a. Benefited the Government: Ever since the sugar policy wasimposed, it led to a significant number of benefits for the both the sugarindustry as well as the government. The Republican government as well as theDemocrat government fruited from the effect of the policy. The governmentsgenerated incomes more than 20 million with the help of the sugarbusiness. b. Boom for Business and Politics: In 1987, The Fanjul brothers “Joesand Alfonso Fanjul, founded and established the Flo-Sun, today known as theFanjul Corp.
The Fanjul Corp, was at the time America’s biggest sugar canegrowing and refining corporation. The establishment of import quotas benefitedthe corporation as it generated more income for the company. The company hadflourished so much that the brothers raised about “one” million dollars asdonations for the 2000 election cycle.
The effect of the quotas proliferatedthe profit generated by the sugar industry. The industry made donations worth”nine hundred forty thousand” dollars to candidates for congress and presidencyduring the 2003-2004 election cycle. c. Drawbacks: While the U.
S sugar producersbenefited from the success of the new sugar policy, their success had resultedin many other countries being denied the opportunity and benefits of freetrade. One among those countries were Australia, the FTA between the two, resultedin Australia looing out on potential exports to the U.S. that was worth millions. However,the Australians weren’t the only one’s who suffered. The U.S. lost any sort of bargainingpower to break up the monopolistic wheat production in Australia and to enterother market sectors.
This resulted in more profits for the Australian wheat producersand a complete loss for American wheat exporters.The removal of sugar from the U.S.
– Australia FTA and other respective FTAslikewise sends many signs to different gatherings. To different industries itis an indication that the U.S. government can be forced into taking aprotectionist position. Anothermajor drawback of imposing quotas is that various other trading partners (Brazil,Thailand, South Africa, etc…) may come to an understanding that getting into afree trade agreement with the U.S. would be difficult and would in-turn alsoaffect the establishment of any future free trade agreements. Thesuccess of the sugar campaign additionally tells sugar exporters in othertrading partners of the U.
S, for example, Brazil, Thailand and South Africa,that FTAs with the U.S will be constrained. This may impede progress in futureFTAs and is in fact one of the key issues in the stalled trade talks betweenthe U.S and Brazil for the FTA of the Americas. d.
World Poverty: The political help to keep theU.S. sugar policy set up and to keep it out of FTA’s has, with differentcomponents, prompted the decrease of sugar imports by a third since the mid90’s. With the domestic cost at three times the world cost, American sugarproducers develop more sugar than is consumed in the domestic market, thusresulting in low world cost. Effective exporters in different nations, asignificant number of whom depend to a great extent on sugar export revenues,are compelled to offer at low world costs in the even that they are not grantedconsiderable quotas by the US.
These sugar producers don’t profit as much asthey would from their comparative advantage if sugar trade were liberalized. Inthis way, the U.S. sugar policy and other protectionist strategies of the otherdeveloped nations, for example, Japan and those in the E.U keep a huge numberof needy individuals in developing countries in poverty.
(Virata, n.d.) e. Liberalizing the Sugar Trade: The price of the sugar would decline andreduce if the trade policies were liberalized in the U.S., such aliberalization would not only help and benefit the sugar industry but manyother players related to the use of sugar. Example: The American candymanufacturing industry.
Inaddition, the liberalization of sugar trade would improve the credibility ofU.S as free trader and world leader. Increase world wealth by $4.7 billion ayear. Generate employment for 1 million workers in developing countries andmost importantly reduce worldwide poverty. 1.
CONCLUSION Importquotas have both positive and negative effects on a country’s trading platform.For example, The U.S. sugar policy resulted in benefits in the form of moreprofits for domestic sugar producers but at the expense of sugar consumers. Thepolicy also resulted in many countries being denied the opportunities andbenefits of free trade. Quotasare typically utilized to ensure protection of infant industries and to ensurelow entry barriers for domestic producers.
Generally, the quotas keep goinglong after the business or industry has matured. Other utilizations for quotasare to ensure protection of vital industries such as defence and agriculture. Whenone nation utilizes quotas, its trading nations likewise does the same andcites to similar reasons. Thus, eventually resulting in less exportingopportunity for all producers and high costs for all consumers. Highquotas can lead to trade wars between nations. For example, The European Unionand China were associated with an exchange disagreement regarding textiles thatdelayed an agreement that expired in 2005. These disputes affect the incomes ofeach country involved in trade.
Trade works only when nations import andexport. Despitethe above-mentioned demerits, Quota system is an efficient system of providingprotection to domestic industry. To that extent, therefore, it can be of greathelp in encouraging economic and monetary development, provided it is usedjudiciously.