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Free Trade

Free Trade. Food First. Comparative Advantage. Major idea of Free Trade: Comparative Advantage Each country exports what it produces best Money used to import what it cannot grow This could alleviate hunger and poverty. Costa Rica Coffee.

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Free Trade

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  1. Free Trade Food First

  2. Comparative Advantage • Major idea of Free Trade: • Comparative Advantage • Each country exports what it produces best • Money used to import what it cannot grow • This could alleviate hunger and poverty Costa Rica Coffee http://bloggle.com/wordpress/wp-content/uploads/2004310637-1.jpg

  3. Problems withComparative Advantage • Exports have boomed • in Third World countries • Hunger has gotten worse • Those who profit from exports • are not the poor • Wealthy do not use profits to benefit the poor • Export crops displace food crops • Brazil • Bolivia • Chile • Thailand Soybeans in Brazil http://www.brazilintl.com/states/matogrosso/agtours_mt/kory_pat/images_kory_pat/faz_cantosul.jpg

  4. Brazil • 1970s: • Soybeans become #1 export • Most soybean production • goes to feed livestock in Europe, Japan • Rice production fell • Staple food • hunger grew • By 1990s: • Brazil ranks third in world in Ag exports • ¼ of Brazil’s population • lives below poverty line Hunger program in Brazil http://www.paho.org/Images/DD/PIN/persp20_23.jpg

  5. Brazil 2003 Food Exports • Soy products • $8.1 Billion • Sugar • 2.1 Billion • Chicken • $1.7 Billion • Coffee • $1.5 Billion • Beef products • $1.5 Billion • Orange Juice • 1.2 Billion

  6. Brazil Ag Frontier • Cerrados: • 120 million hectares • high plains • Previously uncultivated • Soil acidity, aluminum • 2006 World Food Prize • Soil improvement of Cerrados • 40 million hectares now cultivated (2006) • Potential for expansion http://www.worldfoodprize.org/assets/pressroom/2006/June/brazil_map.jpg

  7. Chile • 1990s had become world’s #1 exporter of table grapes • 90% of world trade in grapes • Sales mostly to U.S. • Poverty widened dramatically • 1970s poor = 20% population • 1990s poor = 41% population

  8. Free Trade • Can be exploited by big corporations • to move farming, factories to where labor cheap • Large corporations get huge subsidies • from governments eager to attract investment • If unions raise production costs • strike for higher wages • company moves on World Trade Organization Protest http://www.panoramio.com/photos/original/8285536.jpg

  9. Fair Trade • Idea: support fair export prices for small producers in developing countries through co-ops: • Coffee • Tea • Bananas • Cocoa • Mangos • Pineapples • Crafts • 5 million growers in 40 countries • $180 million sales in U.S. (2002)

  10. Globalization • Some companies seek: • Lowest wages • Most lenient regulations • Cheapest resources • “Race to the Bottom” • People compete to work for less • Accept part time employment • Forgo health insurance • Forgo occupational safety regulations

  11. Slash and Burn Capitalism • Large export farming operations set up in a place for a few years: • Melons in Mexico: 7 years before unprofitable • Overused chemicals • Increased pest resistance • Increased wages • Pullout caused economy to slump • Cheap for another multinational to come in • Cycle leaves economy and ecology in decline

  12. NAFTA • Resulted in loss of jobs • in both US and Mexico • Jobs in Mexico lost • by flooding country with cheap mass produced goods • 28,000 local companies • out of business • Unemployment in Mexico • doubled • Number at or below poverty • increased from 32% to 51% Slums in Mexico City http://images.world66.com/sl/um/_q/slum_quarter_in_th_1_galleryfull

  13. Bubble Up Economics • After WWII, Japan, Taiwan, Korea huge economic growth • No Free Trade • Prohibited food imports, direct foreign investment • Land Redistribution • Government subsidies and tariff protection of domestic manufacturing • Incomes and purchasing power of poor peasants and workers raised: • Workers and peasants became strong domestic market • After market strong, opened borders Tokyo Tokyo http://www.rasterman.com/photos/tokyo_skyline/dscn6090.jpg

  14. World Trade Organization • Is it a dictatorial tool of the rich and powerful? • Does it destroy jobs? • Does it ignore concerns? • health • environment • development • WTO says emphatically no! http://www.wto.org/

  15. WTO Says • Misunderstanding: The WTO destroys jobs, widens the gap between rich and poor. • Answer: Not true, inaccurate and simplistic. • Trade can be a powerful force for creating jobs and reducing poverty. • Sometimes adjustments are necessary to deal with job losses • The alternative of protectionism is not the solution. • 1.5 billion people are still in poverty, but • trade liberalization since World War II has contributed to lifting an estimated 3 billion people out of poverty.

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