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Food for Thought

Food for Thought. Lecture #7 Joe Lau. 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.

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Food for Thought

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  1. Food forThought Lecture #7 Joe Lau

  2. 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.

  3. 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?

  4. 2005 Index of Economic Freedom http://www.heritage.org/research/features/index/country.cfm?id=HongKong • Hong Kong (1st) • Singapore (2nd) • Luxembourg (3rd) • Estonia (4th) • Ireland (5th) • New Zealand (5th) • United Kingdom (7th) • Denmark (8th) • Iceland (8th) • Australia (10th)

  5. World Economic ForumGlobal Competitiveness Report 2004-2005

  6. World Economic ForumBusiness Competitiveness Report 2004-2005

  7. Supermarket duopoly

  8. Market dominancehttp://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

  9. 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

  10. 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.

  11. TELECOMMUNICATIONS ORDINANCE Ch106, Section 7K (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. (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.

  12. 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

  13. 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

  14. 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 2005WTO 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

  15. 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

  16. 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.

  17. 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)

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

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