Inflammation and stories on trade

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Understanding Why Providing Foreign Aid Helps the U.S.

foreign aid helps the U.S.
Giving, especially in the form of foreign aid, has shown to cultivate meaningful relationships among people and countries, some that lead to rewarding trading agreements amid other benefits. Recent history has particularly exhibited how foreign aid helps the U.S., which is a crucial consideration in the political dialogue surrounding the current foreign aid budget.

Foreign Aid Helps the U.S. with Trade

One valuable return the U.S. has received in its giving of foreign aid to other developing countries has been the increase in American jobs as well as trade. Foreign aid is much like an investment; it helps to forge the foundation needed for low-income countries to build up and become middle-income, sustainable states. Here are some examples:

  1. After World War II, U.S. foreign aid to Japan helped recover Japan’s infrastructure and highly contributed to the success of American companies like Microsoft.
  2. The U.S. now trades and does business with former recipients of foreign aid, such as South Korea, Brazil, Mexico, Vietnam and Thailand.
  3. The President’s Emergency Plan For AIDS Relief (PEPFAR) successfully slowed down the AIDS epidemic and countries that received such aid have, in turn, consumed more American goods. Exports rose 77 percent in Tanzania, 189 percent in Zambia and 241 percent in Ethiopia.
  4. PEPFAR is one of the strong determinants of increases in the trade of pharmaceuticals.
  5. Foreign aid has attributed $46 billion more in U.S. exports and 920,000 more jobs in the U.S.
  6. In 2011, 44.6 percent of U.S. exports went to developing countries.
  7. In Tennessee alone, more than $33 billion in goods and services were exported to foreign countries in 2014 and this trade, in turn, supports over 22 percent of jobs, 830,000 local jobs to be specific.

Foreign Aid Helps with Health

Foreign aid helps the U.S. in preventing global epidemics that could otherwise be much worse. While assisting developing countries with their challenges in health, the U.S. also does its duty to minimize any possible health issues and diseases from traveling overseas or across borders to the U.S. There has been a great number of such instances, such as:

  • The U.S. was the largest funder of a number of health workers stationed in Nigeria with the original goal of polio eradication. The workers were later reassigned and succeeded in countering the infamous Ebola epidemic.
  • The PEPFAR program has helped stop the spread of AIDS by supplying life-saving medicines to over 14 million people.

Foreign Aid Helps with National Security

One of the non-negotiable benefits the U.S. reaps from its giving of foreign aid to developing countries is an improvement in national security. To prevent a third world war, the U.S. created what is now the modern development assistance program to avoid further instability in Europe.

Stability in developing countries is key in preventing future political issues from unfolding. The U.S. has defense agreements with 131 out of the 135 countries that it provides foreign aid to.

The importance of international aid lies in economic benefits, such as trading proliferations, as much as health and national security. As evidenced above, it is clear that there is truth in the fact that foreign aid helps the U.S. just as much as it helps other nations.

– Roberto Carlos Ventura
Photo: Flickr

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The Massive Potential of Biotrade in Peru for Economic Growth

biotrade in Peru
Peru’s economy saw a significant boom between 2004 and 2014. However, this growth was achieved in rather unsustainable ways. The U.N. has noted this and has been helping Peru establish more sustainable progress, particularly through what is known as biotrading. Biotrading consists of economic activities such as the collection, production, transformation and commercialization of goods and services from native biodiversity, all while preserving or improving environmental, social and economic sustainability.

The idea behind establishing a green economy in Peru arose in 2012 when four United Nations agencies formed the Partnership for Action on Green Economy (PAGE). PAGE’s mission is to redirect investments and policies toward sustainability, which focus on clean technologies, resource efficient infrastructure, functional ecosystems, good governance and green skilled labor.

Biotrade in Action

According to the United Nations Environment Programme, the implementation of biotrade will develop a green economy in which human well-being, social equity and the protection and health of the environment will all be improved alongside the economy. In fact, over the last five years, biotrade in Peru has resulted in an average annual growth of 20 percent following an almost 200 percent growth from 2009 to 2010, amounting to $320 million.

An example of the poverty reduction biotrade has offered lies with the Peruvian indigenous plants of tara and quihuicha, as well as the animal called cochineal. In the region of Arequipa, the growing area of quihuicha increased from 150 to 578 hectares within three years, tara production expanded more than 400 hectares and planted cochineal reached 4,400 hectares.

The awareness of the direct link between the success and profitability of biotrade in Peru with the health of ecosystems and biodiversity has led to several initiatives. A major focus is on diminishing deforestation, illegal logging, pollution and soil erosion, in conjunction with commercializing non-timber forest products like Brazil nuts and cat’s claw. There are also efforts to increase genetic diversity in crops as well as decreasing the use of pesticides.

As consumers are increasingly seeking products that provide greater health benefits and quality, companies’ socially responsible and environmentally friendly standards, energy-efficient manufacturing and fair labor and trading practices, biotrade in Peru is becoming a more lucrative endeavor. Consumers are still attracted to such bioproducts despite their 30 percent difference in price compared to conventional products.

The Potential of Biotrade in Peru

Projections state the following about the impact of biotrade in Peru from 2010 to 2020:

  1. The growth of sales exports will increase anywhere from about 519 percent to 2,379 percent.
  2. GDP from biotrade will increase from almost $110 million to $2.7 billion.
  3. Employment growth will increase anywhere from 10,000 new job openings to 271,689 openings, from a 619 percent to 2,717 percent increase.
  4. Carbon sequestration impact increased from 2,592 to 5,184 hectares, where 1 hectare is equivalent to 300 tons of carbon emissions.

Improving the Impact of Biotrade in Peru

Peru has significantly benefitted from biotrade, which has stimulated its transition into a green economy while maintaining its economic growth. However, to further progress biotrade in Peru, achieve the sustainability goals of the U.N. and set a pivotal example for other countries in regard to sustainable growth, Peru must now address the following in the years to come:

  1. Provide greater availability of finance for producers and small and medium-sized enterprises
  2. Increase resources for public policies
  3. Support more research and development
  4. Enhance awareness of bioproducts
  5. Improve capacity building
  6. Facilitate the process of achieving quality and sustainability standards
  7. Address market power for products and producers

With a green economy in mind, Peru, with the help of PAGE, has focused policies and investments on sustainability. Now, Peru experiences economic growth as biotrade exponentially grows annually, new green jobs are created, poverty and inequality are reduced and environmental sustainability is protected and even incentivized. Fruitful results are reached when the health of an economy is interdependent with that of nature.

– Roberto Carlos Ventura
Photo: Flickr

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Jump-Starting Regional Trade in East Africa

Jump-Starting Regional Trade in East Africa
East Africa has some of the fastest-growing economies in the world. Besides being the source of some of the world’s best coffee, East Africa has growing industries in agriculture, financial services, medicine, textiles and apparel. Despite the region’s wealth of natural resources, USAID reports that more than 27 million East Africans go to bed hungry and 46 million live in poverty. This is partially due to the lack of regional trade in East Africa.

Three Things to Know About Regional Trade in East Africa

  1. East Africa’s trade infrastructure was built toward exporting natural resources abroad rather than moving goods within the region. Similar to the rest of Africa, East Africa was colonized, primarily by the British, for a long time. Colonization was partially driven by European countries’ scramble for power, but Europeans were also fighting for resources and trading posts. Most of the countries in the region gained independence in the 1960s, but intercontinental trade was already well established and took precedence over regional trade.
  2. Regional trade in East Africa makes up only 13 percent of the region’s total trade. This means that 87 percent of East Africa’s tradeable resources and products are exported out of the region. In other continents, the percentage of regional trade is much higher. For example, 60 percent of trade in the European Union and 40 percent of trade in Asia is regional.
  3. National policies in East African countries substantially slow trade across East African borders and prohibitively increase costs. Most goods traded within the region cost about 40 percent more than retail because the cost of simply getting the goods to East African consumers is so high.

How Can Regional Trade Be Increased?

The best way to increase regional trade is to boost trade and investment opportunities within East Africa and make regional trade freer and fairer. USAID’s East Africa Trade and Investment Hub (also known as The Hub) works to do just that. The Hub also works to make East African agricultural value chains more competitive, particularly the grain trade.

The Hub’s regulatory reform activities have increased regional trade in East Africa by 39 percent over the past two years. USAID reports that The Hub has facilitated $59.3 million in private sector investments since its founding in 2014. As of 2018, The Hub has already helped create 38,682 jobs and had given 1,402 firms capacity building assistance. The Hub has also supported 829 food security producers and organizations and has contributed to the food security of more than 14.9 million East Africans.

USAID works with and in Burundi, Kenya, Rwanda, Tanzania, Uganda, Ethiopia, Madagascar and Mauritius. The Hub partners with these countries’ governments as well as civil societies and private regional institutions to remove trade barriers in East Africa. Certain regional institutions include the Common Market for East and Southern Africa, TradeMark East Africa, the East Africa Grain Council and the East African Community (EAC).

The EAC promotes the Common Market, a regional integration milestone that accelerates economic growth and development in East Africa. The EAC maintains a liberal stance toward the economic market and specifically works to ensure five freedoms of movement in East Africa:

  • Free movement of goods
  • Free movement of persons
  • Free movement of labor/workers
  • Free movement of services
  • Free movement of capital

East Africa grows enough food to feed its entire population. Freeing trade in the region and making it fairer will help East Africans keep the food they grow and get it to those in need. Free-flowing goods will reduce East Africa’s need for food and financial aid and make the region more self-reliant.

– Kathryn Quelle
Photo: Flickr

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Understanding How the U.S. Benefits From Foreign Aid to Serbia

How the US Benefits from Foreign Aid to Serbia
Serbia is working to strengthen human rights protections and to promote economic growth within the country while facing external pressure from Russia. Russia has been expanding its influence and amplifying ethnic tensions in several countries that may join the European Union. In particular consideration of the close relations between Serbia and Russia, the U.S. benefits from foreign aid to Serbia because this aid works to prevent a new Cold War in the Balkans.

Social Benefits of Foreign Aid to Serbia

From 2001 to 2017, the U.S. gave about $800 million in aid to Serbia to help the country stimulate economic growth, promote good governance and strengthen its justice system. One example of a major issue Serbia is dealing with is human trafficking.

According to the U.S. Department of State’s 2017 Trafficking in Persons report, Serbia remains listed as a Tier Two country because it has yet to fully comply with the minimum standard for eliminating the issue. However, Serbia has shown significant efforts to address human trafficking by establishing a permanent human smuggling and trafficking law enforcement task force, identifying more victims as well as providing guidelines to judges and prosecutors.

Other U.S. aid to Serbia in the past has gone toward strengthening its export and border controls. This includes efforts to prevent the spread of weapons of mass destruction. More recently, U.S. military aid has helped Serbia take part in NATO’s Partnership for Peace programs as well as prepare for international peacekeeping missions.

Economic Benefits of Aid to Serbia

From an economic standpoint, the U.S. benefits from foreign aid to Serbia through U.S. investors in the country. These investors include KKR, Philip Morris, Ball Packaging, Coca-Cola, PepsiCo, Cooper Tire and Van Drunen Farms. In 2013, Fiat began shipping cars manufactured in Serbia to the U.S., increasing imports from the Balkan countries.

In addition, U.S. technology companies in Serbia are becoming more interested in opportunities in areas such as e-government, cloud computing, digitization, IT security and systems integration. In 2013, Microsoft even signed a $34 million contract to provide software to government offices in Serbia.

Political Benefits of Aid to Serbia

U.S. aid to Serbia is currently focused on helping the country integrate into the European Union, which will decrease Serbia’s vulnerability to Russian aggression as well as strengthen its democratic institutions. Out of the $5.39 million the U.S. plans to allot in foreign aid to Serbia in 2019, 46 percent will be allocated to strengthening the country’s rule of law and protection of human rights, 34 percent will be put toward increasing the capacity of civil society organizations and 20 percent will be for good governance.

The U.S. benefits from foreign aid to Serbia from a diplomatic perspective as well in the case of international terrorism. The Ministry of Interior Directorate of Police, the Security Information Agency and Serbia’s law enforcement and security agencies have continued to work with the U.S. to prevent this major security threat, which affects both nations as well as the rest of the world.

In the past, Serbia has hosted a regional counterterrorism conference on foreign terrorist fighting. The country has also sent representatives to conferences in Albania, Italy and Slovenia to discuss how to counter violent extremism.

There are many economic and political reasons the U.S. and Serbia would benefit from the U.S. providing aid to Serbia. Together, the two countries have great potential to make technological advancements as well as work for a more peaceful world.

– Connie Loo
Photo: Flickr

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Top Five US Trading Partners Receive US Foreign Aid 

Top five U.S. Trading Partners
The U.S. has strengthened relations with other countries around the world by offering foreign aid. In 2017, the top five U.S. trading partners all received foreign aid from the U.S., the world’s largest trading nation.

In 2013, U.S. exports in goods and services were $2.3 trillion. Trade is vital to the U.S. economy as it provides growth, aids jobs and offers Americans affordable goods and services. It supports families and businesses by allowing more productive and higher paying jobs, growing the variety of products available for purchase and encouraging investment for a more rapid economic growth.

The top five U.S. trading partners of 2017 received foreign aid, and then returned the favor by assisting the U.S. economy.

China

Aid received from the U.S. in 2017: $16 million.

China is the United States’ top trading partner with 130,000 exports and 505,000 imports in 2017. In 2015, Chinese manufacturing lowered prices in the U.S. for consumer goods which lowered inflation and in turn gave more money to Americans; as a result, consumer prices were 1 to 1.5 percent lower.

Though the percentage seems small, such actions make a significant impact throughout time. In 2015, the average income for a household was $56,500; trade with China saved these families up to $850 each in that year alone.

Canada and Mexico

Aid received from the U.S. in 2017: $28 million and $61 million.

Canada, Mexico and the United States are members of the North America Free Trade Agreement (NAFTA). Between 1993 and 2017, trade between the three countries quadrupled from $297 billion to $1.17 trillion. Specifically, the U.S. increased its exports of goods to Canada and Mexico from $142 billion to $525 billion.

NAFTA aids economic growth, profits and jobs for all three countries in its agreement.

Japan

Aid received from the U.S. in 2017: $30,000.

Japan benefits the U.S. by providing 710,000 American jobs via exports, and their benefits continue to grow as well. Japanese students that study abroad in the U.S. contribute at least $600 each to the U.S. economy; Japan also ranks fourth of countries to contribute to American tourism. In 2014, there were more than 9.4 million Japanese visitors who spent $17 billion in the U.S.

Germany

Aid received from the U.S. in 2017: $15,000.

Germany is the largest consumer market in the European Union (EU), and due to its success, the U.S. benefits from Germany through exports. Although U.S. investors may have to pay a higher cost while doing business in Germany, they can count on high levels of productivity, a highly skilled labor force, quality engineering, a first-class infrastructure and a prime location in the center of Europe. Germany also helps the U.S. through spreading their businesses overseas — companies such as BMW, Daimler, Siemens and Volkswagen have expanded operations in the U.S. which has resulted in more jobs.

Foreign aid is an important aspect of world operations because it strengthens economies and improves other countries’ ability to grow and build relations. The top five U.S. trading partners demonstrate the direct benefits that foreign aid can bring back to American soil.

– Anne-Marie Maher

Photo: Flickr

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How US Relations with Algeria Help Both Countries

U.S. relations with AlgeriaThe United States of America and Algeria have shared strong relations with each other since diplomatic relations began in 1962 following Algeria’s independence from France. Algeria was one of the first countries in the world to recognize the United States’ independence in 1795. U.S. relations with Algeria have benefited both countries due to a strong trade partnership and Algeria‘s aid in fighting global terrorism.

Algeria is a strategically located and capable partner with the U.S and has strong diplomatic, law enforcement and security cooperation. U.S. bilateral foreign help to Algeria is designed to strengthen Algeria’s capacity to combat terrorism and crime. Foreign assistance supports Algeria’s ongoing fight against Da’esh, Al-Qaeda in the Islāmic Maghreb and other hostile actors in the region. U.S. relations with Algeria foster cooperation between the two countries in their commitment to fighting terrorism.

Algeria was one of the first countries to condemn the 9/11 attack on the U.S. and committed its support to the U.S. in fighting the War on Terror in the years to follow. Both countries have intensified their relationship in recent years when it comes to counterterrorism and law enforcement cooperation. U.S and Algeria conduct frequent civilian and military exchanges. Algeria has hosted multiple U.S. senior military officials and ship visits.

Algeria and the United States enjoy deep relations, as demonstrated by the frequency of visits by Algerian and American officials. The Secretary of State held a strategic dialogue with Algeria’s Foreign Minister in April 2015, and the Deputy Secretary of State visited Algeria in July 2016.

Algeria has remained relatively stable despite turmoil in neighboring countries, and it is playing a constructive role in promoting regional stability. Both countries are now focused on increasing the number of reciprocal trade missions to further develop their trade and economic relations. U.S. relations with Algeria have helped strengthen this trade connection.

American companies operating in the hydrocarbons sector have had had productive partnerships with Algerian counterparts for many decades. More recently, both countries have recognized additional opportunities and are moving into other areas of interest, including agriculture, dairy cattle, energy equipment and public works machineries. Today, 190 American companies are operating in Algeria.

The 2001 Trade and Investment Framework Agreement has opened new dialogues and discussions to further enhance cooperation. The U.S. is one of Algeria’s top trading partners and one of the top trading partners in the Middle East/North African region. Funding through the Middle East Partnership has been allocated to support the work of Algeria’s developing civil society through programming. The U.S. government continues to encourage Algeria’s economic reform program, its move toward transparent economic policies and the liberalization its investment climate.

The United States and Algeria have continued to help each through cooperation in counterterrorism and trade relations. This has helped foster economic growth in both countries, and has provided each other with a committed partner to aid in fighting terrorism and bolstering the security of the two nations. U.S. relations with Algeria are a great example of how aid, cooperation and good relations can be of great benefit to any two countries entering into a partnership and have a positive effect on the world as a whole.

– Zachary Ott

Photo: Flickr

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5 Important Ways that World Trade Reduces Poverty

World trade reduces poverty
World trade proves to be a prosperous way for countries to keep good relations while benefiting from one another. World trade reduces poverty in many unique forms, allowing businesses to buy and sell their goods in an easier, safer environment while improving economic balance and structure.

Economic Benefits

According to the World Trade Organization (WTO), an economy will grow quicker and at a more consistent pace when free trade is more easily accessible. A company which earns a greater profit is more likely to hire a larger amount of people while giving their employees a stable position within the company, without fear of being laid off or fired due lack of funds or money.

WTO reports that there has been a 34 percent wage increase for companies in sub-Saharan Africa that participate in exporting goods. In a closed economy, the numbers severely decrease in amount, proving that the impact of trade can have a great consequence on each individual country. Generally speaking, world trade reduces poverty by boosting each economy and providing more opportunity for growth in any country.

Education and the World Trade Institute

With a better economy that has higher profits, this creates more money to be given to educational institutions. Not only do elementary, middle and high schools benefit, but for countries with an open market, this gives college-aged students and business owners a chance to learn the skills in trade, importing and exporting.

The World Trade Institute (WTI) provides many different programs for graduate students interested in learning the art of trading. WTI offers Doctorate and Masters programs in economics, political science or international law and economics. The World Trade Institute also offers courses and topics in trade, investment and sustainability, leaving its students with the knowledge of a successful career in trade while providing internship opportunities to gain experience and learn how world trade reduces poverty.

Reduction of Corrupt Governments

Many times, high poverty rates within a country can be a sign of government corruption or the country’s leaders taking advantage of its citizens. The World Trade Organization has enabled many different plans to help fight bribery, extortion, fraud and nepotism. Through the Government Procurement Agreement, government purchases can now be tracked and watched to ensure all money received or gifted is in good faith and only used for those who are abiding by the law.

The American Society of International Law reports that citizens universally pay around 25 percent more than average for communal goods and services under corrupt governments. When the government is providing better funding for things such as housing, education or creating jobs rather than participating in questionable business deals, this opens up opportunities for the people to create a better life.

Industrialization and Infrastructure

When business owners and entrepreneurs have access to public transportation and roads, it provides an outlet that allows them to travel to and from different regions, expanding their markets and advertisements. However, when a business owner who produces a good they would like to trade does not have a simple entry into other provinces, it proves difficult for them to be able to make any money or get their product noticed.

The World Bank reports that, sometimes, increasing trade for poverty-stricken areas can have quite an easy answer; sometimes, all that is needed is a new road. The World Economic Forum states that for a continent such as Africa, it is best for nations to trade with their neighboring countries. This allows the business to trade on a smaller scale before moving on to trade with first-world countries such as China or the U.S.

Technology Brings New Trading Outlets

Technological advances have made it easier than ever before for consumers to find what they wish to buy and for business owners and product builders to “post” their brand online. This way, the consumer can have their product delivered right to their door, while the company benefits from the profit.

E-commerce sites have recently become a staple in African communities, and businesses such as Jumia have seen a rise in revenue by raising $150 million in 2014 alone. Websites like Jumia have everything a customer could possibly want or need, from electronics to fashion to grocery items. Websites like Jumia showcase how technology can bring in money and jobs, while easily marketing brands around the world.

Technology, economic benefits and industrialization are only a few ways world trade reduces poverty. The Office of the United States Trade Representative ensures that our markets are left free and open, while keeping trade agreements with countries where poverty can be most prominent, such as Africa, the Middle East and South and the Western Hemisphere of the Americas. Keeping good relations with these countries ensures economic and job growth while bringing in an abundance of goods.

– Rebecca Lee

Photo: Flickr

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How International Trade Benefits Latin American Development

How International Trade Benefits Latin American Development
Latin America encompasses the area from Mexico to the southern tip of South America, and consists of 19 sovereign states amidst other territories and dependencies that span two continents.

The region has had a varied and unstable economic history: in 1982, rising oil prices led to the Mexican debt crisis, latin American GDPs began to decline and around 64 million people lived in poverty. In 2010, however, the overall GDP growth rate rose to 5.8 percent. Some of this recent growth can be attributed to various trade agreements adopted by Latin American countries.

From Mercosur to the Pacific Alliance, international trade benefits Latin American development in very significant ways.

Mercosur

Created on March 26, 1991 by the Treaty of Asuncion, Mercosur is a South American economic and political trade bloc that includes four members: Argentina, Brazil, Paraguay and Uruguay.

The bloc is a notable example of renewed global interest in regional trade agreements, and the four countries agreed to five terms:

  1. Eliminate customs duties
  2. Adopt a consistent trade policy toward outside countries and blocs
  3. Enforce a 35 percent external tariff on certain imports from outsiders
  4. Coordinate macroeconomic and sectional policies
  5. Abrogate restrictions on reciprocal trade

In addition, people from member countries can apply for a two-year residency with the right to work. This policy benefits immigrants because they can obtain permanent residency as long as they do not have criminal records.

Since 1991, Mercosur has grown intra-bloc trade from $5.1 billion to $58.2 billion while world trade growth was only five-fold. In addition, the bloc acts an essential step in boosting industrial activity; for instance, Argentina and Brazil are the third biggest global markets for automobiles. Through results such as these, Mercosur demonstrates how international trade benefits Latin American development.

NAFTA

In 1994, Canada, the U.S. and Mexico signed the North American Free Trade Agreement (NAFTA), which created a trilateral trade bloc in North America. NAFTA’s goal was to integrate Mexico into the highly developed economies of the U.S. and Canada.

NAFTA is the largest free trade agreement in the world. This agreement eliminates tariffs to a large extent, and Mexico abrogates non-tariff barriers and other trade-distorting restrictions. This policy also leads to lower prices on groceries and oil in the U.S. and more exports from Mexico. Regional trade grew from around $290 billion in 1993 to more than $1.1 trillion in 2016.

Although Mexico’s unemployment has risen since then, many experts conclude that its economic performance is affected by non-NAFTA factors, such as devaluation of the peso and competition with China’s low-cost manufacturing sector. Overall, NAFTA has reshaped the trade pattern between these three countries and is one of the ways that international trade benefits Latin American development.

Pacific Alliance

Established in 2011, the Pacific Alliance is a Latin American trade bloc that includes four member countries: Chile, Colombia, Mexico and Peru. Its goal is to build a comprehensive trade relationship between its member countries, promote a free flow of capital, goods, people and services, and further expand this relationship to Asia-Pacific trade. Under this agreement, member countries agree to reduce tariffs to 10 percent. This kind of international trade benefits Latin American development.

In 2014, the Alliance signed the Framework Agreement to cut 92 percent of all tariffs and phase out the remaining 8 percent in the coming years. In 2016, the Pacific Alliance accounted for 35 percent of the total GDP of Latin American and the Caribbean. Compared to Mercosur, Pacific Alliance has an even more powerful influence on Latin American economic growth.

The growth in exports of goods and services reached 14.6 percent in 2010, while Mercosur resulted in more than 7 percent growth. All in all, the Alliance stimulates foreign investment in member countries and regulates government intervention in economic affairs.

Global Engagement

These trade agreements are good examples of the effect that international cooperation can have on the economies of developing countries. The continued encouragement of free trade both within Latin America and with other nations will promote growth and opportunities for all of Latin America’s people.

– Judy Lu

Photo: Flickr

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What is a Trade Embargo?


What is a trade embargo? A trade embargo is a governmental restriction on trade for political purposes.  The restriction can be referred to as a trade barrier, which is any regulation or policy that restricts international trade. Sanctions, or economic sanctions, refer to provisions of a law that can enact penalties for disobedience towards the restrictions, or rewards for obedience.

What is a Trade Embargo to the governments of nations?

The objective of a trade embargo is to put pressure on other governments by prohibiting exports to, and imports from, those countries. Embargoes rarely involve a categorical ban on all trade, as even the most restrictive tend to allow for medicine and portions of food.

Trade embargoes are often invoked against countries which demonstrate a threat towards other nations or to their own people. Embargoes are often portrayed as a means to avoid war. For instance, the United Nations, at the behest of the U.S., U.K. and others, imposed economic trade sanctions on Iraq under the regime of dictator Saddam Hussein from 1990 to 2003. Hussein, who was Iraq’s leader from 1979 until early 2003, was responsible for the genocides of his own people and was convicted of crimes against humanity in a trial following his capture.

Said Richard Holbrooke, U.S. ambassador to the U.N. during the Clinton administration, “The concept of sanctions…[is] necessary. What else fills the gap between pounding your breast and indulging in empty rhetoric about going to war besides economic sanctions?”

What is a Trade Embargo to the people of nations?

A practical facet of embargoes and sanctions is the demonstration by a government to its people that their leaders will take action against a threat.  However, the victims of the sanctions are often not those in power, but the citizens of the affected nation.

This was the case in Iraq. Led by a dictator who had proven his indifference to citizens’ welfare, powerful Iraqi leaders made deals with other nations for goods and services during the economic sanctions. As a result, they benefitted individually while Iraq’s health, strength and infrastructure crumbled.

The once developing and prospering nation became a land where eradicated diseases returned and children were dying. As a result of legal trade being blocked, citizens were poverty-stricken and dependent on food aid from the U.N. and education had all but dissipated.

At least 500,000 children did suffer and die during the U.N.-imposed economic sanctions and the country has yet to rebuild completely, even in 2017.

As history acknowledges, trade embargoes have the power to prevent war but are potentially fraught with unintended consequences.

– Jaymie Greenway

Photo: Flickr

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Why Labor Unions Support The Jones Act But Not Vice-Versa

Labor unions support the Jones ActThe Jones Act made headlines in the past month, an impressive feat for an obscure law almost a century old. The law requires a certain amount of U.S. ships to deliver aid and trade to other parts of the world. Lawmakers of the 20th century designed the act to protect the finances of U.S. maritime industries.

Puerto Rico has been in dire need of aid since Hurricane Maria hit the island. It requested an extension of a Jones Act waiver during the crisis, so emergency supply delivery would not be impeded. The federal U.S. government denied this request.

Defenders of the Jones Act include the International Longshore and Warehouse Union, the Marine Engineers Beneficial Association, the Inland Boatmen’s Union and the Sailor’s Union of the Pacific. U.S. labor unions support the Jones Act, believing the 1920s legislation protects U.S. jobs. However, the Jones Act does not help labor like it used to.

The Capital Research Center, in its outline of the Jones Act, notes why labor unions find this regulation so appealing. Its supporters declare that national defense depends on both a strong navy and a healthy maritime industry and that lifting such protections would result in significant job loss. However, what is good for overseas shipping is not necessarily good for the United States. The International Trade Commission discovered in 1995 that the Jones Act cost the U.S. $2.8 billion each year. Moreover, the restrictions caused ridiculous situations where lumber had to be trucked from Maine to Florida before it could then be sent to Puerto Rico by boat. The Jones Act has not stopped American generosity and trade, but it has certainly made both acts much harder. Even people given jobs by the U.S. maritime industry are hurt by rising gas and food prices from the $2.8 billion price tag.

Are these sacrifices worth enduring if the results lead to the survival of the shipbuilding industry? Linda Lingle, the former governor of Hawaii, believed that repealing the Jones Act would put American shipping companies out of business. But perhaps the Jones Act is not helping in that regard. Since 1946, the U.S. maritime industry removed roughly 2,000 vessels from its service, leaving it in 2007 with a fleet of fewer than 200. During that period of time, 200,000 jobs and 60 American shipyards were lost in the industry. According to the U.S. International Trade Commission, a “Jones Act repeal would affect about 2,450 laborers in the coastwise shipping trade and would cost only 36 jobs in the shipbuilding industry.”

Matthew Paxton, the president of the Shipbuilder’s Council of America, cannot deny the vestigial nature of the Jones Act even while defending it. Paxton explained to the Washington Examiner why labor unions support the Jones Act in September 2017. But he acknowledges that the shipbuilding business has shifted to Asian countries in the previous three decades. “The U.S. shipbuilders know they can’t compete fairly, so they rely on the federal government to keep this thing going,” said Paxton.

Ultimately, the Jones Act protects few jobs at the expense of the needs of the many. Richard Rowland, of the Grassroot Institute of Hawaii, states, “Greater competition in shipping would bring down prices and make the business climate more investor-friendly. Really, the only one being helped by the Act are the shipping interests.” If labor unions support the Jones Act for its protected jobs, then labor unions will have to question if Puerto Rico’s poverty is a fair cost.

– Nick Edinger

Photo: Flickr