Essay on "Contemporary Issues in International Business"

Essay 7 pages (2433 words) Sources: 6 Style: APA

[EXCERPT] . . . .

Business-International

Contemporary Issues in International Business

Protectionism v. Free Trade in the New Zealand's Agriculture Industry

New Zealand is very dependent on exporting fresh fruit around the world. Being able to do this with out any barriers has been the best way for this industry to flourish. Those who support the idea of protectionism in this country would be doing more harm than anything. Free trade is the best model in which this country needs to operate in order to continue to be successful.

The argument for protectionism or fair trade may at first sound appealing to some but not to others. Supporters of protectionist laws claim that keeping out foreign goods will save jobs. They feel that it will give ailing domestic industries a chance to recover and prosper, and reduce the trade deficits that are now present. During the last century classical liberal philosopher John Stuart Mill observed that trade barriers really do more harm than they do good for those countries that impose them. This appears to be just as true today if you look at the following ways in which harm has been seen.

The first harm is in that of lost jobs. Protectionist laws raise taxes or impose tariffs on imported goods along with imposing limits or quotas on the amount of goods that the government allows to enter into a country. These laws not only restrict the choice of consumer goods, but also contribute greatly both to the cost of goods and to the cost of doing business. Under protectionism it is often thought that people end up poorer. They have less money for buying the things that they want and need. It has also been seen that protectionist laws that reduce consumer spending power actually end up destroying jobs instead of saving them (Miller and Elwood, n.d.).

The second harm that is seen is that of higher prices. Japanese consumers pay five times the world price for rice because of import restrictions that have been put into place to protect Japanese farmers. European consumers pay dearly for restrictions on food imports and heavy taxes for domestic farm subsidies. American consumers also suffer from this same double burden. They pay six times the world price for sugar because of trade restrictions. Another example can be seen in the U.S. Semiconductor Trade Pact. This agreement pressured Japanese producers to cut back production of computer memory chips which caused a sharp worldwide shortage of these highly used parts. Prices quadrupled and companies using these components in the production of electronic consumer goods around the world were effected (Miller and Elwood, n.d.).

The third harm that can be seen is that of higher taxes. Protectionist laws not only force one to pay more taxes on imported goods, but they tend to raise general taxes as well because governments regularly expand their Customs Department bureaucracies in order to force compliance with their new trade restrictions. There is also the expense of more red tape and paperwork for trading companies and more harassment of individual travelers passing through the borders (Miller and Elwood, n.d.).

The fourth harm that can be seen is that of producing a debt crisis. Western Banks are owed hundreds of billions of dollars by several Eastern European and Third World countries. Trade restrictions that have been imposed by Western governments, however, have cut off Western markets for these countries, making it virtually impossible for them to earn the money that is needed to repay their loans. It is thought that this greatly increases the possibility of a collapse of the world banking system (Miller and Elwood, n.d.).

They only people who are thought to gain from protectionist laws are special-interest groups. These include big corporations, unions, and farmers' groups. These people would all like to be able to get away with charging higher prices and getting higher wages than they could expect in a free marketplace. These special interest groups have the money and political clout in order to influence politicians to pass laws that favor them. Politicians in turn play on the fears of uninformed voters to rally support for these kinds of laws (Miller and Elwood, n.d.).

Protectionism refers to government policies that are put into place to shield domestic production and producers from foreign competition. Analysis of the economy shows that economic losses from a tariff exceed its benefits. In theory, a tariff is wasteful because it leads to a substitution of higher-cost home production for lower-cost imports. It is thought that if tariffs were repealed, manpower and capital in protected industries would shift to other employments, at home or abroad, and everyone, in their role as consumers, would gain from lower prices (Dales, 2009).

Free trade happens when there are no artificial barriers put in place by governments to restrict the flow of goods and services between trading nations. When trade barriers, such as tariffs and subsidies are put in place, they protect domestic producers from international competition and redirect, rather than create trade flows (Edge, n.d.).

Free trade allows countries to specialize in the production of those commodities in which it has a comparative advantage. Specialization enable countries to be able to take advantage of efficiencies generated from economies of scale and increase output. International trade increases the size of a firm's market, resulting in lower average costs and increased productivity (Edge, n.d.).

Free trade improves the effectiveness of resource allocation. The more efficient that one is at using their resources the higher productivity and increasing total domestic output of goods and services that they have. Increasing competition promotes innovative production methods, the use of new technology, marketing and distribution methods. Consumers benefit in a domestic economy as they can now obtain a greater variety of goods and services. This increased competition ensures goods and services, as well as inputs, are supplied at the lowest price (Edge, n.d.).

When a country sells exports overseas it receives hard currency from the countries that they can then use to buy goods. Trade liberalization helps to create losers and winners as resources move to more productive areas of the economy. Employment tends to increase in those countries that export while workers are displaced as import competing industries fold in the competitive environment. With free trade many jobs have been created in all sectors.

The countries involved in free trade experience rising living standards, increased real incomes and higher rates of economic growth (Edge, n.d.).

Agriculture is a big industry in New Zealand. Over 14% of the total land area of New Zealand is devoted to agriculture. Capital investment in land improvement and mechanization has been two things that have contributed greatly to the steady growth in agricultural production without an increase in the farm labor force. About 76,000 tractors and 3,100 combines were in use during 1998. Agriculture contributes about 8% to the GDP and 11% of exports in 2001. Cereal cultivation, more than 90% of which takes place on the South Island plains and down lands, fluctuates in terms of both acreage and size of crop. In 1999, areas harvested to wheat totaled an estimated 131,000 acres, with a yield of 290,000 tons; 27,000 acres yielded 40,000 tons of oats; and 198,000 acres yielded 400,000 tons of barley (New Zealand -- Agriculture, 2009).

New Zealand is largely self-sufficient in horticultural products and exports things like apples and honey. In 1999, 988,000 tons of fresh fruit was produced. Kiwi represented 90% of the horticultural exports. In 1985, New Zealand produced more than half the world's supply of kiwi fruit. During the mid-1980s, New Zealand lost some of its market share in the production of kiwi. This was due to the fact that other countries began or expanded their own domestic kiwi production. By the late 1990s, New Zealand was producing one-third of world's kiwi supply. Due to bad weather conditions, kiwi production in 1999 was estimated at 221,000 tons, down 10% from 1998. "In 1999, New Zealand produced 536,000 tons of apples, 57,000 tons of peas, and 170,000 tons of corn. About 70% of apple exports are derived from the varieties developed in New Zealand. In 2001, the export of 261,861 tons of apples was valued at $134 million" (New Zealand -- Agriculture, 2009).

The Department of Agriculture and the Department of Scientific and Industrial Research works to provide farmers and horticulturalists with advice and encouragement on new farming methods, elimination of plant diseases, and improvement of unproductive land. Government subsidies have assisted in improving and bringing under cultivation marginal and unused land. Since the mid-1980s there has been a shift in government policy, and many subsidies to agriculture have been removed or phased out (New Zealand -- Agriculture, 2009).

Forty-percent of the world is feeling the effects of some form of recession. New records have been seen for both personal and corporate bankruptcies. America's trade deficit continues to grow to historic levels. The amount that people are saving has gone down, as the average consumer spends $1.10 for every dollar they earn.… READ MORE

How to Reference "Contemporary Issues in International Business" Essay in a Bibliography

Related Essays:

Business Plan for an Imaginary Software Company Business Plan

business plan for an imaginary software company, Techno soft which aims to enter South Asian market as a part of its international business expansion strategy. The paper is divided into… read more

Business Plan 16 pages (5030 words) Sources: 16 Topic: Business / Corporations / E-commerce

---

International Curriculum and Employability in Multinationals Annotated Bibliography

International Business Graduate Education -- an Annotated Bibliography

Burrell, D.N. (2006). Emerging options in doctoral study in management for international executives.

Vikalpa, 31(6), 13-17.

Darrell Norman Burrell makes the argument… read more

Annotated Bibliography 4 pages (1884 words) Sources: 12 Topic: Business / Corporations / E-commerce

---

EZ Tracker: Analysis of International Business Opportunity Business Plan

It is now one of the key players in a global economy providing the largest market for consumer goods while supplying a huge chunk of manufactured products. This is why… read more

Business Plan 40 pages (10645 words) Sources: 10 Style: MLA Topic: Advertising / Marketing / Sales

---

Impact of Big Data on Business Strategy Term Paper

Big Data on Business Strategy

Business Strategies

The competitive nature of today's business environment is driving companies to use technology driven business strategies (Berman & Hagan, 2006, p.28). Big Data… read more

Term Paper 20 pages (5673 words) Sources: 18 Topic: Business / Corporations / E-commerce

---

International Political Economics the Impact of UN Peacekeeper Corruption Term Paper

International Political Economics: The Impacts of UN Peacekeeper Corruption

International political economy tries to understand global and international problems through a diverse interdisciplinary arrangement of theoretical perspectives and analytical tools.… read more

Term Paper 15 pages (4412 words) Sources: 15 Topic: Government / Politics

---

View 100+ more related papers  >>