Monday, August 8, 2011

How open to openness are you?

Taiwan, as my home country, which is an island country has no valuable natural resources and less population. How could Taiwan survive in such a competing world and become one of the Asian tigers in 1980s? The answer is almost there, trade. In fact, the Government must understand that rely on global trade is the only window we can connect to the world and get through the economic test.

However, Taiwan also paid for the price before the rapid economic growth. There were two times import-substitution in order to help our domestic firms to grow up being stronger. Meanwhile, Taiwan develop its technology, invest its education (quality labor), promote its transportation system (waterway, railway, and highway). All of these steps are trying to lure foreign investments inflows into Taiwan.

Until now, Taiwan is still trying to catch up with the developed countries through global trade which deeply depends on high technology development and skilled labor. In addition, in order to integrate with the whole world economy, Taiwan became the membership of WTO and signed ECFA with China mainland. Apparently, the Government engaged in access to the larger market to enlarge its global trade; moreover, it also take advantage of ECFA as a gateway into China market for foreign investors to invest Taiwan domestic firms.

To sum up, I believe that Taiwan is pretty open to openness and it is the right way to continue forever. But, Taiwan has to notice that over rely on one single large economy will bring a lot of dangers in th future. All the world should pay attention to this issue as well.

Saturday, July 30, 2011

The role of trade in Brazil

Brazil is a member of diverse economic organizations, including Mercosul, WTO, Unasul, and the Cairns Group. Upon this, we could know that Brazil deeply depends on its contribution of global trade to its economy. In addition, it mainly exports manufactured and semimanufactured goods (60% of total). In fact, Brazil has experienced an incredible increase of imports and exports since 2000 because of the lower wages and the demand of its skilled labors. Thanks to outstanding technology and Government's policy supporting the openness of economy, Brazil has been the world's eighth largest economy by comparing to GDP.

Due to the increasing demand of quality labors, improving technology, stable government condition (friendly policy and no war) and fruitful materials (coffee, cocoa, and sugar), these factors lure a lot of foreign direct investments inflow to Brazil. That brings about several advantages for Brazil. For example, creating numerous jobs, increase of labor wages, boosting purchasing power from middle-class.

In my opinoins, Brazil still has room to reverse its policies to take care of those people whom have suffered from the flawed economic system. It is because that even though Brazil has several superior developments and it is the eighth largest economy; however, there is a problem which is uneven distribution of wealth. Therefore, while Government is thinking how to get there to become the fifth largest economy in the world, they should make order to shorten the distance between riches and poors. Here I suggest that Brazil should take first step to take good care of the unskilled labors' wages and benefits through imposing taxes on importing luxury goods, such as great cars.

Monday, July 25, 2011

East African Community (EAC) Customs Union

The East African Community (EAC) is an intergovernmental organisation comprising the five east African countries Burundi, Kenya, Rwanda, Tanzania, and Uganda. It was first established in 1967 and re-established in 2000. "The objective of EAC is to create one single customs territory to enable partner states to enjoy economies of scale, with a view to supporting the process of economic development" (EAC, 2011). Upon this, we can know it is a regional trading agreement of customs union.

Furthermore, its benefits include same policy and law in the countries under the regional area, enlarged market with minimal customs clearance formalities, and better conditions for world-market exporters through cheaper inputs and lower pressures on the exchange rate. On the other hand, it also has some disadvantages, including conflicting interests between nations, no convincing instrument to guide the dispute settlement, and language barriers.

I think regional trade agreements accompany with several advantages for developing countries in terms of economic growth. First of all, it simplize the customs procedure that result in the losses of added costs of time and money. Secondly, it enlarges the markets and strengthen the cooperations between members. Thirdly, it attracts the foreign investments which want to take advantage of free duty policy.
However, there are still some unfair situations in the EAC as I mentioned above. As a result, I recommend that they could negotiate on an agreement for an annual judger to effectively solve the disputes. In addition, they could reallocate revenues fairly depends on how much they work. In fact, I think if they have differen focused specialization activities to make oppotunities for trading would be fairer than recllocating wealth.

In terms of international rade, how will ISO be beneficial?

At the beginning, we should know what ISO is and what its main prupose is. In short, ISO is the abbreviation of "International Organization for Standardization" and whose major purpose is to promote and develop international standards to serve as a basis for countries and companies to follow. In addition, it expects the manufacuring suppliers around the world to improve and establish its quality and quality assurance systems, and achieve the lowest cost to meet the requirements of customer or product.

Well, what advantages we may have if we pursue ISO certification for our business? First of all, we can reduce production costs by decreasing turnovers as ISO promises to achieve the lowest cost to address the requirements. Secondly, we can maintain good working relationships with our suppliers. Thirdly, we can help our systems to reduce the degree of regulatory constraints to a minimum. The last but important is that we can increase customers' confidence to trade with us by adopting ISO.

From my point of view, I do believe that ISO could accelerate global trade even though it takes a lot of time and money. However, it can help us to build up our reputation for foreign companies to purchase our products. And also, the international standardization process makes our products become better quality with low cost. The foreign companies may consider outsource their parts in our countries. It indeed is another way to increase domestic jobs and promote importing and exporting, isn't it?

Tuesday, July 12, 2011

How did import substitution and export-led growth affect Taiwan's economy

After I go over the two industrialization policies, import substitution and export-led growth, I find they can absoluately change a country's economic structure that I have never think about it. Let's take my home country, Taiwan, as an great example.
Taiwan has been through two times rotations of import substitution and export-led growth to protect and thrive its industries. From 1953 to 1959, Taiwan used import-substitution policy to protect its light industry such as the textile industry, plastic industry, and food processing industry in order to improve people's lives and accelerate industrialization.
Then, from 1959 to 1973, due to the rise of outsourcing and offshoring, Taiwan started utilizing its labor-intensive industries to attract the capital from overseas. As of the period of time, Taiwan's GDP grew a lot and became a industrilized country.
However, Taiwan adopted the import-substitution policy again from 1973 to 1979 in order to establish an independent economy. The reason was that the whole world was experiencing the economic recession and fuel crisis, therefore, an independent economy could prevent Taiwan from the hard time. Meanwhile, Taiwan focused on developing its heavy industries such as petrochemical industry and steel industry.
After the second import-substitution, Taiwan decreased tariff barriers and encourage the inflows of overseas investments until now.

All in all, I think the entire transtion of Taiwan's industrilization strategy was a great example to realize how import-substitution and export-led growth can influence a country's economic structure. In addition, the proper usage of these two policies can lead a country to succeed in economic growth beyond question.

Tuesday, June 28, 2011

"America's Flawed Tariff System" and "Tariff as Revenue"

According to the two articles, I think America's Tariff system really has two problems which are affecting adversely American's living stardand and destorying the countries' mutualtrust tariff rules. Especially, it is going to be tougher and tougher for citizens when government increases tariff of some basic materials or resources, such as flour, rice, and steel. Increasing the prices of these materials will bring a chain reaction to other daily necessities and light industry products. All the things will seriously influence the lives of poor people. Furthermore, the U.S. government's tariff revenue is extremely consisted by low-tech consumer goods (average rate of 10.5%) and the rest of consumer goods(0.8%). It is no doubt that the incresed costs must be transferred to customers. The situation will hurt people strongly who have lower income. The less the people earned, the more the people being hurt.
Sincerely, I believe that America's tax system and tariff system are unfair for its blue-collor workers and other developing countries which rely on their exported light industry goods, such as shoes and clothes. In fact, the government imposes higher taxes and tariff on them that result in a bad trade interaction and tough lives. However, the U.S. government should try to figure it out before something worse happened.

Tuesday, June 21, 2011

Has the war on terror become its own barrier to trade?

From my point of view, it is definitely true. As the case mentioned, the nation's transportation companies increased a lot of costs associated with preventing terrorism attack. In addition, numbrous transportation delays have accompanied with the security check. It is an absolute loss for those companies in the United States because they have to deal with the added costs. Generally speaking, it is no doubt that the added costs will be transferred to the customers or outside partners. However, it will result in decreasing willingness for other outside companies to team up with the U.S. companies. In other words, the trade barriers apparently exist after 911 terrorism attack.
But, from the point of Government view, it would be the first important emergency response which they have to implement well. It is because they could not even afford a second similar attack that will dramatically shock down the global trade business of United States. Moreover, the tourism industry which U.S. relys on a lot would affect adversely as well.
In conclusion, I think the associated delays and costs for preventing terrorism threat are much worth than it should be. However, I rethink that might be the only way for U.S. to win back its reputation and the confidence of international companies.