Even in the current gloomy economic climate, there is something else that has grabbed media attention – the outbreak of swine flu. This is of particular concern, given the WHO’s announcement that we are in an H1N1 flu pandemic. The symptoms and health risks have been widely broadcast, but it is not just this that governments are concerned about. The economies of some countries, in particular Mexico, have been suffering. ‘Swine flu has dealt a major blow to Mexico’s already battered economy’. Many countries have issued advice to businesses on dealing with a potential pandemic and some countries are facing trade restrictions. It’s important to consider the economic consequences of this outbreak in a time of global recession. How will some of the worst hit industries cope and what are the costs that firms could face if the situation gets worse? The following articles explore the issues.
Economic impact of swine flu BBC News: World News America (4/5/09)
Advice to businesses on swine flu BBC News (4/5/09)
Swine flu nations make trade pleaBBC News (3/5/09)
WTO protectionism report to feature swine flue bans The Economist (12/6/09)
Mexico economy squeezed by swine flu BBC News (30/4/09)
Swine flu fears hit travel shares BBC News (27/4/09)
Swine flu: Four ETFs to watch Seeking Alpha (12/6/09)
Employers have to pay for swine flu quarantines Scoop Business: Independent News (12/6/09)
- Which industries are the most affected by the outbreak of swine flu?
- What are some of the costs that businesses will face following the WHO’s announcement that we are in a flu pandemic?
- Some of the articles talk about possible trade restrictions. What are the arguments (a) for (b) against protectionist measures in these circumstances?
- How will this flu pandemic add to the global crisis we are currently facing? What will happen to share prices, to tourism, to people’s expectations?
- Do you think that firms have a social responsibility to deal with this pandemic?
- Will there be additional health costs and who should bear them? What do you think will be the impact on the NHS, given its method of provision and finance?
- Do you think that this pandemic will affect the global economy’s ability to recover from this recession?
The following article from The Economist looks at the role of imports in stimulating economic development in developing countries. It questions the simple perception of many people, not least politicians, that exports are good, but imports are bad. Far from merely being a drain on the balance of payments and a threat to domestic industries, imports can provide both useful competitive pressures and access to intermediate goods.
Opening the floodgates The Economist (7/3/09)
(The paper referred to in The Economist article above)
- How can reducing trade barriers and thereby reducing the price of imports help a developing country?
- Consider whether the total removal of trade barriers would be desirable for developing countries.
- Explain what is meant by “But the Indian variant of creative destruction seemed unusually benign” and why this was so.
- Why has it proved so difficult to secure an international agreement to reduce trade barriers under the Doha trade round?
In an earlier news item we saw that the global recession has hit the demand for organic produce. The same is not true for Fairtrade products as a global survey published on 17/4/09 shows (see). Awareness of Fairtrade products continues to grow as do sales. The articles below look at the findings of this survey and at the explanations behind it.
UK: Fairtrade Flows Against Economic Tide Namnews (20/4/09)
The government must act on fair trade now Public Service Review: International Development Issue 13 (20/4/09)
Fairtrade a hit with shoppers as demand rises despite credit crunch Glasgow Daily Record (17/4/09)
Link to short videos from the Fairtrade Foundation; Link to facts and figures on Fairtrade Fairtrade Foundation
- Consider the reasons why Fairtrade sales have increased while sales of organic produce have declined.
- Does purchasing Fairtrade products mean that consumers are not seeking to maximise their consumer surplus?
- What economic challenges face Fairtrade producers? How should governments help the Fairtrade movement?
- Is the liberalisation of trade in the interests of Fairtrade producers?
Large areas of land in the former Soviet Union and Eastern Europe are lying uncultivated due to export barriers and tariffs. Given the recent rapid rise in food prices, this fallow land (estimated to be around 23 million hectares) could help to reduce upward pressure on food prices.
Bread basket that is left to grow weeds Times Online (12/3/08)
||Identify three different forms of protectionism.
||Explain why the land identified in the article has remained uncultivated.
||Discuss the arguments for and against these countries reducing tariffs on food.
In the article below, Irwin Stelzer argues that Congress has adopted a more protectionist stance towards trade policy. Not all would, however, agree. Why not have a look at the comments after the article to see some of the discussion that has taken place about the article?
The end of free trade as we know it Times Online (20/5/07)
||Assess the extent to which the new trade agreements under discussion are likely to improve the position of workers globally.
||Analyse two policies that the US administration could put in place to reduce the level or protectionism.
|| Discuss the extent to which the new trade agreements referred to in the article will represent a more protectionist approach to trade.