Impact of international trade on onion price rise in Bangladesh

Impact of international trade on
onion price rise in Bangladesh
Course Name : Global Political Economy
Course Code : GED223
Section : 01
Prepared by:
Name ID
Jahid Khan Rahat 171011211
Sushmita Binte Musadique 171013079
Submitted to:
Mr. Rigan Chakma
Department of General Education Program (GED)
University of Liberal Arts Bangladesh (ULAB)
Submission Date: 31st December, 2020

Abstract
Global politics has direct impact on product price of a country. Nowadays most of the country
around the world depends on International Trade. However, country’s political relationship
makes trouble of international trade. In fact, Bangladesh import onion from India. So,
Bangladesh and Indian political relationship influenced onion price in Bangladesh. Moreover,
it can influence product demand and supply of a country. Government intervention and
invisible hand is the mechanism to increase and decrease product price in a particular
country. In this research we try to find out the global political relation and mechanism of
product demand and supply. To make the research effective we try to relate Bangladesh
onion price hike and political relation.
Keywords: International trade, Trade relation, Global trade policy, Import, Export.

Table of Contents
1.0 Introduction...................................................................................................................................... 1
2.0 Research Objective........................................................................................................................... 1
3.0 Research Questions.......................................................................................................................... 1
4.0 Historical Background ...................................................................................................................... 2
4.1 International Trade ....................................................................................................................... 2
4.2 Trade Relation............................................................................................................................... 2
4.3 International Trade Policy............................................................................................................. 3
5.0 Methodology.................................................................................................................................... 3
6.0 International Trade Influence the Onion Price in Bangladesh........................................................ 3
6.1 International Trade Influenced Economic Growth ....................................................................... 4
6.2 International Trade Affect Global Politics..................................................................................... 5
6.3 Bangladesh Benefit from Global Political Relationships ............................................................... 5
6.4 Prevention of the Negative Impact of the Global Political Economy............................................ 6
6. 5 International Trade has Influenced Product Prices...................................................................... 6
7.0 Findings based on Demand and Supply........................................................................................... 7
7.1 Decrease the Onion Supply due to India Ban to Export Onion..................................................... 7
7.2 Increase the Demand for Onion due to Future Expectation......................................................... 8
7.3 Decrease the Onion Supply due to Stockpile................................................................................ 8
7.4 Decrease the Demand for Onion due to Price Increase ............................................................... 9
8.0 Recommendation...........................................................................................................................10
8.1 Make an Effective Market Economy...........................................................................................10
8.2 Government Intervention in Onion Market................................................................................12
9.0 Conclusion ......................................................................................................................................12
10.0 References ...................................................................................................................................14

1.0 Introduction
International trade such as import-export play an important role in economic growth of
Bangladesh. (HEAKAL, 2020). In modern-day economy foreign trade is very popular idea. The
term import refers buying products from overseas and export indicate selling of goods or
services in foreign country. The international trade happened between two countries because
of satisfying demand. Export enable to sell product that is produced domestically. On the
other hand, import helps to consume foreign product in our country. International trade has
direct impact to rise onion price in Bangladesh. (HEAKAL, 2020).
Onion is a very important kitchen commodity in Bangladesh. (Dhar, 2020). No one can think
about cooking dishes without onion. It is a necessary ingredient for cooking such as beef curry,
chicken curry, egg omelets, and snacks items. Suddenly the price of onions in the market has
risen in Bangladesh. It was an unexpected situation for the consumers. The day before 30th
September 2019 the price of onion was 70-80TK but all sudden on 30th September the price
become 110TK in the local markets of Dhaka such as Shaymbazar, Shaymoly Bazar,
Karwanbazar and as well as super shops. Then the onion prices began to rise sharply. (Dhar,
2020). It occurred because of international trade barrier imposed by India.
2.0 Research Objective
To investigate the impact of international trade and onion price rise in Bangladesh.
3.0 Research Questions
a) How international trade influenced economic growth?
b) How dose international trade affect global politics?
c) How can Bangladesh benefit from global political relationships?
d) How can we prevent the negative impact of global political economy?
e) What is the role of government to remine decent political relationship among the
country?
f) How can international trade have influenced on product price?

4.0 Historical Background
During Mercantilism establishing by replacing barter system in 16th to 17th century,
international trade started and enrich its history. In 18th century it shifted toward liberalism.
As a result, economic structure and principles made rapid change in international trade policy.
4.1 International Trade
Notable events are accompanied by a record of global alternatives that have influenced
alternatives in different countries. The term 'global change cannot actually be implemented
with the upside push of the nation-state to the withinside of the previous generation, but the
method is a smooth distance alternative; the pace, including the presentation of global
exchanges, is in line with current international commodities. (Wikipedia., 2020).
There is a rich record through global alternatives that the barter machine was transformed
from mercantilism in the 16th and 17th centuries into a flow towards liberalism in the 18th
century. The beginning of the 19th century a move towards professionalism, which declined
towards the end of the century. It was during this time that the father of economics, Adam
Smith, wrote the famous book The Wealth of Nations in 1776, in which he defined the
importance of specialization in manufacturing and brought international trade to that
opportunity. David Ricardo developed the principle of comparative advantage, which still
holds true today. (International trade, 2020).
4.2 Trade Relation
The definition of exchange acquisition is a collection of people with equal initiative who do
not come together to achieve their dream of an unusual place and to sell their interests in an
unusual place. For the collective promotion of the interests of merchants or companies of
commercial enterprise in their extraordinary place. The participation of an enterprise
exchange company among family sports public members with simultaneous advertising,
education, publications, advocacy, and political grants but the collaboration between its
awareness agencies is ongoing. Associations may additionally provide a variety of services,
including convention production, networking or charitable protection, or training or
instructional materials. In an international location with a social marketplace economy,

enterprise firms regularly deal with recruiting firms, which play an additional role in social
conversations. (Trade association, 2020).
4.3 International Trade Policy
International Opportunity Insurance coverage is one of the oldest branches of financial
thought. From ancient Greece to the present day, officials, intellectuals, and economists have
come up with the idea of over-designated entities between countries, transforming or
harming the United States, and more importantly, which insurance change is best? Not a
completely unique in USA from the time of the ancient Greek philosophers there was a
dualistic view of trade: the recognition of the advantages of international exchange and the
concern that certain domestic industries (or workers, or cultures) would be harmed by foreign
competition. Various analysts have come to a particular conclusion about the choice of an
uninterrupted exchange, depending on the weight of the victims from the general benefit or
change. Economists have exchanged more than technological advances: the general benefits
of society are sufficient even after a short time. Nonetheless, changing the evidence through
such intense debate today focuses on the concern that these twins have somehow overcome
the imaginative and far-sightedness of change. The Benefits of Loose Change There was
almost typical consensus among leading financial thinkers in the early 19th century, but those
same economists and later technologists have searched for examples of deviations from loose
trading that would cause financial gain. (Irwin, n.d.).
5.0 Methodology
This defines the initial study plan of the motion study. It provides information to solve the
study questions of strategies. The branch justified the strategy to be followed for engaging in
studies. The research mainly focuses on secondary data sources. This research also collects
information from newspaper, journal articles and research papers.
6.0 International Trade Influence the Onion Price in Bangladesh
International trade has direct and indirect control to raise product price in a particular
country. Infect political relation among the country also depends the product price. While
each country has friendly relationship among them, they traded more product. As a result,
product price become significantly lower. Moreover, trade policy of the country has direct

and impact on product price fluctuation. The factors that influenced international trade is
given below:
6.1 International Trade Influenced Economic Growth
An important role in the economy of each individual country is played by international trade.
It allows to meet the needs of the people; Stimulates the internal development of the country.
International trade is the exchange of goods and services between countries. The issues of
international trade were considered by many economists. According to E. Hex char, a
representative of neo-classicism, increase in income of foreign trade owners and additional
factors in the production and export of the product increases and stimulates economic
development. This article or section needs sources or references that appear in credible,
third-party publications. The research survey is to review the international level resource
process across the country and its experience on country development. The authors
researched and analyzed economic trends from 2015 to 2016 that had significant impacts in
China, the United States, Russia, and Germany. Without getting affected, position in the
global arena, its economic system is improving from the recession. Compared to the previous
year, the price of the country's exports and imports has increased (2014-24.5% and 2015-
11.8.7%, -7.7% and 2015-2016 -5.5%), however the foreign exchange index remained
negative. When studying the American economy, it is important to pay attention to openness.
However, export and import prices fell because of the 2006-2008 economic crisis. The foreign
trade deficit has increased. ln an analysis of the Russian economy showed that the "oil curse"
had come to an end, and although the sanctions damaged the well-being of the people, they
became a springboard for strengthening the national economy. At the peak of 2015,
Germany's economy is growing. Imports increase Exports increase over last year + 4.2%; And
the balance of foreign trade is +16%. Germany, China and the United States, Russia: This is
how the latest trends in the global economy studied by the author's team have made it
possible to rank countries as a group by the importance of foreign trade to the economy,
including Germany, China, the United States and Russia. This is the difference between the
ranking result and the Q/A result. (Makhmutova & Mustafin, 2017).

6.2 International Trade Affect Global Politics
Government efforts to liberalize or restrict international trade have led to highly controversial
actions. Trade creates winners and losers at the individual, corporate, industry, national and
regional levels. The complexity of international trade policy allows international political
economy (IPE) researchers to switch to different levels of analysis and policy due to the
complexity of international trade policy. Scholars agree that issues of collective action,
government and international factors, and social priorities influence trade policy and political
outcomes. Together, these aspects of trade policy shape trade policy and determine whether
it will be liberal or protectionist. Social priorities are the first entry point into the trade policy
development process. Understanding how economic actors from different social groups
benefit or lose from trade liberalization or protection is the first step to understanding trade
policy and its impact. After prioritizing social enterprises, they need to be included in
collective interest groups or grassroots movements to influence trade policy. This is easier for
some groups of actors than others. To support government policymakers, stakeholders noted
that local businesses play an important role in transforming social contributions into policy
outcomes. Policymakers are more sensitive to lobbying for specific interests than the
preferences of larger social unions, the degree of political party and structural rules also
influence policy outcomes, and in certain configurations they place more emphasis on
protection or liberalization. (Madeira, 2018).
6.3 Bangladesh Benefit from Global Political Relationships
Internal, regional, and interregional pressures have shaped Bangladesh's foreign policy and
relations with the two most powerful and influential countries in the region: South Asia, India,
and Pakistan. It should be descriptive and biased. The most frequent themes in this study are
those that point to turbulent political life and Indian economic aspirations or Indian
aspirations for regional dominance as the main factors influencing regional and international
relations. Meanwhile, this study shows and explains how internal and external pressures were
exerted on external relations in Bangladesh. Different angles are used to increase depth of
investigation and minimize distortion. This perspective considers what usually happens in this
area and beyond. Apart from what happened in Bangladesh. Bangladesh's foreign policy
studies show that the regional perspective needs to be emphasized more than ever. For this

reason, in the next chapter on the most important relationship between Bangladesh and
India, the regional perspective takes precedence over the domestic one. (Jacques, 2020).
6.4 Prevention of the Negative Impact of the Global Political Economy
For 25 years, politicians, academics and journalists have known that neoliberalism is a huge
success in the global economy. We "transform" the costs of global control over capital, labor,
and goods markets, including the movement of workers and society, and benefit from
macroeconomic growth, balance quality, quality of life and decline. Indeed, poor countries
were told that their only hope of prosperity was to open all national markets and pursue
export-led growth strategies. The so-called "Washington instinct" does not bode well for
convincing evidence. Most arguments are based on irrefutable evidence and usually only
calculate benefits and ignore costs. Honest scholars question a more systematic liberalization
effort than “openness” to a country's economic performance (Rodriguez and Rodriguez
2000). Contrastingly, the big faction has a good reason why the net effect of neoliberalism is
negative. For example, the British economist John Eatwell (1996) found in a UN study that
financial liberalization in the 1970s was: to increase economic growth, to move developing
companies from low savings to improved borrowing costs, interest rates generally rose and
economic growth slowed. (Faux, 2002).
6.5 International Trade has Influenced Product Prices
International exchange sincerely has greater benefits than prices for the financial system. For
economies like investment, basses are priced at international spaces. Discussed is the
economic economist, how can people enter a country that is not understood? Perseverance
of the Streets Autumn States the Desk: Product Its Device Specification Participation of the
Spirit Out Utilities. Let us become an exporter of diverse fabric products from electronics to
our China example, which is America and various nations. Each export USA. There are benefits
for, and the United States of America uploading. In the United States, international locations
benefit from uploads of low-cost products, and exporting countries benefit from additional
employment, wage increases, and profits. In addition to the benefits, there are also prices for
global trade. As the volume of imports increases, the home enterprise must compete with
the imported products. For example, many people have lost their jobs because of the
importation of advanced fabrics into the United States. There was a time when fitness, which

was declining in fabric production, was changed by being transferred through various
factories and they were retrained in this new job. The United States withinside even used a
few fabric companies to grow and develop generations and capitals. So, we each should start
to focus on a few services and products so that delivering items and offers and importing the
rest is so effective. Overall, the advantages of global exchanges outweigh the fees for the long
economic system as well as the general economic system. (Benefits and Costs of International
Trade, n.d.).
7.0 Findings based on Demand and Supply
The onion price fluctuates based on demand and supply of onion. It is popularly known as
invisible hand that directly influenced onion piece in Bangladesh. In this section, we can see
the international trade and invisible hand impact on onion price.
7.1 Decrease the Onion Supply due to India Ban to Export Onion
According to the government data, total 24 lac tonnes of onion needed per year. (Onion price
hike brings tears to Bangladeshi eyes, 2020). Where Bangladesh produces 16 lac tonnes of
local onion and the rest 8 lac tonnes of onion is imported from other countries, mostly from
our neighbour country India. But in September 2019 the Prime Minister of India Narendra
Singh Modi denies exporting onion to Bangladesh. Due to heavy rainfall, India could not
produce enough onion to export. So that we could not get any tonnes of onion. As a result, it
had a great impact on market economy and the supply in the market become lower. So here
the supply decreases and the supply curve shift in leftward.
Figure 1: Decrease the onion supply due to India ban to export onion.
S1= Previous Supply
S2= New Supply
E1= Previous Demand
E2= New Demand
P1= Previous Price
P2= New Price
Q1= Previous Quantity
Q2= New Quantity

7.2 Increase the Demand for Onion due to Future Expectation
The supply fall in the market the price start to rise and the demand also become higher. As
the onions are an essential kitchen commodity so people need it in their daily life, they also
fear about further increasing of the price in future because there is shortage of supply. As we
see in microeconomics expectations about future lead to change in quantity demand. When
the prices are about to raise in future it has an impact on consumers demand so that they
choose to buy more product. As a result, the quantity demand increases, and the demand
curve shifts in rightward. Here in onion market when the prices increase from 100 to 150 TK
consumer thought that the price will increase more and more in future, so they bought at
least 5-6 kg onions. So, the demand for onions has increased in onion market. We can see,
the consumer bought more onion even though the price is high so their demand curve for
onion shifts in rightward which is given below
Figure 2: Increase the demand for Onion due to Future expectation.
7.3 Decrease the Onion Supply due to Stockpile
This situation happened some dishonest suppliers try to take benefit from this. They want to
make more profit. They started hoarding onions so that they can sell them at higher price. As
a result, it causes more shortage in supply, they stocked the onions but said that they did not
have enough onions. And it happened in November 2019 the prices of onion become 220 taka
and it increased incredibly. This time the supply fall again and supply curve shifts in leftward.
D1= Previous Demand
D2= New Demand
Q2= New Quantity

Figure 3: Decrease the onion supply due to Stockpile.
When the supply decrease there is a shortage in market equilibrium. The demand become
higher and when this happens the price of onion rise horribly.
Figure 4: There is a shortage of onion supply due to Stockpile.
7.4 Decrease the Demand for Onion due to Price Increase
According to the report, the people from middle and lower class, vendor is bought fewer
onions. In daily star’s report it was found that one of the people named Abdul Alim said that
he went to the market to buy 5kg onion, but he returned with 1kg because of high price. So,
Abdul Alim’s demand curve shifts in leftward because his demand decreases. On the other
hand, when the prices of onion cross 200tk most of the people denied buying onions and
D1= Previous Demand
D2= New Demand
Q2= New Quantity
S2= Previous Supply
S3= New Supply
D2= Demand
E3= Previous Equilibrium
E4= New Equilibrium
P1= Previous Price
P2= New Price
Q2= New Quantity
Q2= New Quantity
S3= Supply
D3= Demand
P1= Previous Price
P2= New Price
E5= New Equilibrium

looking for alternative to make their food better. The items for that onion are a complement
good such as piazza, pakora and deep-fried snacks are stooped selling in the street food courts
and restaurants. According to microeconomics concept if the price of a good increases the
demand for complement good decreases. Then people started using chives or more garlic
instead of onion in their daily made dishes. Here chives worked as substitute for onion. In
Microeconomics, when there are two goods for increase in the price of one good lead the
increase in the demand for another good is called Substitute. Example: when the price of
Coca-Cola increased the demand for Pepsi is increased because the taste of both Coca-Cola
and Pepsi are almost same. If people get Pepsi in lower price than why do they buy Coca-Cola
with high price.
So, in this situation the taste of fresh chives and onion quite same that’s why consumers
prefer this. As a result, the substitute demand for chives increase and demand curve for chives
shifts in a rightward. The quantity demand for onion decreases and the curve for quantity
demand of onion shifts in leftward which is given below.
Figure 5: Decrease the demand for Onion due to price increase.
8.0 Recommendation
The recommendation is given below
8.1 Make an Effective Market Economy
The increasing of price has an impact on both demand and supply. According to the
economist, buyers and sellers are two important parts in market economy. Buyers determine
D3= Previous Demand
D4= New Demand
E5= New Equilibrium
Q= Quantity

the demand for the product and sellers determine the supply of the product and both supply
and demand are determining by the price. When the demand of a product increases the
quantity, demand decreases and when the price decreases the demand increases. Same as
when the price increases the quantity supply also increases and when the price falls the
quantity supply also decrease.
In onion market, the increasing price of onion has a great impact on people. Because onion is
a most wanted ingredient for food. Onion is an inelastic good because there are no better or
effective substitute for onion. According to microeconomics, the goods that have many close
substitutes are more elastic demand and the goods that have not close substitute are less
elastic demand. The increasing of price does not affect much on the demand. So, people
cannot decrease their demand for onion even though the price of onion increases.
When the prices of onions rise incredibly, it also has an impact on other vegetable in the
kitchen market. The price of other vegetable also increases such as Garlic, egg, soybean oil,
potato, chilli, and tomato. A five litter can of soyabean was selling at Tk495-515 the previous
price is 485-510. The eggs were selling at 40 TK(4pieces) the previous price is 35 tk. Per kg
bean sold at Tk55-60, Ginger at Tk 120 and garlic Tk150, radish Tk30, papaya Tk30 and tomato
Tk50, chili Tk40-50 and potato Tk30-35. The price of rice increased by Tk3-8 a kg and sugar by
Tk2-3 a kg.
Chart 1: Shows the price rises during the time.

8.2 Government Intervention in Onion Market
The Bangladesh government plays a significant role in domestic market. When the prices
increase badly the Prime Minister Sheikh Hasina said to avoid using of onions in dishes. Even
in her residence the dishes made without onions. Later the government announced that to
avoid the shortage of supply and market failure government will import 50,000 tonnes of
onion from other countries: Myanmar, Egypt, Turkey, Pakistan, and China. The ministry of
commerce said that there is nothing to be worried about onion price as onions will imported
soon so the market price will stable soon. When the imported onion arrived the supply of
onion rises again and lastly there is a surplus in the supply. The curve for onion is given below:
Figure 6: Surplus in supply due to import from other countries.
9.0 Conclusion
In the meantime, the Retail marketers sell onions at high price compare to wholesale market.
A shop keeper from bangshal said that they sold local onion per kg at 240-250 and the
Burmese variety at 150-180 tk. When the reporter asked why they are selling onion at high
prices even there is a fall in wholesale markets, the shopkeeper said that they bought the
onions when the price was at their peak. The commerce minister said the cost of imported
onion through air cargo from Egypt and Turkey crossed 200 TK a kg, but the government
thinks about local people and to control the circumstances government sold the onions
S3= Supply
D4= Demand
P1= Previous Price
P2= New Price
E3= Equilibrium
Q2= New Quantity

through Trading Corporation of Bangladesh The Trading Corporation of Bangladesh (TCB)
started the open market to sell onion at reasonable price. They set few points and stay there
with a truck full of onions. They were selling the onions at Tk 45 per kg while it was selling at
Tk 120 at marketplaces.
However, the ministry of commerce also called a meeting with the businessmen and
importers and requested them to do their business with honesty. Moreover, the government
has also declared that as per the law necessary steps would be taken if anyone tries to stock
onions and tries to make an artificial crisis in onion supply. According to the Financial Express
news report the commerce secretary said the government had set up 10 monitoring teams
including senior executives to watch the market. The monitoring teams visited from market
to market and keep an eye on them. If anybody tries to exploit the market, then they will be
punished by the government. So, the teams visit the onion producing areas in the country and
keep watching the supply line.

10.0 References
Benefits and Costs of International Trade. (n.d.). Retrieved from Finance Train:
https://financetrain.com/benefits-and-costs-of-international-
trade/#:~:text=There%20are%20benefits%20for%20both,increase%20in%20wages%2C%20a
nd%20profits
Dhar, R. (2020, September 26). Onion prices remain high despite govt initiatives. Retrieved from
Dhaka Tribune: https://www.dhakatribune.com/bangladesh/nation/2020/09/26/onion-
prices-rise-despite-numerous-govt-initiatives
Faux, J. (2002, April 24). Rethinking the Global Political Economy. Retrieved from Economic Policy
Institute: https://www.epi.org/publication/webfeatures_viewpoints_global_polit_econ/
HEAKAL, R. (2020, August 24). The Investor's guide to global trade. Retrieved from Investopedia:
https://www.investopedia.com/insights/what-is-international-trade/
International trade. (2020, December 15). Retrieved from Management Study Guide:
https://www.managementstudyguide.com/history-of-international-trade.htm
Irwin, D. (n.d.). A Brief History of International Trade Policy. Retrieved from The Library of Economics
and Liberty: https://www.econlib.org/library/Columns/Irwintrade.html
Jacques, K. (2020, December 16). General Influences on Bangladesh’s Foreign Policy. Retrieved from
Springer Nature: https://link.springer.com/chapter/10.1057%2F9780333982488_1
Madeira, M. A. (2018, April 4). The Politics of International Trade. Oxford Research Encyclopedia of
Politics, 1-12. doi:10.1093/acrefore/9780190228637.013.598
Makhmutova, D., & Mustafin, A. (2017, September). Impact of International Trade on Economic
Growth. International Journal of Scientific Study, 5(6), 140- 147.
doi:10.17354/ijssSept/2017/029
Onion price hike brings tears to Bangladeshi eyes. (2020, September 17). Retrieved from The Arab
News: https://www.arabnews.com/node/1735731/world
Trade association. (2020, December 17). Retrieved from Wikipedia:
https://en.m.wikipedia.org/wiki/Trade_association#:~:text=A%20trade%20association%2C%
20also%20known,operate%20in%20a%20specific%20industry
Wikipedia. (2020, December 17). International trade. Retrieved from
https://en.m.wikipedia.org/wiki/International_trade

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