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.
Download ReportTranscript 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.
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 http://bloggle.com/wordpress/wp-content/uploads/2004310637-1.jpg Problems with Comparative 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 Soybeans in Brazil http://www.brazilintl.com/states/matogrosso/agtours_mt/kory_pat/images_kory_pat/faz_cantosul.jpg – – – – Brazil Bolivia Chile Thailand 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 Hunger program in Brazil http://www.paho.org/Images/DD/PIN/persp20_23.jpg • ¼ of Brazil’s population – lives below poverty line 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 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 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 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 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) 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 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 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 Bubble Up Economics • After WWII, Japan, Taiwan, Korea • • • • • Tokyo Tokyo http://www.rasterman.com/photos/tokyo_skyline/dscn6090.jpg • • 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 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/ 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.