2_20_Notes_on_Trade_Led_&_GVC_Driven.pptx - Trade Theory-Driven Theories of Agricultural Economics GVC Analysis as one Theory of Agricultural

2_20_Notes_on_Trade_Led_&_GVC_Driven.pptx - Trade...

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Trade Theory-Driven Theories of Agricultural Economics: GVC Analysis as one Theory of Agricultural Economics and Policy Tsegabirhan W.Giorgis, AAU, CBE, DE, 2019-2020 AY 11/15/2019 1
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Introduction Definition of resources, as endowment or as human creation Scarcity of endowed resources or created resources? If the problem is all about the scarcity of created non-natural resources , the scarce resource is the capacity to create such resources not the effect (the existing hardware technologies, machinery, equipment, buildings, known as capital goods, the means of production) Evolution of trade theories from comparative advantage to new- new trade theory, which argues for the ‘ creation of competitive advantage ’ seems to support this line of argument. If so the strategic direction should be to nurture innovative capacity of a given society, government, private organization (the firm), which is the major driver of creating competitive advantage along the entire value chain from a field to a spoon (up to feeding table) . 11/15/2019 2
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Introduction If “Globalization is an irreversible process then low income countries like Ethiopia need to recognize, understand and endeavor to maximize the possible gains from globalization and minimize or avoid the risk of marginalization from this dynamic global setting . This dynamic globalization process which involves an " accelerating pace of technological change and globalization of production , defines new opportunities and challenges " for low income countries” like Ethiopia ( Lall,1999, p.2). 11/15/2019 3
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Comparative Advantage Theory Traditional theories of trade (the theory of comparative advantage ) and their versions the competitiveness of countries and industries is based on endowments and factor intensities ( relative supply of different factors of production, labor, capital and others ). These theories argue that a country has a comparative advantage in the production and export of goods, which can be produced at a lower opportunity cost compared to other countries. The consequent industry and trade policy for low-income countries is to specialize on labor-intensive industries and primary commodity based- agro-industries. These industries are taken to be cost and hence price competitive compared with capital-intensive and knowledge-intensive industries, in which these countries have comparative disadvantage . (Ciuriak, et al, 2011, p.2; Smit, 2010, p.110) These theories of comparative advantage are basically resource-driven explanation of competitiveness and growth . 11/15/2019 4
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Comparative Advantage Theory These theories do not lend much space to conscious efforts to enhance productivity and innovation which are the underlying forces of sustainable and dynamic competitiveness of countries, industries and firms .
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