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Oilseed trade negotiations

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Soybean trade negotiations between U.S. and EU

Soybean trade negotiations between U.S. and EU

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  • 1. Introduction to Oilseed Trade Negotiations Soybean trade negotiations between U.S. and EU marked a turn in the two countries’ trade practices  This dispute was brought twice to GATT  GATT recommended EU to Update Trade Policy in terms of duty-free trade  200% tariff on $300 million worth of EU (mainly French and German) products, mainly  white wine,  sausage,  Liquors Given these fact; the objective of this case study is to answer the following questions:
  • 2. If the EU had decided to counter the U.S. threats with further retaliation against U.S. products, what might it have picked for maximum effectiveness? Having the world’s largest bilateral traders involved in a tradeNo. 1 dispute, is a true clash of titans. No. 2  Millions of customers affected by disputes of such trade war, erosion in annual inflationNo. 3  If EU had decided to counter U.S. threats, a careful review of its export portfolio was necessary. No. 4  Solution: export quota for: Medicinal, Dental andNo. 5 Pharmaceutical preparations.
  • 3. If the EU had decided to counter the U.S. threats with further retaliation against U.S. products, what might it have picked for maximum effectiveness? Tariff BarriersNo. 1  Retaliatory tariff (for oilseed imports from U.S.)  Add/increase environmental ad valorem tariff for U.S. produced/imported SUV’s  Prohibitive tariff for genetically modified food. No. 2 Nontariff Barriers  Export quota control for Medicinal, dental and pharmaceuticalNo. 3 preparations  Set special regulation standards for labeling, packaging and testing for American Food Chains in EU  Introduce licensing arrangements for their food programs No. 4  Launch an EU-wide campaign for promoting EU food products (buy local)  Subsidize companies promote oilseed export to China, Japan and Taiwan.No. 5 Reciprocal requirements (EU supplies with medicinal and pharmaceutical substances after U.S. drops the 200% tariff).
  • 4. The United States Subsidies its agricultural production and exports in various ways. Is there an ethical dilemma involved in trying to get other countries to dismantle their subsidy programs? The Austrian School of Economics and other free-marketers hold theNo. 1 view that subsidies generally do more harm than good by distorting economic signals (Wikipedia®, n.d.). Oxfam prove that subsidies are translated into millions against No. 2 already poor countries from the third world. Their example illustrates how EU spends €3.30 in subsidies to export sugar worth €1 (Oxfam International. 2004).No. 3  Export subsidy: a mean of compensation or protection, provided by a foreign state to its native producers. No. 4  Government influence in pricing; therefore dumpingNo. 5 Should be treated in country-by-country and product-by-product cases, in order to determine and settle dilemmas
  • 5. At the time of the oilseed trade negotiations, France had an unemployment rate of about 10% and mounting racial tensions in working-class neighborhoods. What constraints did these conditions put on French politicians negotiating an agreement?No. 1  US request to cut the oilseed production for 7.5-8 million metric tons  a year, being 40% less of their current output No. 2  Low possibilities for market for both Asia, as well as EU  No capacity utilizationNo. 3  Layoff  Through trade, Europe is connected with the rest of the world No. 4  Limit this involvement or inflate  Endanger influence,  Political hegemony.No. 5
  • 6. If the United States were to threaten Japan, what product(s) would be (a) likely candidates(s)? Would the possibility of reaching an agreement with Japan be as high as with the EU? The export portfolio of Japan towards the U.S. is rather concentratedNo. 1 in manufactured goods (cars, computer accessories etc.) (Daniel Workman. 1993).  Efficient Product: Steel No. 2  What way: Import tariff of ~40%  Why efficient:  Limit Japan’s market shareNo. 3  Stimulate domestic producers  competitive advantage  increase their production capacities, while on the other side;  Japan unable to sell due to higher price dictated by import tariffs No. 4 Is it easier than with EU? Yes. Single - single governmental body offers a rather less complex legal and business framework. Japan’s accounts as one of world’s largest economies, and the second largestNo. 5 investor in the United States.
  • 7. What risks were apparent in the U.S. announcement to limit EU imports?No. 1 If the Oilseed agreement was to be set on a status quo, or even worse fail, the world would face a turn in the socio-economical aspect, with time deteriorating things increasingly. No. 2  Turmoil:  Unemployment rate rolling upwards  Instability  Disturbing social welfareNo. 3  Political weakness  Negative signal for developing countries – retreat  GATT – WTO?? No. 4 In figures: G7 countries:  each extra $1 billion in exportsNo. 5  Est. 19,000 new jobs (Peter Sutherland. 1993. p.p. 5).
  • 8. Works Cited EUROSTAT (Comext, Statistical regime 4). 22 9 2009. Retrieved 6 5 2010, from Europa.eu: http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113465.pdf, p.p. 5 EUROSTAT (Comext, Statistical regime 4). 22 9 2009. Retrieved 6 5 2010, from Europa.eu: http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113465.pdf, p.p. 6 EUROSTAT (Comext, Statistical regime 4). 22 9 2009. Retrieved 6 5 2010, from Europa.eu: http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113465.pdf, p.p. 7 Wikipedia®. (n.d.). Retrieved 6 11, 2010, from Wikipedia.org: http://en.wikipedia.org/wiki/Subsidy Oxfam International. Oxford, UK (2004). "A Sweeter Future? The potential for EU sugar reform to contribute to poverty reduction in southern Africa." Oxfam Briefing Paper No. 70. November 2004. pp. 39-40. Peter Sutherland. (1993). Countdown to the Uruguay Round. Retrieved 6 5 2010, from World Trade Organization: http://www.wto.org/gatt_docs/English/SULPDF/91730177.pdf Daniel Workman. (1993). Japans Top Exports & Imports. 2 7 2007. Retrieved 6 5 2010, from Suite101: http://internationaltrade.suite101.com/article.cfm/japans_top_exports_imports