INTERNATIONAL TRADE Essay

1. Who benefits from the government policies to (a) promote production of ethanol and (b) place tariff barriers on imports of sugar cane? Who suffers as a result of these policies? ANS: Benefiters in promoting production of ethanol: -Corn producers. They get subsidies from the government and get a free way of marketing from the government. The government promotes consumption of ethanol, ethanol is produced out of corn, so indirect marketing for corn farmers that will get more demand out of policies that promote ethanol. -Ethanol sellers. -People all around the world. As to be seen in the direction of global warming, you can say that using ethanol is better. But using ethanol leads to increasing food prices. So there is a negative and a positive side. -Businesses. If farmers get subsidies from the government they can lower their price. If farmers lower their price, the production to produce ethanol becomes cheaper thus making ethanol cheaper. Businesses that use ethanol will have a cheaper price, reducing costs and increasing profits. -The Government. In a democratic society we are seeing right now that a lot of people go green. When going green the government is trying to let you know that he cares about the world and he wants to make it better. It is a win win situation because there are no people in our opinion that are opposed in going green, but they are a lot of followers and possible followers that support an environmental friendly world. Benefiters in placing tariff barriers on imports of sugar cane: -The Gove rnment. They get all the money out of these tariffs. Sufferers as a result of these policies: -Countries that produce sugar for a living. Profit goes dramatically down when talking about a 25 to 50% import tariff. -Countries that set import tariffs for sugar. Countries that produce sugar can have put import tariffs themselves as protection against the country that has an import tariff on them. And countries that produce sugar can consider other possibilities when exporting their product to another country. They can acknowledge that it is not in their best interest to produce products to a land where import tariffs are so ridiculously high. They can see other possible solutions. 2.  One estimate suggests that if food prices rise by one third, they will reduce living standards in rich countries by about 3 percent, but in very poor ones by about 20 percent. According to the International Food Policy Research Institute, unless policies change, cereal prices will rise by 10 to 20 percent by 2015, and the expansion of bio-fuel production could reduce calorie intake by 2 to 8 perc ent by 2020 in many of the world’s poorest nations. Should rich countries do anything about this potential problem? If so,what? ANS: Rich countries should not give any subsidies to the bio-fuel corn farmers. They should decrease import tariffs so that it can be cheaper for countries that produce sugar (and so they can make bio-fuel out of sugar) thus increasing the amount of sugar that countries can export. They should develop new ideas in how they can attack environmental changes through cost-effective ways. 3. The argument for giving subsidies to ethanol producers rests upon the assumption that ethanol results in lower CO2 emissions than gasoline and therefore benefits the environment. If we accept that global warming is a serious problem in itself, should we not be encouraging government to increase such subsidies? What are the arguments for and against doing so? On balance, what do you think is the best policy? ANS: When the government started to subsidies farmers who grow crops. So they could turn them into bio – fuels ( primarily corn and soy beans ). More farmers where now planting crops, because then they got subsidies from the government. It’s also very good for th e environment. But it also has a negative side. When more farmers where planting crops. There was an dramatic effect on the demand for corn and soy beans. It increased very fast that in 2007 the U.S was responsible for half the global increase for the demand on crops. But when this happened the high tariffs where shutting out producers of the product sugar cane. So they could compete with the other products because the prices were so high. And that’s very unfortunately because sugar cane is an more friendly environment material than crops and soy beans. I think the best policy is to reduce the high tariffs on the other products. Because the sugar cane is even more environment friendly. And isn’t that what it’s all about, reducing the global warming effect. So I think they should drop the high tariffs and introduce the sugar cane.