How Trade has Effected Russia

Russia currently has an emerging economy. This is widely due to their foreign direct investments, international migration of labor, and of coarse, trade. Russia got its independence from the Soviet Union in 1991, and has been growing every since. It's top trading partner is China, followed by Germany and the Netherlands. Russia's main export is petroleum which has greatly boosted and sustained Russia's economy.

Foreign direct investment has helped Russia immensely. President Vladimir Putin pledged to boost foreign investment to 25% of economic output by 2015. This pledge has so far allowed foreign direct investment, net outflows (% of GDP) to reach its highest value (over the past 16 years) of 3.57 in 2009. These investments have largely been in the financial industry, followed by manufacturing and mining. Cyprus has become the largest foreign investor for Russia. The Netherlands, Luxembourg, U.K. and China are also key foreign investors. Interestingly, foreign direct investment has risen in almost direct correlation with the development of the Russian economy. This shows how beneficial foreign direct investment is for developing countries.

Russia is at a crucial point in their international migration of labor. Currently, Russia's labor migrants are predominantly Russian citizens. This has, up until recent years, been the cause for stability in the region. The problem Russia is facing now is a declining and aging population, especially in the working age groups. Another significant issue is that because Russia's emphasis on education is not as substantial as other countries, they are finding that there is a lack of skilled personnel in certain professions and occupations. Russia may need to increase their international migration of labor if they intend to competitively compete with other nations.

Russia is not a land locked region, the flow of trade has significantly impacted and enhanced their economy. This developing nation seems to be showing greater success each year, its only a matter of time before they become a vital trading partner for nations around the world.

Preserving the Port of Providence

The Port of Providence plays a key role in bringing stability to Rhode Island. The Port of Providence doesn't simply move cargo, it is responsible for hundreds of millions of dollars in economic impact. The Port provides thousands of jobs for Rhode Island and its surrounding states. The port also supplies the resources needed for the regions heating and energy, a fact that is significantly undervalued.

Recently the longevity of the Port of Providence has been threatened. The City of Providence wants to make substantial zoning changes to the area where the Port resides, disrupting the normal functioning of the Port. The City would like to use this area to build residential condos, hotels, and marinas, in hopes of increasing the city's property tax revenue. The city's ideas are shortsighted, they need to examine the possible long term effects and understand how this decision will negatively impact the region. The Providence Working Waterfront Alliance is determined to show the city just how indispensable the Port of Providence is.

The Providence Working Waterfront Alliance is a team dedicated to preserving the Port of Providence. The alliance is actively working to educate officials and the public about the vital role the Port plays in sustaining Rhode Islands economy. If the Port of Providence ceases operation thousands of port-related jobs would be lost. Of these thousands of jobs, are blue-collar jobs. The Port is one of the few well paying jobs left for blue-collar workers, losing this could have drastic effects on the economy. Also, since the port is the sole supplier of energy, heating and energy costs would rise significantly due to the cost of transporting these resources from a distant port. The costs to the region if the Port of Providence closes are immense. People and officials don't seem to fully understand the detrimental consequences that would come from loosing such a vital economic resource.

Mercosur and its Global Effects

It's obvious that trade agreements substantially benefit the members involved. However, many people seem to forget to consider how certain trade agreements affect members outside of the agreement. While researching the trade agreement Mercosur, I found several countries it hinders, rather then benefits. Mercosur is an economic and political agreement established in 1991. This agreement is between Argentina, Brazil, Paraguay, Uruguay, and Venezuela. The agreements intended purpose is to promote the free movement of goods, services and people through member states, with its ultimate goal of full South American economic integration. Regardless of its intent, Mercosur primarily focuses its efforts on eliminating high tariffs.

The biggest problem with Mercosur is it restricts trade with non-members. Many countries want to see the agreement terminated because they feel it will drive its members to open up trade with the rest of the world. Mercosur has blocked trade with the United States and China, with the intention of limiting cheap Chinese imports.

Aside from Mercosur creating issues for non member countries, Mercosur is also beginning to create problems between members. Brazil and Argentina had a serious issue with car manufacturers. Brazil car industry became increasingly competitive, mostly because of the devaluation of their currency. Argentina created a retaliatory tariff on Brazilian steel imports and the feud magnified. Argentina also fought with Uruguay over plans to build factories that would pollute Argentina, impacting tourism. Feuds between Mercosur members are not uncommon, and often make the trade agreement an unhealthy situation for all members involved.

I think Mercosur needs to return to its core values or disband. This trade agreement cuts off trade with a large portion of the world. A direct effect of Mercosur restricting trade is it limits the flow of technology and ideas between nations, as well as prohibits members from acquiring recourses from areas other than Latin America. I believe these members could enter into a more organized and beneficial trade agreement with other nations.

Effective Trade Policies for Developing Nations

In Economics you learn that there are many trade policies aimed to ease trade between nations. Unfortunately, many of the trade agreements discussed in the classroom are the policies that help sustained, developed countries. What about the trade policies for developing nations? These policies are perhaps more important to focus on if we want to grow as a nation. I recently came across an organization called the, Organization for Economic Cooperation & Development (OECD). This group provides a forum in which governments from around the world can work together to promote policies that improve the economic conditions of developing nations. This organization was established in 1961 and consists of 34 members. The OECD is funded by the member countries; the United States is the biggest contributor, providing 22% of the funds, followed by Japan. —Most importantly, the OECD examines core issues that directly affect developing countries. For example, how to improve schooling and pension systems for their citizens. 

The effect the OECD has had on developing nations over the years have been astonishing. In September of 2010 Israel became the 33rd member of the OECD. Upon joining the members of the OECD collectively agreed Israel needed help in four key areas; education, investment, trade, and public governance. Immediately the organization become implementing policies and procedures to fix these areas. By 2012 all-in taxes on the average worker decreased from 29% to 20.2% of labor costs, employment rates have increased substantially for women, and life expectancy reached 81.7 years (almost two years more than the 79.8 average in 2008). Israel has also begun to see increases in technological advances, which has help tremendously in the fields of science and health. 

The OECD is a proven effective organization that aids developing nations. The policies they create and implement into developing countries act as precedent for future emerging economies to follow. The OECD and trade policies like it are import to understand and research. We cannot grow as a nation, without the help of other countries. These developing countries could on day bring valuable recourses and new technologies to the U.S., which would not have been possible if organizations like the OECD did not exist.

Is A Higher Import Tariff the Solution to Getting the U.S. Out of Debt?

The deficit has always been popular topic, however in recent weeks it seems to be discussed more frequently and in-depth. In an article posted by Paul Solman titled, "Could a Higher Import Tariff Pay for Medicare and Get the U.S. Out of Debt" a man by the name of Joel Soewell shares his "simple" solution to correcting the deficit. Soewell explains that if taxes on goods imported to the U.S. were raised by 15 percent, the tax revenue alone could generate enough money to bring the U.S. out of debt. He feels this tariff increase would stimulate domestic manufacturing growth and bring money into the government without increasing the tax on income of any "class".

While Soewell makes some good points, I do not feel his solution was entirely thought out. Increasing import tariffs to increase revenue and bring the U.S. out of debt sounds like an excellent solution for the present day. However, once we begin to examine the possible future/long term effects, this solution becomes less and less appealing. Paul Solman makes an excellent point in the article and it should be the only point she needs to make; once the united states raises the import tariff, the amount of goods that are imported will significantly decrease. Many of our top trading partners would cease trading with us, and most likely create a retaliatory tariff, increasing the price and making it harder for the united states to export goods. This "simple solution" could potentially have an opposite effect and increase the deficit.

Another potential effect of increasing import tariffs that needs to be examined is how these high tariffs will effect domestic prices. Imported goods would have to be priced significantly higher to make up for the extra tax. Also imported raw material prices would increase, which as a direct effect would raise the prices for U.S. consumers.

While increasing import tariffs seems like a "no brainer" solution. One should truly examine and consider the drastic long term effects this could have on our country, economy, and especially our current debt crisis.

Union Demands Effect Trade

The recent ILA strike effecting the West and East coasts has caused significant issues and trade barriers.  World Trade 100 estimates the strike could cost over $200 billion this peak shipping season. Companies shipping merchandise are undoubtably going to be affected by the strike. Many shipping lines have diverted their cargo from portland to other west coast ports in an attempt to avoid delays that would cost companies millions in revenue. A strike of this magnitude is not the first of its kind. Bonnie Chan a senior analyst on the industrial and transportation research team says it took shipping lines over a month to clear out congestion when U.S. west coast ports were shut by strikes for 10 days in 2002.

Union strikes hinder and can sometimes cease shipping. In extreme cases like the ILA strike, if union demands are not negotiated and met the situation creates detrimental trade barriers. As previously mentioned, union strikes are not uncommon and when a strike effects trade it can be detrimental to people, companies and the economy. It's extremely curious that a policy has not been created to eliminate a trade barrier, should another strike arise. To my knowledge, no such policy exists. The effects of unions on shipping and trade in respect to costs is significant, but the effect of unions on strike is much more astonishing. A policy should be created specifically for union demands, so trade barriers are eliminated and the economy is remains unaffected. Trade is an essential factor in the stability of the United States economy, its astounding that nothing exists to prevent the negative effects of something as common and inevitable as a union strike.

Health Care Benefits Affects Comparative Advantage

After reading "Globalization Drives Changes for U.S. Automakers" its apparent that as long as the Big Three (GM, Ford, and Chrysler) are burdened with outrageously high health care costs and benefit packages it will be nearly impossible for them to compete with foreign car manufacturers. In 2008 GM spent 4.8 billion on health care costs alone. This in turn increases the price of every vehicle produced by $1,500. Health care costs for Japanese competitors are not nearly as high as U.S. manufacturers, because of this Toyotas health care costs create only a $200 increase per vehicle. This gives Toyota a $1,300 cost advantage. 

If this isn't enough to completely eliminate any chance of the Big Three competing with foreign manufacturers, these companies are also paying $6 more per employee in wages then Toyota and Honda factories located in the U.S.. With GM and Chrysler receiving a $17.5 billion loan to prevent them from going into bankruptcy in 2008, its clear these U.S. car manufacturers cannot competitively compete while they are expected to pay such high wages and benefits.