The Role of Brazil's Trade

Brazil is the largest country in the South America, and the economy is the world's seventh largest by nominal GDP. Recent year, Brazil has been talked a lot because it is one of main emerging countries. The economy of Brazil increase very fast and many businessmen in china have concerned this big market.

Brazil’s trade increases very fast in the recent years. The main trade countries are China 15%, United States 10%, and Argentina 9%. The main exports of Brazil are transportation equipment, iron ore, soybeans, footwear, motor vehicles, concentrated orange juice, beef, and tropical hardwoods. The main imports include Machinery, electrical and transportation equipment, chemical products, oil, and electronics.

Agriculture of Brazil is a major part of economy, and it is also the main factor for economic growth and foreign exchange. Agriculture accounts for 6 percent of GDP and 36 percent of exports. Brazil has a trade surplus of $55 billion in agriculture part in 2009. Brazil is also the world’s largest biofuels exporter and sugar-based ethanol makes up over 50% of its vehicle fuel usage.  Brazil is the largest FDI recipient in Latin America and account for half of all South America’s incoming FDI, which was estimated to increase about USD 33 billion.

To increase export, the government tries to access foreign market through trade negotiations and increased export promotion. Brazil has been a leading member in the WTO’s Doha Round negotiations. The Rousseff administration is also trying to strengthen the trade ties with developing countries, such as Mercosul customs union with Uruguay, Paraguay, and Argentina. Mercosul contribute a free trade arrangement with Israel and Egypt. The trade relationship with other countries help Brazil to develop export industries, it also demonstrates that the international trade is important for Brazil’s economy.

According to openness concept, the Brazil’s openness is about 20 percent, which is still low in the countries, and many people still in the poverty. The government should lower the protection to increase trade with other countries. To create jobs, the policy need to focus on attract FDI by providing a better development environment and domestic investment by tax deduction for some area. 

The US-Morocco Free Trade Agreement

The US-Morocco Free Trade Agreement is a bilateral trade agreement between the United States and Morocco. The agreement was signed on June 15, 2004, and came into effect on January 1, 2006. The 95 percent of tariff on trade goods were eliminated since the FAT came into effect.

US-Morocco Free Trade Agreement is mutually benefit for two countries. For the United States, their products can sell to Morocco with more competitive price. The US exports to Morocco increase very fast. Also the US companies can found the company in Morocco to take advantage of the low labor costs. Because of it’s convenient for transportation to the European countries. US companies also benefit from the countries that have signed the FTA with Morocco, because they can make the products in Morocco and sell to these countries without tariff.

For the Morocco, the direct benefit is the increase employment and tax contribution by investment from US companies. The US companies can improve the productivity and people in Morocco are benefit by purchasing these products. Morocco’s economy has been growing steadily after past ten years. The country has a stable exchange rate, low inflation, and moderate unemployment.

However, this FTA also has negative impact. In Morocco, about 40% to 50% of people working in agriculture, the decline of the tariff on agriculture products has the direct effect on agriculture, government income and employment, because U.S. has the comparative advantage of agriculture products without tariff. The agriculture in Morocco loses the comparative advantage, so the labor should move to other industry. The companies from U.S. has already created some jobs to remedy the jobs lose in agriculture. Also the government should make policy to coverage people to develop labor-intensive industries, which they have comparative advantage of labor, and exports these products to U.S.. That will help Morocco could keep the employment and increase tax income. 

The seaport economy of RI

Seaports play a very important role in the trade, especially for international trade. The shipping cost by sea is far lower than by air, because the vessel could carry large amount of products to lower its shipping cost per unit. The decline of the shipping cost could keep the comparative advantage of the products sell to other countries. With the development of the sea transportation, some new business appeared, such as port service, security service, shipping insurance and truck shipping. This has contributed to local economy.

When we talk about the comparative advantage of the economy, it is usually between countries. But it also can be applied to the region’s economy. Such as port in the Rhode Island, it creates a lot of jobs and makes a great contribution to the local economy. The products which are shipped to the RI directly has lower costs than the other states which don’t have ports and need to deliver the products by truck from these ports. Also the consumption increase when a lot of people work at the port such as restaurants and hotels.

Because of the status of the seaport to local economy, the government should focus on develop the seaport. As a citizen whose work is not related to the sea transportation may not concern about the economy effect of sea transportation. Local people complaint about the nosey of the port, and prefer the recreational boating which could affect the sea traffic in the seaport. This is conflict with the development of the seaport economy. The government should build enough waterfront recreational area to fulfill people’s needs. Increase the service of the communities around the seaport to decrease the complaint. In addition, RI seaport has a long history, the government need consider to built a museum to raise the people’s attention to importance of the seaport to local economy. 

Can IMF improve the world's economy?

International Monetary Foundation (IMF) was built to help the membership countries to get out of economical crisis, increase the employment and decline the poverty. Usually, the IMF will provide financial assistance to the countries who experience the financial difficult and need borrow money too solve the problems. The money comes from the 187 member countries for the foundation to help member countries that need help. The country that needs help should provide the information of the difficulties and need to borrow money.

As a person or a company, when we want to do business, we have to get enough capital to invest to purchase material and hire people to work. If the money is not enough, we can borrow from bank or other friends. However, if a countries lack of money to develop its economy and deal with poverty, where could it borrow money? The answer is the World Bank, IMF and other unions. IMF is important for the development of the countries, which face the financial crisis; the loan could help the country continue to run rescue plan and improve the economy. The member countries can benefit from this foundation when he deposits a mount of money in the IMF. Although the World Bank can provide the support, IMF is important to work together with the World Bank.

Think about the recent Greece debt crisis, if no one such as European union and IMF borrow money for it to deal with financial problem, how it would be? Bankruptcy? If that, the country will have security problem and impact on the world’s safety.

However, when the country borrows money from IMF, in have to meet the requirement, such as increase the tax and decrease the government spend, and increase the interest rates to stabilize the currency. When the economy is weak, this requirement may hurt the economy rather than to help it. Government usually cut the spends on the health care and the input to health care, food and other public investment, finally cause the decline of the economy. To solve this problem, the IMF should make the different requirements depend on the countries’ situation, because even the financial crisis from different countries is different.

Can tariff protect the U.S. economy?

According the concept of tariff, we understand that tariff is used to protect the domestic industries that are comparative disadvantage in the market competition with foreign companies. When the domestic products lost competitive in the market, there market share will be decreased and people in this industry will lose jobs. So the government may raise the tariff of import products to protect domestic industry. This method is common since the global trade exist. However, does tariff benefit the economy?

When the U.S. government added 35 percent of tariff to tires imported from china, the U.S. tire industry became competitive of price in temporary, because of the increased price of imported tires. However, all the people in U.S. have to pay more money to buy tires. The consumers were responsible for the increase of price. If more and more industries apply tariff to protect the jobs, the price level will be increased and people need more income to live, which caused a higher level of labor price. So in long term, the cost of U.S. tire industry will be increased.

The increase of tariff for import goods also caused the decrease of the export. When a country raises the import tariff, the other countries may also raise the tariff of products from your country to resist it. The decrease of the export also can affect the economy and job. Such as China raised the import chicken feet tariff when U.S. raised the tire tariff of china tires. As a result, two sides will be losing in this competition.  

Global specialization improve the efficient of the world, each countries specialized in the industry which they have comparative advantage to produce goods. When U.S. companies find that the labor costs is too high to afford, some of them consider to move the factories to low labor cost countries, such as China, India and Brazil, and then import the products to U.S. market. We cannot stop this trend, the best way we can do is to develop the technology and improve the productivity. The agreement between countries to lower the tariff to each other is benefit for countries and avoid the trade war.

  

Does the war on terror become trade barrier?

The “war on terror” looks like unrelated to global trade, but it really have a significant effect on global trade. This kind of effect has become barriers of trade. Since September 11^th, 2001, for the security reason, U.S. government increased the inspection on the ports and customs. The products imported from other countries need more time for security inspection, which caused the additional fee and more shipping time. The additional fee and shipping delay increased the cost of the products, which declined the comparative advantage of these imported goods. Especially from developing countries, the products from these countries have an advantage of labor price. The increased costs decreased the demand of these products.

The oil price has a direct effect on the shipping fee, which is an important factor in global trade. The “war on terror” caused the great need of energy. In the other side, some oil exporter countries get involved in the war, so the instability of these countries also caused the increase of the oil price. The increase of the oil price also becomes the barrier for the international trade.

For U.S., the “war on terror” cost a lot of money, which accelerated the country’s economy recession, and result of the decrease of consumption. A lot of daily goods in the U.S. are imported from other countries, so the decrease of consumption decreased the demand of import.

The “war on terror” is to protect the country, so the barrier it caused is not the fault of the government. To decrease the effect on the international trade, the government can make some policy to improve the efficiency of the inspection. Such as to develop the technology, which use internet system to get the whole information of the import products before they arrive the port. Also, if the import goods are important to the countries, U.S. can lower the tariff as subsidy of the increase cost.

Improve the Comparative Advantage of US Car Manufacturers

The market share of US car decreased  quickly when more and more foreign brands entering into US market. Some foreign car makers have the advantage of low labor cost because the employees have national health care system. US car makers have a high health care bill so that lose competitive in the market. Because of globalization, foreign brands enter into the US market and caused the US market more competitive. The cost is one of the most important factors in this competition. The lower cost of the labor in the foreign car manufacturers help their products become more competitive in the US market. The technology is another important factors in the auto industry. Many car manufacturers compete in the market by more safe car, low gas consumption, low pollution, and more electronic control.


If the US business afford a portion of health care benefit will increase the comparative advantage in the short term. Decrease the cost so the car manufacturers can devote more money into car development or lower the car price to compete with other companies. In long term, it can not solve the problem. US car makers not only have the high cost problem, but also have many other problems need to be solved. Such as gas efficiency, most US car have a relative low millage for gas compare to Japanese car. In the recent economy condition,  the increase of gas price and the decrease of job oppotunity cause the increase demand of economical cars. Compared to European car, the gas consumption are similar, but the quality and design are still lack. US car makers especially for the there big, developing by multiple brand, each brand need to devote a great mount of capital and resource, so the manufacturers can not concentrate on the development of technology.

There are some other policies can improve the comparative advantage of US car maker. First, Increase the import tariff of cars and lower the tariff of the car parts. Using this policy, the import car will have a high price and lose the competitive in the market. In addition, the lower tariff of car parts can attract the foreign car makers found manufacturers in United States, so they need to more employees which need to pay the same health care bill. In addition, this policy also benefit US car makers by importing car parts with low price to cut the costs. Second, government awards for car technology improvement could be set to encourage the innovation of US car technology, technology is another factor the make the car competitive in the market, people are willing to pay the same or high price to buy a high quality, more fuel efficient cars. In the recent economical environment, fuel efficient car is more popular because of the high gas price and economy depression caused lower income. The government also can invest on the technology development or provide a part of capital for car manufacturers to improve the car technology so that US car will become competitive in the future market.