1 / 16

Trade and Agriculture

Trade and Agriculture. ApEc 3071. Why Is Agric. Trade So Important. Allows countries to take advantage of comparative advantage. - Produce what produce best - Could grow bananas in the US in hot-houses. - Saudi Arabia: oil & wheat. Allows countries to improve food security.

chelsea-burns
Download Presentation

Trade and Agriculture

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Trade and Agriculture ApEc 3071

  2. Why Is Agric. Trade So Important • Allows countries to take advantage of comparative advantage. - Produce what produce best - Could grow bananas in the US in hot-houses. - Saudi Arabia: oil & wheat. • Allows countries to improve food security. Import when have a shortage from a global market. Reduces price changes in a country. • However, only a small portion of food in the world is traded internationally.

  3. Why Are Agric. Prices So Volatile

  4. Effect of Export on Int’l Price of Rice

  5. Output Responses to Price Changes in Dev. Countries Table 16-4 • Percent change in output for a 10% increase in price. • Short-run and Long-run responses. • Wheat: 1.0 & 10.0 • Maize: 1.0 & 10.0 • Coffee: 0.4 & 10.0

  6. World Trade Organization (WTO) • Based in Geneva. • Role is to supervise (act as referee) & liberalize (further reduce barriers) trade. • Provides an method of dispute resolution to prevent trade wars.

  7. Doha Development Round of WTO Trade Negotiations • Started in 2001 with great fanfare. • Goal to assist developing countries. • Reduce Developed Country agric. subsidies. • And reduce barriers to developing country agric. exports. • Negotiations became highly contentious & are completely stalled. • Key issue was high level of agric. subsidies in U.S. & Europe (EU).

  8. Non-Tariff Trade Barriers • Have become more important as traditional barriers (tariffs) have been reduced. • Sanitary & phyto-sanitary conditions. • Environmental conditions. • Labor conditions. • Packaging & labeling conditions. • Ex. EU won’t import US GM agric. commodities. • Probably legal if able same conditions to domestic & imported products.

  9. Importance of Currency Exchange Rates in Trade • Types of Exchange Rates: Floating (market determined) Fixed (pegged – within a range) ex. DR, Argentina, China Manipulated • Overvalued –exports more expensive; imports less. • Undervalued – exports less expensive; imports more. • Currency is a good that is bought & sold for investment & speculation, so even free market rate can be distorted.

  10. Purchasing Power Parity (PPP) Exchange Rate • Based on the notion that if exchange rates are at the “correct level” should be able to buy the same amount of goods & services in a country as a US dollar would buy in the US. • Big Mac Index – The Economist.

  11. Ratio of PPP to Market Exchange Rate:Degree of Over/Undervaluation, 2008 • France: 1.4 • Norway: 1.6 • Japan: 1.1 • US: 1.0 • Argentina: 0.6 • Guatemala: 0.6 • Kenya: 0.5 • Bangladesh: 0.4 • Thailand: 0.5 • China: 0.6

More Related