Class notes
Economics 348: Trade and Industrial Economics
- Course
- Economics 348
- Institution
- Stellenbosch University (SUN)
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Economics 348Trade and Industrial Policy: Professor Jafta
*Can use the online textbook/e-book from last year for some topics – prescribed readings
for each section
Lecture 1
International supply chains were severely impacted in 2020 because of the pandemic – not
out of the woods yet – current 3rd wave in SA – cyber security attack on Transnet (SA
specific)
To increase GPD: Consumption (uncertainty because of job loss … may not give), investment
(positive in private sector but not at rate we would expect), Gov spending (under pressure –
former minister of finance was clear that we are incurring debt – tkae us to difficult fiscal
situation – not a lot of boosts here), external sector – imports and exports (the importance
of trade)
Theme 1: Covid-19, International Trade Collapse and the death of Globalisation
Foretold
Class discussion: What will happen to international trade as the pandemic plays out?
Global value chains might become more resilient, and trade will benefit from this
Supply chains will shorten – before pandemic supply chains had become stronger
regionally than globally – consumers have changed preferences due to
environmental concerns, want to reduce carbon footprint, so buy locally ect. –
regional integrated incentives also became more attractive
International trade has decreased as there was an unprecedented disruption as
production and consumption scaled back across the globe - Some producers have
decided to not distribute to emerging market – shortage of supply in emerging
countries
Trade could be negatively impacted by protectionist policies – Trump and China
following suit – trade wars not resolved – haven’t seen a significant increase with
measures that have been implemented
Talk about reindustrialization (local) rise in trading – possible that due to job losses
over the pandemic, countries will try to produce more within their own countries to
increase employment
There may be an increase in home-shoring of essential products (eg medical supplies
and vaccines) – some countries would rather have a 3rd vaccine round for their
citizens rather than share with countries like SA so SA has to start producing their
own vaccines
Countries that are still under heavy restrictions cant produce to full efficiency and
will rely on imports which will have a positive impact
Trade of vaccines and PPE highlighted the importance of international trade: We
realize we need vaccines – well established international train supply chains were
, very activate and useful – for SA, we had imported PPE sponsored from private
companies from china and concern was somewhere along the way there would be
delays ect. All was done in collaboration with department of health and supply
chains – delivered by Takealot
Trade has started picking up and is looking better than last year – the outlook is
optimistic
SA and Africa is the last big possibility of spectacular economic growth and
international trade growth and the population in Africa being relatively young –
developed countries have older population – to propel economy forward, we need
labor, capital ect, and Africa has abundant labor and resources, we need capital to
come in thru investment and **30ish mins
WTO: vaccine needs components from 19 countries – shows importance of trade
Changing consumer preference gives a feedback loop to producers – eg fashion
industry reinventing itself – bad production textiles for the environment
Give a brief description of the current global economic context, with a specific emphasis on
international trade prospects [10]:
Is Covid-19 the end of globalization or just accelerating a trend that already started before
the pandemic? [10]
Lecture 2
The pandemic has given unprecedented opportunity for the whole spectrum of how
economic growth happens and how international finance works.
Work towards a greener economic environment
Chap 5 – trade as a catalyst for a greener and fairer
Theme 1 continued
UN trade and development reading – steped up research capacity – capture what has
happened in internation trade bc covid + what happens in poverty, vulnerable in society and
the private sector and businesses.
Chap 5 for 1.3
LO
1. To understand the implications of the pandemic for global trade in general, and
regional intergration and economic growth prospects for Africa, in particular
2. To understand how a ‘better recovery’ from the pandemic can contribute to a
healthier, fairer and greener globalization that can be nourished by a more resilient
approach to multilateralism
, Q 1.3. how can a ‘better recovery’ from the pandemic can contribute to a healthier, fairer
and greener globalization that can be nourished by a more resilient approach to
multilateralism? [20]
Layout of the question:
Introduction
o Context (pandemic, immediate impact on trade, trade as a disruptor etc.)
Impact of covid on small firms and consumers (small firms generally don’t have a lot
of cash flow and savings – rely on cash flow)
Impact of covid on the environment (masks in the ocean - litter)
Policies for a fairer and greener recovery through trade
o Trade policy for a stronger recovery
o Transparency in trade measures (Embargo – policies implemented bc of covid
– to work together for better future/recovery we need to be more
transparent with things – barriers to trade? Do more harm or good?)
o Enhance trade co-operation to address global health crisis
o Better use of the multilateral trading system (UN – several organization
instrumental in helping gov cope with pandemic and work together for
recovery. A multilateral trading system means there are many countries
involved in said trade deal – this is under the WTO and is a platform for the
members
Role of competition policy (briefly) – protect and enhance the process of competition
– market becomes so concentrated that power in vested in 1 or 2 v big firsm –
difficult market access for small and medium size enterprises – S&M have important
role in recovery so we need to look at ways to make market entry easier)
Focus on greener and bluer recovery – a bluer recovery has to do with the health of
the oceans – a large part of the earth is covered in water – pollution kills a lot of the
populations in the oceans
Stimulus packages (to try boost economies – SA has done so (modest copared to the
rest of the world) aimed at medium relief rather than long term. This could be a
good tool to encourage investment but it is funded by tax money so may give room
to gov to attach conditions to the SP).
Conclusion
Reduction in red tape is a trade facilitation agreement – under WTO that members that
agree to this will reduce red tape (the # documents, time at customs & invest in more
efficient technologies to trade across boarders)
Lecture 3
Regarding the impact of international trade and economic growth on the environment
(more specifically, climate change), is it possible for trade and economic growth to not have
this negative impact on the environment? The type of pf international trade and economic
growth that we have had in the past has had negative impacts on the environment, so is it
possible have a different type of economic growth that is kinder to the environment and has
less of a negative impact and mitigates less of the risks. The WTO do have a page on their
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