Why Are Global Food Prices Soaring?

Improved Essays
The Political Economy of International Trade

Chapter Outline

OPENING CASE: Why Are Global Food Prices Soaring?

INTRODUCTION

INSTRUMENTS OF TRADE POLICY

Tariffs Subsides Country Focus: Subsidized Wheat Production in Japan Import Quotas and Voluntary Export Restraints Local Content Requirements Administrative Polices Antidumping Policies Management Focus: U.S. Magnesium Seeks Protection

THE CASE FOR GOVERNMENT INTERVENTION

Political Arguments for Intervention Country Focus: Trade in Hormone-Treated Beef Economic Arguments for Intervention

THE REVISED CASE FOR FREE TRADE

Retaliation and Trade War Domestic Politics

DEVELOPMENT OF
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Political arguments for intervention are concerned with protecting the interests of certain groups within a nation (normally producers), often at the expense of other groups (normally consumers). Economic arguments for intervention are typically concerned with boosting the overall wealth of a nation (to the benefit of all, both producers and consumers).

Political Arguments for Intervention

B) Political arguments for government intervention cover a range of issues including protecting jobs, protecting industries deemed important for national security, retaliating against unfair foreign competition, protecting consumers from “dangerous” products, furthering the goals of foreign policy, and protecting the human rights of individuals in exporting countries.

Protecting Jobs and Industries

C) The most common political reason for trade restrictions is "protecting jobs and industries." Usually this results from political pressures by unions or industries that are threatened by more efficient foreign producers, and have more political clout than the consumers who will eventually pay the
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Some students will probably suggest that the costs in terms of lost wages and benefits associated with free trade outweigh the benefits that would be gained. Other students however, will probably argue that since protectionism typically benefits only a few at the expense of others, while free trade generates greater economic growth and higher wages, a free trade policy should be followed.

Teaching Tip: The Web site for Institute for International Economics is available at {http://www.iie.com/}.

A New Round of Talks: Doha

R) In late 2001, the WTO launched a new round of talks at Doha, Qatar. The agenda includes cutting tariffs on industrial goods and services, phasing out subsidies to agricultural producers, reducing barriers to cross-border investment, and limiting the use of anti-dumping laws.

FOCUS ON MANAGERIAL IMPLICATIONS

A) What does all of this mean for business? Managers need to consider how trade barriers impact firm strategy, and what role they can play in promoting free trade or trade barriers.

Trade Barriers and Firm

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