Tag: trade liberalisation

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A trade conflict

International economists have long advocated the advantages of free trade. By boosting competition, increasing choice and market size, trade has long been seen as an engine of growth and efficiency.

For many years, tariffs and other restrictive trade practices have been removed on trade between both developed and developing countries and many rounds of negotiations have taken place, with mixed results.

The World Trade Organisation (WTO) plays a key role in trade negotiations and has the main aim of liberalising trade. The organisation requires its members to operate according to a variety of rules, including the prohibition of quotas and the inability of countries to raise existing tariffs without negotiating with their trading partners.

If any country breaks a trade agreement, the WTO can impose sanctions. A current case that has been referred to the WTO for ‘consultation’ concerns Argentina. Argentina has imposed various import restrictions on trade, such as import licensing and a requirement for countries to balance its exports and imports.

A number of WTO members recently expressed their concerns about these restrictive trade practices. The EU trade commissioner Karel de Gucht said:

Argentina’s import restrictions violate international trade rules and must be removed. These measures are causing very real damage to EU companies – hurting jobs and our economy as a whole. … Argentina’s trade policy has become rooted in unfair trade practices.

Argentina has said that it was expecting the move from the EU, but claims that its protectionist measures are there to support and re-industrialise the country. This case is unlikely to be resolved any time soon and while the ‘restrictive trade practices’ remain in place, EU companies trying to export to Argentina will find barriers, such as a requirement for all imports to receive pre-approval.

The effects of these restrictions have already been felt, with EU exports to Argentina down by 4% in April this year, compared with the same month last year. The following articles consider this issue.

EU takes Argentina trade fight to WTO France 24, (25/5/12)
EU files WTO suit over Argentina’s import restrictions Reuters, Sebastien Moffett and Tom Miles , (26/5/12)
EU escalates dispute with Argentina Financial Times, Peter Spiegel and Joshua Chaffin, (25/5/12)
EU refers Argentina’s import restrictions to the WTO BBC News (25/5/12)
EU steps up challenge to Argentina’s policies Wall Street Journal, Matthew Dalton (25/5/12)

Questions

  1. What are the rules governing the members of the WTO?
  2. What are the advantages of free trade?
  3. To what extent should emerging economies be allowed to impose protectionist measures to help support their economies?
  4. What action could the EU take in response to the ‘restrictive trade practices’ imposed by Argentina?
  5. What is import licensing?
  6. How will the import restrictions affect EU companies and the growth of the EU as a whole?
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The importance of imports

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)

Questions

  1. How can reducing trade barriers and thereby reducing the price of imports help a developing country?
  2. Consider whether the total removal of trade barriers would be desirable for developing countries.
  3. Explain what is meant by “But the Indian variant of creative destruction seemed unusually benign” and why this was so.
  4. Why has it proved so difficult to secure an international agreement to reduce trade barriers under the Doha trade round?
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Fair wind for Fairtrade

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

Questions

  1. Consider the reasons why Fairtrade sales have increased while sales of organic produce have declined.
  2. Does purchasing Fairtrade products mean that consumers are not seeking to maximise their consumer surplus?
  3. What economic challenges face Fairtrade producers? How should governments help the Fairtrade movement?
  4. Is the liberalisation of trade in the interests of Fairtrade producers?