L04Sep11_306 - Lecture 4: Trade and Food Markets FRE 306...

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Lecture 4: Trade and Food Markets FRE 306
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Lec 4: Trade and Food Markets 2 Introduction This lecture about International Trade and Food, with emphasis on empirical results Has become an increasingly important area, as Canadian data will show; also important worldwide Important and beneficial from both theoretical and empirical perspectives, with certain caveats What about claims of negative effects of trade? Debate about globalization Questions also raised about firm size in food sector
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Lec 4: Trade and Food Markets 3 Gains from Trade Start with expectation of what occurs with trade from econ. Economic theory: allow countries to specialize in what they produce best, and they will enjoy the lower costs and/or higher returns that arise from this specialization Trade allows countries to pursue this specialization [and enjoy any economies of scale], even if they are small Export commodities (and services) where they have comparative advantage, import where they do not have an advantage, and enjoy any economies of scale by selling into larger global markets. Conversely: think of a world of no trade, where you must produce everything yourself: your housing, food, and clothing. This is what can face poorest LDCs, notably the poorest people in the poorest LDCs.
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Lec 4: Trade and Food Markets 4 Gains from trade: empirical evidence How and to what extent countries engage in trade is very much a question of government policies Exports not function of natural resources; success in trade more dependent on quality of human resources Those countries that opened up to trade in the last three decades have generally shown much higher economic growth rates, higher standards of living Most strikingly observed in Asia 1st round: Hong Kong, Singapore, Taiwan, and South Korea 2nd round: Malaysia, Thailand, Indonesia, Philippines, China 3rd round: Vietnam, India, Bangladesh, Cambodia
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Lec 4: Trade and Food Markets 5 Empirical Evidence II Empirical Evidence in Canada: Q: What would happen if Canada could not trade with the US in softwood lumber? A: Seen with periodic imposition of heavy duty (20+%) on Canadian softwood lumber exports (large decline in incomes) Still some exports, so no-trade situation would be more severe. However, even with >20% tariff there are mill closures throughout BC; the industry has argued this will result in very large job and income losses around the province (35,000 jobs) What would happen if we could not trade our wheat? Domestic price would fall dramatically due to inelastic nature
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This note was uploaded on 11/18/2011 for the course FRE 306 taught by Professor Rickbarichello during the Winter '11 term at The University of British Columbia.

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L04Sep11_306 - Lecture 4: Trade and Food Markets FRE 306...

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