Essay about The Political Economy of International Trade
OPENING CASE: Why Are Global Food Prices Soaring?
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 …show more content…
QUESTION 2: How has demand for bio-fuels affected the price of food? What are the implications of this trend? Reflect on the role of government in pushing prices up. What role do tariffs and subsidies play in the situation? In your opinion, should the governments of the United States and the European Union bear any responsibility for bringing food prices back down?
ANSWER 2: In an effort to slow global warming, both the European Union and the United States have adopted policies designed to increase the production of ethanol and bio-diesel. The policies involve providing subsidies to farmers. The net effect of the subsidies is to encourage farmers to produce less food, and more crops that can be used in bio-fuel production. The situation is exacerbated by high tariffs on alternative products that can be used for bio-fuel production – particularly sugar cane. Most students will recognize that the combined effect of the subsidies and tariffs are creating a difficult situation for consumers, while at the same time protecting producers. Some students may note the irony of the situation. Consumers, hit by higher prices at the pump are putting more pressure on