SERVICES EXPORT- THE EUROPEAN TOURISM CASE (AUGUST 30Th)

 1. Concepts.
European Commission: The European Commission is the EU's executive body. It represents and upholds the interests of Europe as a whole. It drafts proposals for new European laws. It manages the day-to-day business of implementing EU policies and spending EU funds. The Commission also makes sure that everyone abides by the European treaties and laws (European Commission, 2010).

EU tourism policy: it’s a project of European Union that tries to reach a more competitive tourism sector of the members states. The policy focuses on 3 main areas: 1) Mainstreaming measures affecting tourism, 2) Promoting tourism sustainability and,   3) enhancing the understanding and the visibility of tourism. It intends enhance the development potential of the European tourism industry and support the creation of growth and jobs in the EU.  (European Commission, 2009).

2.    Question

 According to the paper "Europe, the world's No 1 tourist destination – a new political framework for tourism in Europe" by European Commission, Why is the role of tourism exports in UE economy?

In general terms, Service sector is becoming increasingly important in recent years, so that today in many countries the service sector is the most representative in the composition of GDP.  Riddle (Cited in Daniels, 2000), expressed, in 1986, that “the service sector is a vital force in stimulating and facilitating economic growth”.  Nowadays It is a major reality and therefore many countries or economic blocs (as European Union) are developing competitive advantages in exports of strategic services.

In this context, ”tourism is, nowadays, of major importance for the world economy and that for many countries is one of the largest single employment and exporting service sector (Balaver and Cantavella-Jordá, 2002: p 877). So,   Tourism sector is a potential economic  force for countries with high naturals resources or cultural and historical heritage because of new conditions (globalization and better communications and transport facilities)  that allows countries to advertise more effectively their touristic destinations and create a  country’s brand in order to promote international tourism.

According to European Commission (2010):

Tourism is an economic activity capable of generating growth and employment in the EU, while contributing to development and economic and social integration, particularly of rural and mountain areas, coastal regions and islands, outlying and outermost regions or those undergoing convergence. With some 1.8 million businesses, primarily SMEs, employing approximately 5.2 % of the total workforce (approximately 9.7 million jobs, with a significant proportion of young people), the European tourism industry1 generates over 5% of EU GDP, a figure which is steadily rising.2 Tourism therefore represents the third largest socioeconomic activity in the EU after the trade and distribution and construction sectors. Taking into account the sectors linked to it,3 tourism's contribution to GDP is even greater; it is estimated to generate over 10 % of the European Union's GDP and provide approximately 12% of all jobs. In this regard, observing the trend over the last ten years, growth in employment in the tourism sector has almost always been more pronounced than in the rest of the economy.

Last facts show us the high importance of tourism service export in EU. In effect,  Europe is the biggest tourist market in the world, and, according to data from the World Tourism Organization (UNWTO), Europe received during 2009, 460 million  international  tourist people and five of the 10 major international  tourist destinations are part of the EU: France, the first;  Spain, Italy, The United kingdom and Germany.

For this reason European Union are developing important strategies in order to strengthen tourism in all regions of the Union. These strategies are based on the sustainable development of sector and therefore involve environmental and social issues.

3. Point of view.

In think that tourism is sector very attractive and each country should seek competitive advantage in this sector because there are thousands of possibilities to offer to international markets: ecotourism, historical and cultural tourism, luxury tourism and many others, and Europe has used its resources, knowledge and experience to attract million tourist every year and so EU has get economic growth in a service sector that is profitable and besides increase employment and the positive image of a country.

So, in this sense,  it think that European Union has a great advantage because it has high potential in several ways: cultural and historical heritage, infrastructure and, with the Lisbon Treaty,   a organized action plan to maintain its position in world tourism ranking.  

Then, it might be an example for many countries which are able to improve the output of their tourism sector. So, I think that the “action framework” * proposed by EU is a very good way to reach competitiveness in tourism not only for European countries but also other countries around the world.

Control on FDI (August 23th)

1. Concepts

·         Foreign Direct Investment (FDI): FDI refers to an investment made to acquire lasting interest in enterprises operating outside of the economy of the investor (MIF, 1993.).  On the other hand, UNCTAD (2001) defined FDI as an investment involving management control of a resident entity in one economy by an enterprise resident in another economy. FDI involves a long-term relationship reflecting an investor´s lasting interest in a foreign entity.

·         Control on FDI: It refers to the restrictions and implemented policies by the government of a country in order to protect ist national industries and interest against foreign companies within the country. As Asiedu and Lien  (2004) mentioned main controls are capital controls and the most important are: the existence of multiple exchange rates;  restrictions on capital account, and restrictions on the repatriation of export proceeds.

2. Question

Why does  a country implement a control on FDI? and Why  does the WTO claim for It?

In recent years FDI are becoming increasingly important because of Globalization context, especially for developing markets, and consequently many governments are interesting to attract it because FDI is considered as one of the most important factors of economic development. So, according to Stehrer and Woerz (2009):

The most frequently mentioned advantages of attracting foreign direct investment (FDI) are the increase in the capital stock in general and foreign capital in particular. The latter is assumed to be more productive, or more efficiently managed, and able to exploit economies of scale and scope, which is seen to be beneficial to the donor as well as the host country. Further, an increase in the stock of capital enables a country or region to employ more people and thus reduce unemployment, boost output growth, and so on Finally, FDI inflows are seen – from the point of view of a less developed host country – as a medium of technology transfer and thus as contributing to higher production efficiency and productivity not only to the foreign-owned firms but also, via spillovers, to locally owned firms and establishments. This increases the competitiveness of a particular industry, region or country, which again is of importance in industries facing global competitive pressures. In a broader sense FDI is also often seen as a remedy against unionization on the labour market side, characterized by high and rigid wages, and as a remedy against monopoly power on the product market side. A higher share of FDI is expected to increase wage flexibility and product market competition, which again raises competitiveness. Similar advantages also hold from the sending country’s or firm’s perspective, where FDI allows for outsourcing particular activities

for instance, labour-intensive activities can be performed more cheaply in other, for example, labour-abundant, countries), exploiting economies of scale and scope more efficiently or entering or penetrating a foreign market (market-seeking FDI). (p.95)

Last paragraph gives us an idea about the reason why poor countries want to attract FDI. This is the case of most of Latin American countries where governments have developed policies and laws to offer better conditions to foreign investors, such as reduction in taxes and improvement of security conditions (for example, in Colombia). But many scholars disagree with this approach because, as Stehrer and Woerz (2009) have also expressed, FDI doesn’t necessarily mean the increase of capital stock and in some cases FDI may drive out local firms and consequently it may have a negative effects on employment.

For these reasons, countries must implement policies that restrict FDI inflows within the country, not only to protect local companies but also to ensure that FDI is meeting proposed objectives, that is, FDI is improving economic and social conditions of people. So, countries, according to Economy Watch, use some strategies such as Incentives taxes or the lack of them for foreign companies, Subsidy scheme targeted at local businesses and, Government policies, which lend support to the phenomenon of industry nationalization.

On the other hand, World Trade Organizations (WTO) seeks to create conditions that guarantee benefits for all parties, because, according it, in many cases FDI may be associated with problems for recipient countries such as low-added value ( for example, investment in  mining sector in Colombia or in garment sector in Honduras), Weak linkages, erosion of local capacity, merger and acquisition and environmental  damages and displacement.

Besides, the WTO (2009) said that:

It is now widely recognized that, under the right conditions, FDI can be an important source of private capital for developing countries that can complement national and international development efforts. It can create jobs, stimulate domestic investment, generate positive ‘spill over’ effects, facilitate technology transfer, and expand access to global markets. However, realizing this potential requires more than liberalization and investor protection. Successful FDI strategies require effective regulatory and institutional provisions in host countries. (p.3)

Consequently, each country, with assistance of world organizations as WTO, must generate “the right conditions” mentioned by the WTO in order to reduce the negative aspects, and it must be a commitment from all parties (developing and developed countries).

3. Point of View.

I think it's impossible not to recognize the important role that has IDF today because currently, much of economic growth in many countries and regions is represented by the increase in FDI. But it is also true that in many cases FDI is not so benevolent with the host communities, an example is FDI in many African  and Latin American countries where high FDI flows are not reflected in the welfare of the poorest population, in large part by lack of commitment by foreign companies and by high indexes of government corruption.

So, I agree with WTO about the need to create and appropriate conditions that benefit both investors and recipient countries. I think that developing countries shouldn’t see FDI as the only solution to their problems while are sacrificing communities and local businesses welfare. Governments should seek not only economic growth but also economic development and better conditions for all population.

In short, I think that government must attract FDI but must do it  by developing responsible policies that promote the creation of added values for the country and not just capital flows. 

Carrefour's strategy in International business (August 18th)

1. Concepts:

Store Format: this term refers to the communication design within a store and includes Size, shape, layout, typography, and arrangement of information given or sought in an ad, document or, form, whether prepared for display, printing, or storage. (Business Dictionary, 2010). store format is especially important for retailers and the 5th most important are: supermarket, hypermarket, convenience store, high discount stores and cash-and-carry stores. 

G4 strategy: in carrefour's strategy, G4 refers to geographical priorities for growth of the group. The G4 is made up of France, as home market; Italy; Spain and Belgium, as the closest and most mature markets (Carrefour, March, 2009). In this case, ease and Compatibility of operations are critical in internationalization of markets.

2. Question.
What are the most important factors in Carrefour`s strategy? 

Carrefour is a french company that, because of its internationalization's strategy, is now the second largest retailer in the world (following Wal-Mart) and the largest in Europe. But, Why does Carrefour choose one or another country? Why is Carrefour format succesful around the world? I'm going to try to resolve these questions.

Carrefour expressed, in its official website that "The Carrefour group has an only ambition: making Carrefour the preferred retailer wherever it operates" and this ambition is support in three strategies: "Client-oriented culture, transformation and innovation" (Carrefour, 2009). However, these global strategies aren't enough in international operations, then, The group defined other important aspects for operating in global markets.

According to Daniels (2004) there are some key factors for evaluation and selection of a country for international operations: Market size, ease and compatibility of operations, Cost and resources availability and economic, politic, monetary and financial risk. Analysis of these factors enables companies to have a perspective of the country and consequently, companies may choose the way of entry in that market. In Carrefour's case, ease and compatibility of operations, especially geographical proximity, was the main point in international expansion: Choice of Belgium, Italy and Spain (with France are G4) as the first markets to entry and the importance of these countries today, becuase of the number of stores, workforce and sales; are clear examples of this. For example, in 2007 Carrefour Spain has 161 Hypermarkets, 87 Supermarkets, 3 Convenience Stores and 2,912 Hard Discount stores where there were 72,282 employees and sales by 14,749 million euros (Carrefour, 2008).

 

However, Carrefour is not concentrated only in these countries. Instead Carrefour is present in many other countries, especially in Europe, South America and China that is the most important growth market. But operations in markets where differences in culture and tastes are very high is more complicated than in closer markets. For this reason, "another factor influencing Carrefour's choice of country has been the ability to find a viable partner familiar with local operating needs its own management learned local operations sufficiently" (Daniels,2004: p. 414). As Jean-Luc Chéreau, CEO of Carrefour China, mentioned in a interview "Legal considerations are not the primary reason we have local partners. We felt that to enter so difficult and complex market- a huge market- we would need a local partner to understand market and move faster" (Child, 2006). this is a very important aspect because it means the opportunity of a more sucessfull acces into local markets and gives Carrefour more trust in operations.

Previous item introduces us in the third key factor in international operations of Carrefour that is "Adaptation". This is, The company tries to develop its business in way of the culture, traditions and tastes of each country or region. About it, Nardon and Steers (2006) said that it is very different to Wal-Mart (the leader retailer) because it uses a standard format worldwide, while Carrefour changes its formats according to local tastes.

However, this doesn't mean that one strategy is better than other: Both Carrefour and Wal-Mart are very sucessfull companies and each one has achieved a competitive advantage based in low prices and differentiation. Maybe what is important in a culture, for others it's irrelevant and a company as Carrefour requires a great understanding of cultural variations in order to analyze the cultural risk according to management style and company's expectations.

Finally, adaptation is important because it allows the company to make appropiate decisions about "Store format", the fourth key strategy. Currently, Main Carrefour's formats are: Hypermarkets, supermarkets and convenience stores, besides they have hard discount and cash-and-carry stores. Store format changes from a country to another following consumers' preferences. So, in Colombia Carrefour operates only with Hypermarket format and recently, it opened a cash-and carry store in Bogota with "Atacadao" Brand (Carrefour,march 15, 2010); because the most important competititors have hypermarket formats, but in other countries around the world, convenience stores are increasingly important, especially in big cities: for example, Carrefour had 3165 convenience stores in France and 11 stores in Madrid downtown (carrefour, 2010).


3. Point of view.

I think that Retailer business are a very competitive sector, where differentation in services should be a factor of competitive advantages and uniqueness. So, strategies for selection of a country is a key factor for reaching market share in global commerce.
 

Carrefour has demostrated its sucess in global markets but, as Daniels said in his book "International Business: environments and operations " some changes in its location strategy has influenced Carrefour failures in some markets such as United States and United Kingdom, that are considered two of the most important markets around the world because of their population and economic performance. in my opinion, these failures are the result of a wrong analysis of the market opportunities in an industry, in others words, this is lack of analysis of "5 forces of Porter", because of the market share of retailers, such as Wal-mart in Us and Tesco in UK, and the tastes of people in these countries.

So, i think that market research and focus in strategy are the most important aspects to achieve "adaptation to other countries". Then, if Carrefour seeks to adapt to each market, it must focus in cultural analysis and opportunities and consequently it must to use experience and learning as a tool for sucess.

Islamic laws and business (august 9th)

1. Concept: 

Islam: islam is one of the most important religions in the world. "It is a monotheistic faith which is regarded as a revelation through Muhammad as the prophet of Allah. [...] Islam is now the professed faith of nearly 1000 million people worldwide, particulary in North Africa, the Middle East, and parts of Asia. To be Islamic means to affirm and individual surrender to God and live as a member of a social community" ( Agalgati and Krishna, 2007: p. 82)

koran: "the Islamic sacred book, believed to be the word of God as dictated to Muhammad by the archangel Gabriel and written down in Arabic. The Koran consists of 114 units of varying lengths, known as suras; the first sura is said as part of the ritual prayer. These touch upon all aspects of human existence, including matters of doctrine, social organization, and legislation" (Oxford Dictionary, 2010). 

Islamic Law:  It is a legal system based in Koran's ideas. Accroding to Wild (2004): "Islamic law is the most Widely practiced legal system today. Islamic law was initially a code governing moral and ethical behavior and was later extended to commercial transactions. It restricts the types of investment can make and sets guideline for  business transactions" (p. 95).

2. Question

What is the influence of the Islamic Law  in  Business and Globalization  process? 

A.

The islamic Law (Koran or Qur'an) establish norms for all  aspects of the life of people: personal life, family, social structures, and obviuosly work and business.  Work is one of the most important parts en the life of a person because it's an order from God and for this reason Business and work are based in a strong ethics: this ethics, acoording to the interpretation of  Ali (2005), have important values that determine the way in which business are made and  the main values are "the prohibition of usury, cheating, engaging in unlawfull business,  swearing, monopoly, withholding of commodities to inflate prices, and those that accentuate discipline, truthfulness, dependability, effort, fulfillment of contract conditions, and observing guidelines". (p. 69).  And, Obviously the lack of these values can mean severe punishmnets imposed by the legal system.  

This law has caused, throughout history, cultural and ideological differences in the development of  business in western and islamic countries. For example, the finance system in islamic countries is very different to the system of Western countries, because of the classic rules that prohibit to charge interest and to pay interest on bank deposits (Wild, 2004: 95). however, this has  slightly been  modified in recent years in order to attend the needs of islamic people and investors in the Region and now many companies consider that Financial system as an attractive sector. 

Undoubtedly, religious beliefs have limited the  total integration of islamic and muslim countries in international business, but this does not mean the total absence of global trade, because of the importance of islamic resources in the global context, mainly Petroleum, that have forced the integration process. For this reason negotations between islamic and Western countries requiere a real knowlegde  and respect for islamic laws and culture in order to achieve good agreements and in this context, It's important to take in account that Women integration in islamic social and busines life is still very limited and consequently western countries mustn't include women in negotation process.

However, the islamic beliefs about business and trade aren't the main limitant for the globalization of islamic contries. For many years, islamic countries have been associaded with high political risk, especially the risk of terrorism from extremist groups such as Hamas and Hezbola, because of the interpretations of  Quram (for some people, these are misconceptions of the islamic law) that justify atacks to no-islamic cultures that threaten th religion. clears example of this beliefs are the  terrorist attacks of September 11, 2001 against the US, the attacks against the transport system of Madrid and London in 2004 and 2005 respectively and constant suicide attacks in the Arab Region, that had a direct effect in the Trust in the region and consequently in Investment and trade negotiations with islamic countries. 

 Suder ( 2004) expressed in this book "terrorism and international business environment" that "The image of islamic radicals operating in these countries has complicated existing trading relationships[...]. Various economic studies, indicators and rakings also mark islamic countries as inhospitable. some of the studies and rankings are argued to be biased against developed countries not heeding the demands of open markets and free trade principles" (p. 139). 

In conclusion,  spite of  the great advances of globalization process,   Islamic countries have failed in this process and the most important reason is the influence of  Islam. Islamic Law, as a theocratic law,  has a strong influence in all aspects of th life of a person and business aren't an exception. This case presents clearly  a situation where the religion and legal system determine the way of business and in this context appear "political Risk" as one of the most important decision variables to do business with islamic counterparts. 

Point of view: 

Certainly, globalization  is one of the most important issues in the world and it is understood not only as the increase of free trade among all the countries but also as a process where culture, beliefs, nationalistic feeling are shared.  In many countries people are concerned about the possibility  of losing important aspects of their culture, their traditions and in general, elements that form the history of a community and undoubtely are part of Identity of people. So, religion is one of the most important parts of Culture because it gather core beliefs of people, expectations about  life and, in particular,  notions of good and evil and in line with these notions a moral is defined.  Maybe, Islam is the strictest religious system in the world and it is a real way of life that influence the business around the world. 

I think  that  for western people is very difficult to understand Islamic beliefs, especially the role of women in society and the terrorism as a way to preserve the religion. But,  Religion is generally a very stable system and rarely goes radical changes that modifie the way in which people live; especially when religion enjoys the status of Legal system as  in islamic countries.   For this reason, I think that is very difficult ro reduce the poltical risk in these country, at least in the short term. Managing Political risk in Islamic countries requires the adaptation to business environment through strategies such as development assistance and isurance, In  addition to gathering information fron reliable sources in orden to know the current conditions of each region. 

Further, western people should seek alternatives that promote dialogue and negotiation in orden to reach not only benefits on commercial topics but also benefits to  communities, ie, Globalization must to improve the living conditions of people but it shouldn't be associated to threats to culture and identity. 

BIBLIOGRAPHY


Agalgatti, B and Krishna, S.(2007). Business ethics. [Online]: http://www.google.com/search?tbs=bks:1&tbo=1&q=Agalgati+and+Krishna,+2007:+p.+82)&btnG=Search+Books#hl=en&tbo=1&tbs=bks%3A1&q=business+ethics-+agalgatti+and+krishna&aq=f&aqi=&aql=&oq=&gs_rfai=&pbx=1&fp=76eef410a5edc076

Hayes, S and Vogel F. (1998) Islamic law and Finance. The Hague: kluwer law international. [online]: http://books.google.com/books?hl=en&lr=&id=4LnlArsnCkEC&oi=fnd&pg=PR13&dq=business+in+islamic+countries&ots=523DhZVM0U&sig=uXABu-xL5M2dqrVQsx4aJLjXRf0#v=onepage&q=business%20in%20islamic%20countries&f=false

Oxford Dictionary. (2010). [Online]. available at : http://oxforddictionaries.com/view/entry/m_en_us1259207#m_en_us1259207

Suder, G. (2004). Terrorism and the international business environment: The security- business nexus. [Online]: http://books.google.com/books?id=sguW9zgK5V4C&pg=PA139&dq=business+in+muslim+countries&hl=en&ei=2Rh1TLSgGcKB8gag4PXKBw&sa=X&oi=book_result&ct=result&resnum=9&ved=0CFkQ6AEwCA#v=onepage&q=business%20in%20muslim%20countries&f=false

Wild, J. (2010). International Business The challenge of Globalization. Pearson. 

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"Cultural Diversity" (august 2nd)

1. Concept: 

Cultural Diversity: "Culture is the relatively stable set or inner values and beliefs generally held by groups of people in countries or regions and the noticeable impact those values and beliefs have on the peoples' outward behaviors and environment" (Peterson, 2004: p.17). On the other hand, Diversity is defined as the quality of being different. So, according to UNESCO (2005), “Cultural diversity refers to the manifold ways in which the cultures of groups and societies find expression. These expressions are passed on within and among groups and societies.

Cultural diversity is made manifest not only through the varied ways in which the cultural heritage of humanity is expressed, augmented and transmitted through the variety of cultural expressions,but also through diverse modes of artistic creation, production, dissemination, distribution and enjoyment, whatever the means and technologies used”.

2. Question

Why Cultural diversity is important to business today?

Cultural diversity is increasingly important because of phenomena such as globalization and high inmigration rates between countries have led to multicultural countries, cities and companies where differencies of beliefs, customs, languaje, dress, race and other aspects are mixed leading to interesting changes in society. therefore becomes increasingly necessary to include people who are culturally different in the everyday life of the host society. Parvis (2007) presents a clear example: "Cultural diversity in America (US, Canada, Mexico and Latin America) is growing incredibly due to interconnectedness and accessibility to human resources. Since 1985, more than ever, we have witnessed more human relationships not only within a culture but among many cultures and civilizations in the world" ( p. 162)

In this context, companies have a crucial role because they are called to create inclusion, acceptance and respect. Learning to manage diversity is perhaps one of the greatest challenges for companies that are competing in an increasingly global world : each company has the opportunity to turn diversity into an advantage or a problem (discrimination, harrasment). UNESCO (2010) has expressed that 

"Cultural diversity is a driving force of development, not only in respect of economic growth, but also as a means of leading a more fulfilling intellectual, emotional, moral and spiritual life. [...] At the same time, acceptance and recognition of cultural diversity – in particular through innovative use of media and ICTs – are conducive to dialogue among civilizations and cultures, respect and mutual understanding". 

So, according to Ely and Thomas (2001), there are three possible scenarios or perspectives within the company: the integration and learning perspective, the access and legitimacy perspective and the discrimination and fairness perspective but only the perspective of integration and learning creates an adnvantage and helps to achieve real benefits for the company. 

In conclusion, Today almost all businesses face a multicultural environment where difference and change are the only constant. But, this situation, instead of a problem, is a benefit to the company and it should created the necessary conditions for generate innovation, synergy, cooperation and uniqueness. 

3. Point of view.

I think that the new conditions which companies are facing because of glabalization require increased ability to respond to changes quickly and and effectively. "Cultural diversity" is one of those changes and companies must adapt their structures and forms of management in order to achieve benefits for all stakeholders: employees, employers and society. cultural diversity should not be an obstacle for the creation of an appropriate organizational climate conducive to the development of people in the organization. On the contrary, cultural diversity is a tool to strengthen the organizational culture: a culture where there is no discrimination on the cultural causes and where learning and inclusion are business development factors. "Diversity is about learning from others who are not the same, about dignity and respect for all, and about creating workplace environments and practices that encourage learning from others and capture the advantage of diverse perspectives". (Woods, Bormann and Schmidle, 2010). 

BIBLIOGRAPHY

Ely, R and Thomas, D.(Jun., 2001). Cultural Diversity at Work: The Effects of Diversity Perspectives on Work Group Processes and Outcomes, 46(2). [Online]: http://www.jstor.org/stable/2667087

Parvis, L (2007) Understanding cultural diversity in today's complex world. [Online]: http://books.google.com/books?id=vyZ_C-xpnjMC&pg=PA162&dq=cultural+diversity+%2Bglobalization&hl=en&ei=whZjTMbIC4G0lQfl-ci-Cw&sa=X&oi=book_result&ct=result&resnum=2&ved=0CC0Q6AEwAQ#v=onepage&q=cultural%20diversity%20%2Bglobalization&f=false

Peterson, B. (2004) Cultural Intelligence: Aguide to working with people from others cultures. Yarmouth: Intercultural Press. 

UNESCO. (2005). Convention on the Protection and Promotion of the Diversity of Cultural Expressions [Online]:  http://portal.unesco.org/en/ev.php-URL_ID=31038&URL_DO=DO_TOPIC&URL_SECTION=201.html

_________(2010) Cultural Diversity. [Online]: http://portal.unesco.org/culture/en/ev.php-URL_ID=34321&URL_DO=DO_TOPIC&URL_SECTION=201.html

 Woods, S.; Bormann, T.  and  Schmidle, J.(2010) Workplace diversity. [Online]: http://www.ilr.cornell.edu/library/research/subjectguides/workplacediversity.html


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July 26th. European Union - Common Agricultural Policy-

1.Concept:

• Common Agricultural Policy (CAP): the system in the EU for establishing common prices for most agricultural products within the European Union, a single fund for price supports, and levies on imports.*  The common agricultural policy (CAP) dates back to the early days of European integration, when Member States made a commitment to restructuring and increasing food production, which had been damaged as a result of the Second World War.**

2. Question

Is CAP a barrier to international trade?

A:  Clearly, The CAP has been one of the most important pillars of economic integration of European countries and has had important achievements in the development of European rural sector.  according to The  official Website  of the EU, Today, "the CAP still has a pivotal role in the European Union, not just because farmland and forests account for more than 90% of land within the EU, but also because it has become an essential mechanism for facing new challenges in terms of food quality, environmental protection and trade".***

However, in recent years,  increased the opponents of this policy because, underdeveloped can not compete on equal terms,  mainly because of huge government subsidies for this sector to ensure the acquisition of more and better technology and access to international markets with better prices. On the other hand, access to European market is very expensive due to high tariffs. a clear example of this is the failure of negotiations between the EU and Mercosur (Brazil, Argentina, Paraguay and Uruguay) the most important economic bloc in South America, in 2004 mainly due to the lack of agreement on land issues.

The WTO (World Trade Organization), seeks to stablish fairer trade conditions and, for this reason,  created The Doha Round, a negotiating agend which pretends  the commitment of developed countries to eliminate subsidies to the agricultural sector by 2013 and reduce tariffs on agricultural products.

3. Point of view:

One of the main criticisms that are made to globalization and international trade is the lack of level playing field between developed and underdeveloped countries, because,  industrialized countries can get more benefit from the agreements because they have the power to set conditions. this could be the case of the CAP:  some sectors of the economy in poor countries may be affected by this policy. for example, at the signing of the FTA between Colombia and the EU, the Colombian dairy sector  feels discomfort because they do not have the ability to compete with European products to enter the colombian market with low prices for subsidies.

Therefore, I believe that while the CAP has been an important and successful policy in achieving the goals initially set by the European union, it is necessary that this be reconsidered in order to comply with the agreements of the Doha round. international trade must be fair and beneficial to all parties. As expressed Hoba and Gulati: "Developing countries must make a fundamental shift in their approach in the ongoing Doha Round negotiations. They need to focus less on S&D treatment and more on equal treatment. Industrialized countries will need to be subjected to much more moral and political pressure before they give up their highly distorting agricultural policies".****

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*Oxford dictionary . 2008. Latin. (online). Available at:

http://oxforddictionaries.com/view/entry/m_en_us1234791#m_en_us1234791

** European Union. (2010). Agriculture. [online]:

 http://europa.eu/legislation_summaries/agriculture/index_en.htm

*** European Union. (2010). Agriculture. [online]:

 http://europa.eu/legislation_summaries/agriculture/index_en.htm

****Hoda, A  and Gulati, A.(June 2008). WTO negotiations on agricultural and developing countries. [Online]: Available at: http://www.ifpri.org/sites/default/files/publications/ib48.pdf

-- imagen from: http://europa.eu/pol/agr/index_en.htm