Back in 1993, the EU imposed tariffs on bananas imported from countries which were not former colonies of EU countries. These former colonies are in Africa, the Caribbean and the Pacific (the ACP countries). This meant that the main countries bearing the tariffs were banana producing countries in Central and South America.
“In 1996, Ecuador, Guatemala, Honduras and Mexico, together with the US, formally complained to the World Trade Organization (WTO) about the tariffs. Since then the WTO has repeatedly ruled that the EU tariffs are unfair, but little has changed thanks to continued discussions and arguments between the major players.”
Over the years the disputes between the EU and the APC countries on one side and the Latin American countries and the USA on the other have become known as the ‘banana wars’ (see Web cases 24.5 and 24.6 in Economics 7e MyEconLab). The WTO has ruled against the EU on several occasions, but to little effect as appeals have been lodged and talks have continued. At last, however, agreement has been reached – and without the WTO. This should see EU tariffs on Latin American bananas cut from 176 euros per tonne now to 114 euros per tonne over a seven-year period.
So are the banana wars over? Will EU consumers gain? And what will be the effect on Latin American and ACP banana producers? The following articles examine these questions.
Ending the longest trade dispute in history: EU initials deal on bananas with Latin American countries EU Press Release (15/12/09)
The EU-Latin America Bananas Agreement – Questions and Answers EU Press Release (15/12/09)
Lamy hails accord ending long running banana dispute WTO Press Release (15/12/09)
EU ends ‘banana wars’ with Latin America EU Observer (15/12/09)
Bananas dispute at the World Trade Organisation Reuters Factbox (15/12/09)
Banana prices to fall after longest trade dispute in EU history settled Telegraph (16/12/09)
End of banana wars brings hope for Doha Financial Times, Joshua Chaffin (16/12/09)
EU cuts import tariffs in a bid to end ‘banana wars’ (video) BBC News (16/12/09)
EU cuts import tariffs in a bid to end ‘banana wars’ BBC News (15/12/09)
Banana wars: the fruits of world trade BBC News, Nigel Cassidy (15/12/09)
EU, Latin America Proclaim End to “Banana War” Latin American Herald Tribune, Marta Hurtado (15/12/09)
Settlement should help Chiquita Business Courier of Cincinnati, Dan Monk (15/12/09)
Banana deal offers hope for global trade talks Sydney Morning Herald, Alexandra Troubnikoff (16/12/09)
Pact Ends Long Trade Fight Over Bananas New York Times, Stephen Castle (15/12/09)
Banana deal offers hope for global trade talks Sydney Morning Herald, Stephen Castle (15/12/09)
EU banana dispute ends in favor of Latin American exporters Deutsche Welle (15/12/09)
Questions
- Who has gained and who has lost from the tariffs imposed on non-ACP producers over the past 16 years?
- How might the agreement over bananas impact on the stalled Doha round talks?
- What is likely to happen to banana prices in the EU over the coming months? Use a diagram to illustrate your answer.
- Are the banana wars likely to be over now?
As the Times Online article below states, “Barely a year ago, The Co-operative Group was selling itself as an antidote to big business, an ethical alternative to the ruthlessness of mammon, but now it has decided to take on the Big Four supermarkets at their own game.”
So just what is the business strategy of the Co-op? Is ethical business consistent with profit maximisation? Does the takeover of Somerfield make the new Co-op a very different type of supermarket from that of a few months ago? The following articles look at the Co-op’s business strategy.
Co-op hits back with its own triple whammy Times Online, Marcus Leroux (30/11/09)
Christmas battle has started but the real test will be 2010 Telegraph, James Hall (5/12/09)
Co-op supermarket chain enjoys Somerfield boost BBC News, Will Smale (11/12/09)
See also the Co-operative group site:
The Co-operative
Questions
- What do you understand by ‘ethical business’? Would you describe the Co-op as an ethical business?
- What type of merger is the one between the Co-op and Somerfield?
- What economies of scale are likely be realised by Co-op’s takeover of Somerfield?
- What type of growth strategy is the Co-operative group pursuing?
- Is being ethical likely to slow or accelerate the expansion of the Co-op?
Paul Samuelson, who died on 13 December at the age of 94, was one of the greatest economists who ever lived. A generation of economics students had their first exposure to the subject through his textbook, Economics, first published in 1948 and now in 19th edition. His research covered many topics in economics and he brought a rigour to economic analysis that has had a profound influence on the development of the subject.
Tributes have flowed in from around the world and many obituaries have been written. The following is a selection that give you a feel for the huge contribution he made to the subject.
Thinking about his achievements, try answering the question below.
Nobel Prize-winning economist advised several U.S. presidents Washington Post, Patricia Sullivan (14/12/09)
‘Samuelson was the pre-eminent economist of our times’ Business Standard (India), Amartya Sen (19/12/09)
Across the Spectrum, Economists Mourn Paul Samuelson the Atlantic Wire, Max Fisher (14/12/09)
Pioneer who turned economics into a science Financial Times, Stephanie Flanders (14/12/09)
Paul Samuelson, RIP The Hindu Business Line, T.C.A. Srinivasa-Raghavan (14/12/09)
Paul Samuelson Telegraph (14/12/09)
Paul Samuelson The Economist (17/12/09)
Question
What makes a great economist?
Well no-one can say that Gordon Brown has had an easy ride: the war in Iraq, MPs’ expenses, flooding, strikes, unemployment, and of course a recession. Will the banking crisis and its knock-on effects prove to be the straw that broke the camel’s back? Only time will tell.
The UK economy will be voting within the next few months and the elected party will play a crucial role in our economic recovery. Public debt reached £829.7 billion at the end of October (59.2% of GDP) and with falling tax revenue and rising government spending, it could get considerably higher. “State borrowing grew by £16.1 billion last month (August) – almost twice the entire budget for the 2012 Olympics.”
The outcome of the election will not only play a role in determining how the UK fares over the next few years in terms of our economic recovery, but it will also indicate the likely direction that policy will take towards areas such as education, healthcare, poverty, pensions, etc. The housing market is also likely to be significantly affected and not just by the election. With the end of the stamp duty holiday approaching, demand for housing may begin to fall in the new year, which could spell a fall in house prices.
No matter what happens, it will be interesting to see the direction of government policy over the next few years, given the spending cuts we are likely to experience.
Public debt hits £800 billion – the highest on record Times Online, Patrick Hosking (19/9/09)
Labour polls fuel talk of early election date Mirror News, James Lyons (14/12/09)
Pre-election politics dictate the Bank of England’s economic policy The Independent, Stephen King (14/12/09)
David Cameron and Labour ready for ‘snap election’ BBC News (13/12/09)
So who said what to whom? The truth about the cuts debate Independent, Steve Richards (15/12/09)
Is UK government debt really that high? BBC News, Richard Anderson (22/12/09)
For data on public-sector finances, see:
Public Sector National Statistics Office for National Statistics
For a lighthearted look at the relationship between elections and the economy (in the context of the Philippines), see:
Election and other economic boosters Manilla Bulletin Publishing Corporation, Fred Lobo (14/12/09)
Questions
- How are economics and politics related? Think about how the up-coming election is likely to affect government policy and why.
- What are the main economic policies proposed by the Labour government? How do these aim to help the UK economy recover?
- What are the main economic policies proposed by the Conservative government? Will these policies be any more effective than Labour’s?
- The Conservative party is ahead in the polls at the moment: why do you think this is? To what extent has Labour’s popularity been affected by the way the government has dealt with the banking crisis?
The New Economic Foundation (NEF) is “an independent think-and-do tank that inspires and demonstrates real economic well-being.” It aims “to improve quality of life by promoting innovative solutions that challenge mainstream thinking on economic, environmental and social issues. We work in partnership and put people and the planet first.” It has just published a study into pay, A Bit Rich: Calculating the real value to society of different professions (see link below). This argues that narrow notions of productivity, whilst having some relation to pay, are a poor way of judging the worth of particular jobs to society.
“In this report NEF … takes a new approach to looking at the value of work. We go beyond how much different professions are paid to look at what they contribute to society. We use some of the principles and valuation techniques of Social Return on Investment analysis to quantify the social, environmental and economic value that these roles produce – or in some cases undermine.
Our report tells the story of six different jobs. We have chosen jobs from across the private and public sectors and deliberately chosen ones that illustrate the problem. Three are low paid – a hospital cleaner, a recycling plant worker and a childcare worker. The others are highly paid – a City banker, an advertising executive and a tax accountant. We recognise that our incentives are created by the institutions and systems around us. It is not our intention therefore, to target the individuals that do these jobs but rather to examine the professions themselves.”
So, to what extent do rates of pay reflect the ‘true value’ of what is being created? How could we establish this ‘true value’? Does pay even reflect marginal productivity in the narrow private sense? The report and the articles look at these issues.
A Bit Rich New Economics Foundation (14/12/09), (see also)
Top bankers destroy value, study claims Financial Times, Chris Giles (14/12/09)
Hospital cleaners ‘worth more to society than bankers Telegraph, James Hall (14/12/09)
Cleaners ‘worth more to society’ than bankers – study BBC News, Martin Shankleman (14/12/09)
Cleaners worth more to society than bankers, says thinktank Guardian (14/12/09)
Hospital cleaners ‘of more value to society than bankers’ Scotsman, Alan Jones (14/12/09)
Bankers and accountants a drain on the state, says think-tank Management Today (14/12/09)
Are cleaners worth more than bankers? BBC World Service (14/12/09)
Questions
- What is meant by the marginal productivity theory of wage determination? Does the NEF study undermine this theory? Explain.
- Why are elite bankers, tax accountants and advertising executives paid so much more than hospital cleaners, waste recycling workers and childcare workers?
- “Until the prices of goods and services reflect the true costs of their production, incentives will be misaligned. This means damaging activities will be relatively cheap and profitable, while positive activities will be discouraged.” Explain this statement and whether you agree with it.
- To what extent can the misalignment of pay and social worth be explained by externalities?
- What is the basis for arguing that tax accountants and City bankers have negative social worth? Do you agree? Explain.
- What would happen if hospital cleaners were give a pay rise and bankers given a pay cut so that cleaners ended up with a higher pay than bankers?
- In the light of the NEF study, what policies should the government adopt toward pay inequality?