Go Lean Commentary
Free Trade agreements are highly controversial:
- Economists love them while workers hate them.
The Economists claim that trade pacts – i.e. NAFTA, MERCURSOR, and the now-defunct FTAA – result in increased economic output: See this excerpt from the 2013 Go Lean … Caribbean book (Page 21):
Voluntary Trade Creates Wealth: People specialize in the production of certain goods and services because they expect to gain from it. People trade what they produce with other people when they think they can gain something from the exchange. Some benefits of voluntary trade include higher standards of living and broader choices of goods and services.
On the other hand, workers complain that in Free Trade pacts low-skilled jobs flee to the participating countries with the lowest wages. See the American drama depicted in this excerpt from a previous blog-commentary from March 2016:
An Ode to Detroit – Good Luck on Trade!
There is a strong current against free trade deals in big industrial cities in the American north. … But chances are, these trade agreements will not disappear… These free trade agreements are ratified treaties with other countries that are not so easily dismantled. Plus, the US business interest has proven to be formidable in their obstructionism to radical changes to their status quo.
The Go Lean movement asserts that there is a Crony-Capitalistic influence in the US that creates a societal defect for forging change. In this case, trade deals like NAFTA allow big corporations to shift labor costs to alternate locales with lower payroll costs. This commentary has related that the money motivation with this strategy may be too much to overcome in the America of 2016.
So when the ascension of the Free Trade Agreement of the Americas (FTAA) stalled in 2005 – see the historicity of FTAA in Appendix A below – this outcome taught an important lesson about something even more important than “Free Trade”:
The art and science of the Food Supply.
The United States of America has the highest level of wages among the 34 countries in this hemispheric economic plan; they would have benefited from cost savings of using cheaper labor in poorer countries to grow certain agricultural products – think lemons-limes in Mexico. This is referred to as the Theory of Comparative Advantage – where greater benefits are derived to the trading partners by allowing the partner with the most value to execute the functionality. See the formal policy here:
Theory of Comparative Advantage
The law of comparative advantage describes how, under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage. In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to trade. Comparative advantage describes the economic reality of the work gains from trade for individuals, firms, or nations, which arise from differences in their factor endowments or technological progress. – Source: Wikipedia
True adherence to this economic concept would have demanded that the US ended their agricultural subsidies for their farmers. (See the definitions of ‘subsidies’ in Appendix B below.). FTAA failed because the US refused to comply with the mandate from the Economists. They reasoned that they must protect their bread baskets (farmers), because in so doing they would protect the independence of their Food Supply.
A society must be able to feed itself …
… despite whether it is cheaper to do so, compared to cross-border trade.
This is the Lesson in History for us in the Caribbean from the FTAA drama.
This is the continuation of this teaching series for December 2019 from the movement behind the Go Lean book. This entry is commentary 4 of 5 considering Food Security for the Caribbean. The first priority should be for us to Feed Ourselves ; rather than depending so heavily on trade. This is a good example from the American-FTAA drama. Other Food Supply considerations are presented in this series; see the full series catalog here:
- Food Security – Bread Baskets on Land and Sea
- Food Security – Temperate Foods in the Tropics
- Food Security – Opportunity: 1 American County in Iowa raises all Beef for a Cruise Line
- Food Security – FTAA: A Lesson in History
- Food Security – Big Chicken
The Go Lean book presents a roadmap for an Industrial Reboot of our agricultural footprint. It introduces a regional solution – the Caribbean Union Trade Federation (CU) – to ensure Food Security for all 30 member-states. The book posits that we must be prepared to Feed Ourselves with intra-regional solutions – we must have our own bread baskets. Among the 30 participating member-states, there are some that are better suited – lower opportunity costs in the Competitive Analysis exercise – to ramp-up an agri-business eco-system.
As a boy growing up in the Caribbean – more exactly, in the Bahamas – we would go to the citrus trees in the backyard and pick fruit for household consumption: seasoning foods and making limeade-lemonade. Now today, the grocery stores only sell imported lemons – see Photo here.
The same issues are prevalent with Caribbean fisheries.
Today in the Caribbean, the prevalence is for “Fish Fingers” on restaurant menus to be American exported, farm-raised tilapia or catfish; despite the 1,063,000 square miles of the Caribbean Sea.
We must do better; we must be able to Feed Ourselves … finally. The Theory of Competitive Analysis has caused globalization to run amok.
The issues in reforming and transforming our interactions with global trade have been addressed in many previous blog-commentaries; consider this list of sample entries:
|http://www.goleancaribbean.com/blog/?p=16341||New Post Office Eco-system – Globalization issues ‘loud and clear’|
|http://www.goleancaribbean.com/blog/?p=16208||In Defense of Trade – Bilateral Tariffs: No one wins|
|http://www.goleancaribbean.com/blog/?p=15875||Amazon Model: ‘What I want to be when I grow up’|
|http://www.goleancaribbean.com/blog/?p=13233||Caribbean proposes new US-Caribbean trade initiative|
|http://www.goleancaribbean.com/blog/?p=6231||China’s Caribbean Playbook: America’s Script|
|http://www.goleancaribbean.com/blog/?p=994||Bahamas rejects US trade demand|
As related in every submission of this Food Supply series, our intention is simple yet providential – as communicated in the outset of the Go Lean book (Page 3):
The CU should better provide for the region’s basic needs (food, clothing, energy and shelter), and then be in position to help supply the rest of the world.
We gotta eat! So it is a great business model – maybe after some government subsidies – to grow, harvest and distribute local foods for the people of our communities. It creates foreign exchange as well. The Go Lean movement presents a business model of fostering packaged foods to sell to the world – imagine our Diaspora scattered in foreign lands; see this portrayal of a Caribbean food service company – GraceKennedy – in this VIDEO here:
VIDEO – Grace Kennedy Belize Ltd – https://youtu.be/kVDhoaa2yWI
Published Sep 4, 2015 – GraceKennedy (Belize) Ltd was established and commenced operations January, 1982 as a subsidiary of GraceKennedy Ltd. of Kingston, Jamaica. Presently, GraceKennedy (Belize) Ltd. is one of Belize’s major food & beverage distributors. GraceKennedy (Belize) Ltd. is involved in the importation and distribution of a wide range of food and non-food grocery items throughout the country of Belize. The company is the exclusive distributor of Grace and Grace-owned branded products. Over the many years, the company’s ability to Brand-build and engage consumers has attracted any other brands such as Malher, Colgate-Polmive, PA Benjamins, Suretox, Roses Toilet Tissues, Mackeson Stout, Carib Beer, Stag Beer and El Dorado Rum.
Join us in our campaign for 2015, Grace We Care .
This is an extension of the ever popular Pass On The Love. Every month GraceKennedy (Belize) Ltd. staff members donate a portion of their salary to the Grace We Care Club. This Club then finds ways to give back to the community. Show you care by preparing a meal with your family, invite someone less fortunate to a dinner or to enjoy a family game. Teach the youths to give to those who don’t have as much as they do by donating toys, usable clothing that is not being worn or books that they have read. There is a lot we can all do to help one another.
- Category: Travel & Events
This plan – fostering regional bread baskets with the help of government subsidies – would be a win-win all around.
We urge all Caribbean stakeholders to lean-in to this Go Lean roadmap … to Feed Ourselves and our trading partners. This is how we make our Caribbean homeland a better place to live, work and play. 🙂
About the Book
The book Go Lean…Caribbean serves as a roadmap for the introduction and implementation of the technocratic Caribbean Union Trade Federation (CU), for the elevation of Caribbean society – for all member-states. This CU/Go Lean roadmap has these 3 prime directives:
- Optimization of the economic engines in order to grow the regional economy to $800 Billion & create 2.2 million new jobs.
- Establishment of a security apparatus to ensure public safety and protect the resultant economic engines.
- Improve Caribbean governance to support these engines, including a separation-of-powers between the member-states and CU federal agencies.
The Go Lean book provides 370-pages of turn-by-turn instructions on “how” to adopt new community ethos, plus the strategies, tactics, implementations and advocacies to execute so as to reboot, reform and transform the societal engines of Caribbean society.
Download the free e-Book of Go Lean … Caribbean – now!
Who We Are
The movement behind the Go Lean book – a non-partisan, apolitical, religiously-neutral Community Development Foundation chartered for the purpose of empowering and re-booting economic engines – stresses that reforming and transforming the Caribbean societal engines must be a regional pursuit. This was an early motivation for the roadmap, as pronounced in the opening Declaration of Interdependence (Pages 12 – 14):
xi. Whereas all men are entitled to the benefits of good governance in a free society, “new guards” must be enacted to dissuade the emergence of incompetence, corruption, nepotism and cronyism at the peril of the people’s best interest. The Federation must guarantee the executions of a social contract between government and the governed.
xvi. Whereas security of our homeland is inextricably linked to prosperity of the homeland, the economic and security interest of the region needs to be aligned under the same governance. Since economic crimes … can imperil the functioning of the wheels of commerce for all the citizenry, the accedence of this Federation must equip the security apparatus with the tools and techniques for predictive and proactive interdictions.
xxiv. Whereas a free market economy can be induced and spurred for continuous progress, the Federation must install the controls to better manage aspects of the economy: jobs, inflation, savings rate, investments and other economic principles. Thereby attracting direct foreign investment because of the stability and vibrancy of our economy.
xxx. Whereas the effects of globalization can be felt in every aspect of Caribbean life, from the acquisition of food and clothing, to the ubiquity of ICT, the region cannot only consume, it is imperative that our lands also produce and add to the international community, even if doing so requires some sacrifice and subsidy.
Sign the petition to lean-in for this roadmap for the Caribbean Union Trade Federation.
Appendix A – Reference: Free Trade Area of the Americas
History In the latest round of negotiations, trade ministers from 34 countries met in Miami, Florida, in the United States, in November 2003 to discuss the proposal. The proposed agreement was an extension of the North American Free Trade Agreement (NAFTA) between Canada, Mexico, and the United States. Opposing the proposal were Cuba, Venezuela, Bolivia, Ecuador, Dominica, and Nicaragua (all of which entered the Bolivarian Alternative for the Americas in response), and Mercosur member states. Discussions have faltered over similar points as the Doha Development Round of World Trade Organization (WTO) talks; developed nations seek expanded trade in services and increased intellectual property rights, while less developed nations seek an end to agricultural subsidies and free trade in agricultural goods. Similar to the WTO talks, Brazil has taken a leadership role among the less developed nations, while the United States has taken a similar role for the developed nations.
Beginning Free Trade Area of the Americas began with the Summit of the Americas in Miami, Florida, on December 11, 1994, but the FTAA came to public attention during the Quebec City Summit of the Americas, held in Canada in 2001, a meeting targeted by massive anti-corporatization and anti-globalization protests. The Miami negotiations in 2003 met similar protests, though perhaps not as large.
Disagreements In previous negotiations, the United States had pushed for a single comprehensive agreement to reduce trade barriers for goods, while increasing intellectual property protection. Specific intellectual property protections could include DMC Digital Millennium Copyright Act style copyright protections similar to the U.S.-Australia Free Trade Agreement. Another protection would likely restrict the importation or cross importation of pharmaceuticals, similar to the proposed agreement between the United States and Canada. Brazil posed a three-track approach that calls for a series of bilateral agreements to reduce specific tariffs on goods, a hemispheric pact on rules of origin, and a dispute resolution process Brazil proposed to omit the more controversial issues from the FTA, leaving them to the WTO.
The location of the FTA Secretariat was to have been determined in 2005. The contending cities were: Atlanta, Chicago, Galveston, Houston, San Juan, and Miami in the United States; Cancún and Puebla in Mexico; Panama City, Panama; and Port of Spain, Trinidad and Tobago. The U.S. city of Colorado Springs also submitted its candidacy in the early days but subsequently withdrew. Miami, Panama City and Puebla served successively an interim secretariat headquarters during the negotiation process.
The last summit was held at Mar del Plata, Argentina, in November 2005, but no agreement on FTA was reached. Of the 39 countries present at the negotiations, 20 pledged to meet again in 2006 to resume negotiations, but no meeting took place. The failure of the Mar del Plata summit to establish a comprehensive FTA agenda augured poorly.
Current status The FTAA missed the targeted deadline of 2005, which followed the stalling of useful negotiations of the World Trade Organization Ministerial Conference of 2005. Over the next few years, some governments, most notably the United States, not wanting to lose any chance of hemispheric trade expansion moved in the direction of establishing a series of bilateral trade deals. The leaders however, planned further discussions at the Sixth Summit of the Americas in Cartagen, Colombia, in 2012. …
Source: Retrieved December 29, 2019 from: https://en.wikipedia.org/wiki/Free_Trade_Area_of_the_Americas
Appendix B – Reference: Subsidy
A subsidy or government incentive is a form of financial aid or support extended to an economic sector (business, or individual) generally with the aim of promoting economic and social policy. Although commonly extended from government, the term subsidy can relate to any type of support – for example from NGOs or as implicit subsidies. Subsidies come in various forms including: direct (cash grants, interest-free loans) and indirect (tax breaks, insurance, low-interest loans, accelerated depreciation, rent rebates).
Furthermore, they can be broad or narrow, legal or illegal, ethical or unethical. The most common forms of subsidies are those to the producer or the consumer. Producer/production subsidies ensure producers are better off by either supplying market price support, direct support, or payments to factors of production. Consumer/consumption subsidies commonly reduce the price of goods and services to the consumer. For example, in the US at one time it was cheaper to buy gasoline than bottled water. …
Agricultural subsidies – Support for agriculture dates back to the 19th century. It was developed extensively in the EU and USA across the two World Wars and the Great Depression to protect domestic food production, but remains important across the world today. In 2005, US farmers received $14 billion and EU farmers $47 billion in agricultural subsidies. Today, agricultural subsidies are defended on the grounds of helping farmers to maintain their livelihoods. The majority of payments are based on outputs and inputs and thus favour the larger producing agribusinesses over the small-scale farmers. In the USA nearly 30% of payments go to the top 2% of farmers.
By subsidising inputs and outputs through such schemes as ‘yield based subsidisation’, farmers are encouraged to over-produce using intensive methods, including using more fertilizers and pesticides; grow high-yielding monocultures; reduce crop rotation; shorten fallow periods; and promote exploitative land use change from forests, rainforests and wetlands to agricultural land. These all lead to severe environmental degradation, including adverse effects on soil quality and productivity including erosion, nutrient supply and salinity which in turn affects carbon storage and cycling, water retention and drought resistance; water quality including pollution, nutrient deposition and eutrophication of waterways, and lowering of water tables; diversity of flora and fauna including indigenous species both directly and indirectly through the destruction of habitats, resulting in a genetic wipe-out.
Cotton growers in the US reportedly receive half their income from the government under the Farm Bill of 2002. The subsidy payments stimulated overproduction and resulted in a record cotton harvest in 2002, much of which had to be sold at very reduced prices in the global market. For foreign producers, the depressed cotton price lowered their prices far below the break-even price. In fact, African farmers received 35 to 40 cents per pound for cotton, while US cotton growers, backed by government agricultural payments, received 75 cents per pound. Developing countries and trade organizations argue that poorer countries should be able to export their principal commodities to survive, but protectionist laws and payments in the United States and Europe prevent these countries from engaging in international trade opportunities.
Fisheries – Today, much of the world’s major fisheries are overexploited; in 2002, the WWF estimate this at approximately 75%. Fishing subsidies include “direct assistance to fishers; loan support programs; tax preferences and insurance support; capital and infrastructure programs; marketing and price support programs; and fisheries management, research, and conservation programs.” They promote the expansion of fishing fleets, the supply of larger and longer nets, larger yields and indiscriminate catch, as well as mitigating risks which encourages further investment into large-scale operations to the disfavour of the already struggling small-scale industry. Collectively, these result in the continued overcapitalization and overfishing of marine fisheries.
There are four categories of fisheries subsidies. First are direct financial transfers, second are indirect financial transfers and services. Third, certain forms of intervention and fourth, not intervening. The first category regards direct payments from the government received by the fisheries industry. These typically affect profits of the industry in the short term and can be negative or positive. Category two pertains to government intervention, not involving those under the first category. These subsidies also affect the profits in the short term but typically are not negative. Category three includes intervention that results in a negative short-term economic impact, but economic benefits in the long term. These benefits are usually more general societal benefits such as the environment. The final category pertains to inaction by the government, allowing producers to impose certain production costs on others. These subsidies tend to lead to positive benefits in the short term but negative in the long term.
Others – The US National Football League’s (NFL) profits have topped records at $11 billion, the highest of all sports. The NFL had tax-exempt status until voluntarily relinquishing it in 2015, and new stadiums have been built with public subsidies.
The Commitment to Development Index (CDI), published by the Center for Global Development, measures the effect that subsidies and trade barriers actually have on the undeveloped world. It uses trade, along with six other components such as aid or investment, to rank and evaluate developed countries on policies that affect the undeveloped world. It finds that the richest countries spend $106 billion per year subsidizing their own farmers – almost exactly as much as they spend on foreign aid.
Source: Retrieved December 29, 2019 from: https://en.wikipedia.org/wiki/Subsidy