Analysis of Russia

After the collapse of USSR, Russia is still looking for a way to go back to those glorious days. After the collapse of USSR in 1991, things have changed for Russia. Economic problems hit the Russian economy and impacts of those problems can still be seen today. Inflation was one of the problems in Russia after the collapse of the USSR. Russia met the real prices in the global market which were totally different than the prices within the USSR which determined by government at Soviet era. Inflation occured as a result of the reveal of real market prices. The price boom in Russia after the collapse of the USSR, caused many problems for Russian economy during the transition from socialist economy to free-market economy.

Russian has many natural resources which gives the comparative advantage in global area. Other than trade of natural resources, Russia's trade is mostly on steel trade. However, the trade volume and the variety of the goods that have been trading are not satisfying. The numbers would have been higher for Russia. The reason of this issue is going back to Soviet Era. In Soviet Union, the western goods and technologies were out of the country, and mostly Russian products were sold. Lack of competitiveness in the Soviet market did not force the manufacturers in Russia to improve the quality and design of the products. The demand was higher than the supply, therefore low quality products were being sold in the USSR and other COMECON countries. However, after the collapse of the USSR, these products were not demanded in the global market and became obsolete. Consequently, Russia only could trade natural resources and steel.

Another problem of Russia is distribution of the wealth among the nation. Russian is the country who has the most dollar millionaire in the world. The 20 % of the Russian GDP is held by approximately 100 Russian billionaires. The reason for the issue is privatization could not be done properly in Russia after the collapse of the USSR. Some "entrepreneurs" who also known as Oligarchs acquired the Soviet assets for very low prices. Therefore,  Russian economy could get the benefits of privatization.

Lack of privatization, economic instability after collapse of the USSR  corruption and lack of tradition of capitalism have caused problem for Russia in global trading area.

Turkey- EU Customs Union

Turkey and the EU signed the Customs Union Agreement in 1995. The agreement allowed both sides to trade goods without any customs duties and tariffs. The agreement is beneficial for both sides. The trade volume has increased highly and The EU became Turkey's number one import and export partner. 

There are many benefits of the agreement for Turkey's side. The benefits could be listed as;

• Turkey has benefited from an “early” legislative alignment process before its accession negotiations started.
• Turkey is participating in the EU single market for goods.
• Turkey has been implementing an EU aligned anti-trust legislation for 10 years.
• Turkey has benefited from an almost EU aligned customs legislation for 10 years.
• Turkish exporters are experienced in manufacturing according to EU technical standards.
• Turkey has adopted and implemented many intellectual property rights.

Additionally, the agreement increases the foreign direct investments between the two sides. FDI is crucial for economies in order to acquire foreign currencies, job creations and cash flow. The chart which has been shown below, shows the increase of FDI between the EU and Turkey.

To sum up, the agreement benefits Turkey and the EU highly. Trading without tariff and duties encourage both sides to trade and make investments which helps the economies to grow.

References:

http://www.avrupa.info.tr/en/turkey-the-eu/customs-union.html?print=1

http://ec.europa.eu/trade/creating-opportunities/bilateral-relations/countries/turkey/

Rezoning issue of the Port of Providence

Ports are crucial for many countries in terms of trade. The issue with regarding to rezoning of the Port of Rhode Island must be analyzed in details. The benefits of rezoning the port and constructing of condominiums, hotels, marinas, restaurants may be seen attracting from the political side. New facilities may increase the tax revenues of the State of Rhode Island. Additionally, it may benefit the economy by  increasing  employment rate if we considered that new business will create new job opportunities for Rhode Islanders. However, this issue is very complex. The port of Providence is located in a very strategic place. The port is on the energy supply route for Rhode Island, some part of Massachusetts and Connecticut and the decision about rezoning of the part may affect the energy prices in the region. Also, the port has many employees and possible rezoning of the port would cause these jobs to be lost. In addition to these, giving decision about the case is getting more difficult as the history of the port of Providence is taken into account.

The decision about rezoning of the port will affect many stakeholders. It seems that it is impossible to make all the stakeholders happy. Creating job opportunities by losing current jobs is a debatable issue. The optimal decision should be given after the analysis of both disadvantages and advantages of the rezoning. The effect of rezoning of the port on oil prices, employment rate, tax revenues, import and export all should be taken into account, and the best decision for all stakeholders needs to be given.

OECD

OECD is an international economic organization founded in 1961 to stimulate economic progress and world trade. OECD is consisted of countries that are committed to free market economy and free trade. Trade is essential for all nations but the importance of trade for developing nations are crucial. Developing countries must use trade to increase the welfare of the country and reach to economies of scale. However, achieving the economies of scale is not easy and needs high effort. The main goal of the OECD is to help the  developing nations when they need help. The organization tries to help its member countries by finding answers to problems such as fighting poverty through economic growth and financial stability and fostering prosperity. 

The main goals of the OECD are listed below. The goals are to;

• Boost employment                              
• Raise living standards

• Maintain financial stability
• Assist member and non member 
countries' economic development
• Contribute to growth in world trade

Could we say that the OECD is accomplishing its main goals? The answer of the question is

ambiguous. If we considered the EU crises, trade wars between countries and trade restrictions; it would not be wrong to say that OECD is just an ''advisor ''. In my opinion, an organization without enforcement could not be more than an '' advisor ''. 





References;

http://oecdmybrochure.org/edu/handle.php?lang=eng&adr=01304611189.pdf

http://www.oecd.org/about/whatwedoandhow/

Trade wars are punishing buyers

There are many economists who find Keynesian theories obsolete and old school. Keynes's emphasis on increase in employment and government spending to boost the economy by creating multiplier effect   has been criticized highly. However, if we look at today's world and see what the governments are doing, I think we owe an apology to Keynes. We are seeing many examples of governments imposing additional tariffs on particular products to protect their own industries from the effect of imports. These type of government actions helps these inefficient industries to survive which is against the nature of 'real' free market. Industries which needs to vanish continuing to produce with the help of governments. Does the government do good for society or just for the industry? Inefficient industries might not compete with their competitors in global market because of the differences in price. Citizens are being affected from the situation in very first place because the products are sold much higher than its real market price by the imposition of additional tariffs and protection of inefficient industries. Citizens are forced to pay more as a result of the government actions. We could say the Chinese-American Tire war is a significant example for this particular case. The US imposes additional tariffs to protect its own industry against cheap Chinese tires. The additional taxes protects the local manufacturing, but has huge  impact on prices and real market prices.

In my opinion, a country cannot manufacture or service everything due to scarcity in resources. Therefore, the protection of US tire industry is against free market rules. If the industry is not able to compete with it other countries, I think there is no reasonable understanding to protect this inefficient industry by imposing additional taxes. In my opinion, US should stop protecting the tire industry and switch to different attention which they have competitive advantage on. There is no need to create Trade Wars in today's world. We should let countries or industries to do what they are good at without protecting our  inefficient local ones. Otherwise, this trade war would keep going as today's wars such as chicken feet and tire wars. To sum up, I  think the countries needs to say ` laissez-faire`and stop protecting their ' own ' industries and punishing their own citizens.

Intentional And Unintentional Trade Barriers: Two Examples

Trade barriers between countries is very common in today's world. Barriers, intentionally or unintentionally change the dynamics of trade in a significant way. Some countries do it intentionally and create trade barriers by increasing tariff rates or fluctuating currency exchange rates. The main purpose of the intentional trade barriers is to protect local industries in the country,  control and balance the import-export relationship. The major example of these type of intentional trade barrier is President Obama's Stimulus Plan in 2009. The neo-keynesian plan tried to boost the American economy by saying '' Buy American Provision ''. The success of the stimulus plan is debatable. However, its is certain the plan aimed to create a trade barrier for exporting countries. From comparative advantage perspective, the plan could be considered as disaster. The plan tried to boost local industries in US which do not have any comparative advantage. The neo-keynesian plan was against the dynamics of  free-market economy, damaged the US economy and led USA to lose it comparative advantage.

On the other hand, unintentional trade barriers, occur due to political and socio-economical reasons. An action of a country create problem for other countries and this issue might lead to unintentional trade barriers. Various examples might be given to describe the situation of unintentional trade barriers. One of the examples about the situation is the tension between France and Turkey  in 2011. In 2011, France’s Parliament passed a bill that would criminalize the denial of ''so-called Armenian genocide ''. Turkey warned France about the possible economic and  political results of the law. French parliament passed the bill and it caused serious damage to economic and trade ties. French products were boycotted in Turkey. The government did not sponsor an official boycott because Turkey is a member of European Customs Union, the boycott has been done by society. The impact of the law caused a major trade barrier between two countries. Unintentional trade barrier was occurred as a result of  an action of French Parliament. This unintentional trade barriers highly affected the French export and products.

* Translation: We are not selling french products after 12 / 22 / 2011. 

Major Problem of Detroit Three

Auto manufacturing is very difficult issue in today's world. The emergence of new manufacturing systems which are mostly based on time and cost reduction led manufacturers to become leaner than ever. While  trying to compete in highly competitive environment, Detroit Three  has other problems that make the situation even worse.

The major problem of US auto makers is healthcare benefits of the employees. In 2008, the numbers of auto employees in US are; 355,000 auto workers and 1,000,000 retirees. The healthcare of retirees is a huge burden for Detroit Three and the additional healthcare expenses make them to lose their competitive advantage. Detroit Three's biggest rival, Toyota, also manufactures its cars in southern part of the US. These two sides of car manufacturers both are under the same legislation, which we can say wages, healthcare, pensions are relatively close to each other. The only difference at this point causes the biggest problem for the North. Toyota and other foreign companies have been operating in USA less than 30 years. Therefore, foreigners do not need to worry about pensions and healthcare of retirees yet. However, Detroit Three needs to deal with these extra cost of the retirees and this leads to a comparative disadvantage for now. To show the negative impact of the healthcare on the industry, GM vice president Bob Lutz claims that, "Sometimes it feels like we're a health-care company that tries to sell enough cars to pay the bills."

The situation does not seem bright for Detroit Three. The other manufacturers does not have these problems that the North has had. Sooner or later, foreign manufacturers will be experiencing the same problems and it is going to cause a chaos for auto manufacturing industry in USA.  So, what can be done to solve the problems of car manufacturers? The answer of the question consists nationalist elements in itself. A reform that will bring public healthcare system might solve the problems of American auto manufacturers. To show the possible improvement, health benefits in Canada cost $120 per car, in the US the number is $1,500 per car could be given as a good example. If the US can reach to these numbers by reforming its healthcare system, they might have the chance to save the auto industry. Otherwise, things does not seem bright for Detroit Three and other manufacturers in the US. Under this circumstances, it would be very optimistic to say that Detroit Three can compete with other car manufacturers which have national healthcare system.




Resources;

https://www.commondreams.org/view/2008/12/13-2

http://www.boldtypemag.com/auto-manufacturing-healthcare/

http://www.richmondfed.org/press_room/speeches/president_jeff_lacker/2011/lacker_speech_20110613.cfm

Introduction to Global Economics

Hello my name is Murat and welcome to blog. This is my second year as a graduate student. I created this blog for my global economic environment course and I will be posting on my blog about global economic issues each week. I will be trying to discuss and analyze different topics of global economics and will give my personal opinion about the concepts.