Growth and Development of Global Economy - Economics - Essay Example

Growth and Development of Global Economy - Economics and Section # of Growth and Development ofGlobal Economy - EconomicsQUESTION 1The global trade arena with regards to cotton import/export in contemporary times involves players from the diametrically opposite nations of the world in terms of development, i.e. the USA and the West African nations along with other nations of the world such as China. The major concern in this field are the negative externalities emitted by the US subsidies allotted to its domestic producers in order to make their yield appear competitive in the global market, but this move on part of the US government harms the West African nations which depend on cotton export for livelihood and a tool which could trigger economic growth.

On the contrary, they are stuck in the vicious cycle due to the US subsidies which crowds the efficient producer’s market, since without subsidies the US cotton production would not be economical. The US government harms the poorer nations through subsidizing their own domestic cotton production more than it helps them through foreign aid, as proved by statistical data in The Oxfam Briefing Paper (Oxfam International, 2004, pages 1-40). The subsidies does not only affect the Balance of Payments, but has a trigger down effect, it lowers the income of farmers, thus reducing the income available for expenditure, further strengthening the economic crisis by lowering aggregate demand, the multiplier sets into a negative action, and poverty sets in, thus making West African nations vulnerable to US cotton subsidies, furthermore in accordance with Anderson and Valenzuela (Anderson and Valenzuela, 2006, page 19) the usage of Genetically Modified Organism for the cotton production in developing nations would have a greater positive effect than eliminating subsidies completely.

However, since it is a time-consuming process to convert every small farm to GM technology, hence from the West African nation’s perspective, the USA should eliminate its cotton subsidies in order to aid the developing nations in coming out of the economic crisis and poverty situation. QUESTION 2The US political policies focus on hardcore protectionism with regards to the cotton market; the subsidies are unfair and distort the free trade system. According to the multiplier effect, protectionism in the cotton industry also leads to indirect help of US domestic textile and apparels industry, as presented in The Oxfam Briefing Paper.

However, these subsidies focus on helping only the larger farms, despite publicizing otherwise, since 67% of the US farms are ineligible to attain the subsidy benefits, and it is generally the top 10% farms which receive 79% of the subsidies, depicting an internal imbalance and favoritism in the political arena (Oxfam International, 2004, pages 1-40). The WTO however tends to take action against this partiality in favor of the richer US farmers, and proposes reforms in order to rectify the situation and make lives of the African farmers comparatively easier, and allow them a fair compensation, since an undistorted cotton trade market could help eradicate poverty and suffering from these unprivileged nations, however the reforms should not be aimed at increasing the debt burden of the already suppressed nations, but rather alleviate their crisis, critical examination of the reform policies is a must, and these should not partially tilt towards benefit the developed nations yet again, and like the EU, prompt action is required for policy reform initiation in order to eliminate trade distortions, despite resistance from the US government which would stress to protect its domestic industry, especially the richer elite farmers.. ReferencesAnderson.

K and Valenzuela. E (2006) The World Trade Organization’s Doha Cotton Initiative: A Tale of Two Issues. World Bank Policy Research Working Paper, 3918, 1-39Oxfam International (2004) Finding the Moral Fiber: Why reform is urgently needed for a fair cotton trade. Oxfam Briefing Paper, 69, 1-47