Trade
and foreign investment create both hope and skepticism amongst many nations.
According to a new survey done by Pew Research Center, 81% believe trade is
good for their countries and 53% believe it creates jobs (Reuters). But of the
two biggest economies, Japan and United States, there is less hope and more
skepticism about trades level of improvement for their nation with regards to
economy and employment. When comparing skepticism versus hope in trade, 68% of
Americans and 69% of Japanese believe trade is good while 20% of Americans and
15% of Japanese believe international commerce creates jobs (Reuters).
This
skepticism is suggested to cause the delay and protectionism in finalizing a
free trade deal amongst Japan and the United States in the Trans-Pacific
Partnership, especially at the summit this past weekend. Overall, the United
States insists that Japan lower barriers to agricultural imports. But Japan argues
that is important for them to protect sensitive products such as pork, beef,
dairy and sugar. The concern of losing exporters benefits as well as consumers
benefits leads to types of protectionism such as these barriers to free
exchange, tariffs, and quotas that the United States wishes to lower.
The United States insists that Japan
lower their barriers of agriculture imports to allow consumer benefits to be
increased. When these barriers are reduced, trade will increase and so will the
gross domestic product (GDP), which gauges the health of a country’s economy. But
the problem here is that if and when Japan reduced these barriers on their
agricultural goods, it will cost them the money they would make in exporting
these high demanded goods: pork, beef, dairy and sugar.
In
my opinion, barriers are something that cannot be avoided, but they can be
reduced. Protectionism, and its other forms, is key in the foundation of a
successful free trade agreement. Because of concepts like comparative
advantage, absolute advantage and opportunity cost, the gap between countries
and efficiency is lessened when protectionism comes into play. Japan has an
absolute advantage, ability to produce more units of a good than another
country using the same quantity of resources, over the United States with these
agricultural goods. I believe that because Japan has this absolute advantage
over the United States, they should lower the barriers. This is because if
Japan doesn’t reduce the barriers on agricultural imports, the United States
could produce these goods on their own, raising the opportunity cost for the United States,
and ultimately causing them to raise the barriers on their goods that they have absolute
advantage over Japan. Thus, if Japan does not reduce these barriers and compromise with the U.S. they could cause a never ending cycle of unfair trade that will ultimately destroy both their economies and future relationships in trade organizations.
I agree with your comments on international trade barriers. The only thing that I am skeptical about is your comment at the end that Japan has the absolute advantage. In order to make this claim, you have to define the specific products that they have the advantage in making and the costs each country bears to produce them. They definitely have certain advantages, but an absolute advantage in every industry means that they should have a much stronger economy than we do, and I don't think that is the case. Other than that, your comments about trade barriers are very interesting.
ReplyDeleteComparative advantage is certainly real, and the effects of this dynamic to trade is felt by the United States and Japanese Public in the research polls. As economic activity is relocated with the help of free trade, facilitated to locations were the trade off is cheaper for it to occur, real people lose jobs all around the world. Especially in Japan and the US, two huge economic powers who have suffered the negative consequences of comparative advantage seeing once prominent and vital manufacturing jobs being shipped elsewhere. The economies of Japan and the United States had to be completely restructured, instead of a mass producing, manufacturing powerhouse, their economies are primarily service economies, most starkly in Japan where financial services and other company services are at the forefront, as natural resource’s are scarce and a very high standard of living has benefited Japanese Society but temporarily burdened their work force.
ReplyDeleteIn a perfect world in which gaining new skills for employment were easy and therefore politicians could consistently stand for free trade and end protectionist policies. Today I feel it is important to strike a balance between understanding the resourcefulness and expectations of constituents with the economic benefits, long term, of free trade. And although GDP may increase, the overall health of an economy from the income disparity that is created is not taken into account.
I do agree that trade barriers pose a great problem to consumers and nations in general. Japan does have some advantages over the US but don’t necessarily have absolute advantage over the US. I also agree that barriers should be reduced by Japan. Since Japan has the ability to produce products more efficiently than some nations it does have some leeway to lower its trade barriers.
ReplyDelete