L7 global

Food forThought: 

Food for Thought Lecture #7 Joe Lau

Food, fair trade & globalization: 

Food, fair trade & globalization Social and global perspectives about food. How food relates to power and economics. Fair trade = free trade? How fair is food trading locally and internationally.

Free market: 

Free market All economic decisions and actions regarding transfer of money, goods, and services are voluntary. Is a free market desirable? Unrestricted freedom not desirable Physical harm Price fixing The extent of regulations Business incentives Interests of consumers How free is Hong Kong?

2005 Index of Economic Freedom: 

2005 Index of Economic Freedom http://www.heritage.org/research/features/index/country.cfm?id=HongKong

World Economic ForumGlobal Competitiveness Report 2004-2005 : 

World Economic Forum Global Competitiveness Report 2004-2005

World Economic ForumBusiness Competitiveness Report 2004-2005 : 

World Economic Forum Business Competitiveness Report 2004-2005

Supermarket duopoly: 

Supermarket duopoly

Market dominancehttp://cbdd.wsu.edu/kewlcontent/cdoutput/TR503/page47.htm: 

Market dominance http://cbdd.wsu.edu/kewlcontent/cdoutput/TR503/page47.htm Market power The ability of a firm to independently raise prices above market levels for a non-transitory period without losing sales to such a degree as to make this behavior unprofitable. Relevant factors Market Share Barriers to Market Entry Vertical Integration, etc. Market dominance An extreme form of market power Unequal bargaining power

Potential problems with dominance: 

Potential problems with dominance Consumers Lack of choices Higher prices (July 2001) Lifting of interest rate ceiling on savings accounts deposits. Economy Lack of innovation

Entry into the market: 

Entry into the market adMart closed shop in Dec 2003. Online store, bulk purchase; Led to price war. Property ads pulled out for 3 months. Difficulties in sourcing products (but not for stationary / mobiles phones). Carrefour pulled out in August 2000. Difficulties finding good location. Pressured by 22 suppliers not to cut prices.

TELECOMMUNICATIONS ORDINANCE Ch106, Section 7K: 

TELECOMMUNICATIONS ORDINANCE Ch106, Section 7K (3) Without limiting the general nature of subsection (1), a licensee engages in conduct prescribed under that subsection if he- (a) enters into an agreement, arrangement or understanding that has the purpose or effect prescribed by that subsection; (b) without the prior written authorization of the Authority, makes the provision of or connection to a telecommunications network, system, installation, customer equipment or service conditional upon the person acquiring it also acquiring or not acquiring a specified telecommunications network, system, installation, customer equipment or service, either from the licensee or from another person; (c) gives an undue preference to, or receives an unfair advantage from, an associated person if, in the opinion of the Authority, a competitor could be placed at a significant disadvantage, or competition would be prevented or substantially restricted. (1) A licensee shall not engage in conduct which, in the opinion of the Authority, has the purpose or effect of preventing or substantially restricting competition in a telecommunications market. (2) The Authority in considering whether conduct has the purpose or effect prescribed under subsection (1) is to have regard to relevant matters including, but not limited to- (a) agreements to fix the price in a telecommunications market; (b) an action preventing or restricting the supply of goods or services to competitors; (c) agreements between licensees to share any telecommunications market between them on agreed geographic or customer lines; (d) the conditions of relevant licences.

Anti-competition in Hong Kong: 

Anti-competition in Hong Kong Situation No general legislation on anti-competition. No specific laws on anti-competition outside of telecommunications. Consumer Council 2003 report “As a long term solution, the Council is in favour of introducing a competition law framework in Hong Kong; similar to that which exists in other comparable advanced economies.” http://www.consumer.org.hk/website/ws_en/competition_issues/competition_studies/20030811supermkt.html The Government’s response “The Government does not see the need for intervention or a competition law for this sector.” http://www.compag.gov.hk/reference/cc.pdf

Issues: 

Issues Does HK need a competition law? General? Food? Fuel? What should such a law contain? Obvious? price fixing Grey areas? pricing out competitors Further readings (Ronny Tong’s speech in Chinese) http://www.ronnytong.org/public/contents/1836 http://www.economist.com/business/displayStory.cfm?Story_ID=413357&CFID=3131 http://www.hkdf.org/newsarticles.asp?show=newsarticles&newsarticle=13 http://www.webb-site.com/articles/noncompete.htm http://www.channelnewsasia.com/stories/afp_asiapacific_business/view/129871/1/.html

Fair trade in the global context: 

Fair trade in the global context 1999 US & China sign WTO deal “most important event since Deng’s open-door policy” (SCMP) 1999 WTO in Seattle 60000 demonstrators. 13-18 Dec 2005 WTO in Hong Kong. What’s the problem? “The Police Tactical Unit has ordered rubber bullets and lead-filled bean bags, Commandant Suen Kwai-leung said. The thumb-sized bean bags are fired from guns and, like rubber bullets, are intended to be non-lethal.” (AP) http://www.taipeitimes.com/News/world/archives/2005/02/17/2003223390

Globalization: 

Globalization International economic integration Integrated international trade & financial markets Capital mobility Transnational economic institutions World bank, WTO, companies, e.g. Citigroup, GE Cross-border division of labor Outsourcing, manufacturing bases Global sourcing of raw materials E.g. Japanese chopsticks from rainforests

Case study: EU sugar dumping: 

Case study: EU sugar dumping Relies on sugar beet instead of cane because of climate. 2nd to Brazil in world market share Govt subsidies: HK$20 billion per year Over-production depresses world prices and hurt poor farmers Costs Brazil: loses HK$4 billion a year. Ethiopia: HIV/AIDS budget Malawi: primary health care budget Who wins? Large European sugar refiners Fr’s Beghin, Germany's Sudzucker, Britain’s Tate & Lyle.

Why is this so bad?http://www.maketradefair.com/en/index.htm: 

Why is this so bad? http://www.maketradefair.com/en/index.htm Inconsistent rhetoric Unfair competition while pushing for open markets and “fair trade”. Tariffs on imports (Thai frozen prawns) Receive $1 of aid, lose $2 from unfair trade. Devastating consequences on poor countries EU sugar, & milk (West Africa) US cotton (West Africa), rice (Haiti), corn (Mexico)

What can you do?: 

What can you do? Think about it. Talk about it. Show your concern. Make responsible consumer choices.