tanzania is relatively labor-intensive in the agreements, exporting "dry seafood, raw leather, and log, coarse copper and wooden handcrafts" (exports that obviously depend on labor input as opposed to capital input).
ReplyDeleteI understand that China is trying to give a Tanzania a boost in economy in their economy. I assume that through many of these co-op’s Tanzania has agreed to use most, of if not all, the aid in China so the Chinese economy can grow as well. In regards to the Hecksche-Ohlin model, I would argue that China is the capital abundant country in regards to Tanzania, and Tanzania is labor abundant compared to China. This allows Tanzania to export dry sea foods and raw leather and lets China focus on exporting things like chemical equipment. I don’t think Tanzania would benefit from rejecting these resources. Also if China decides to cut foreign aid you would see a decline in both economies because Tanzania will stop importing goods from certain Chinese sectors causing a drop in demand for workers, and Tanzania will have a drop in demand because they no longer have the means to buy the Chinese goods.
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