ASEAN: Risk or Opportunity for China

ASEAN was founded on 8 August 1967 in Bangkok, Thailand by Indonesia, Malaysia, Philippines, Singapore and Thailand. The main purposes of this establishment are:

Ø  Speed up economic development

Ø  To help to improve regional peace

Ø  To maintain regional and international cooperation and reinforce it

Ø  To promote southeast Asian studies

In addition to these countries, china just jointed this group. The Chinese’ government is very optimistic to play an important role in this establishment. With regards to this foundation, there are some advantages and disadvantages for countries that are the members of these establishments.

The main upside would be related to restrictions on trade. Naturally, there would be no limitation in front of commercial activities between those countries. However, things are not that easy all the time. Although it is really great to have trade with no limitation, sometimes countries should pay off for taking these opportunities.

 Paying attention to European Union as an example, it could be understood that joining a group always does not have advantages. As a way of illustration, Greece is experiencing a critical economic situation right now. It is bankrupt and it is the European Union members’ responsibility to help it to figure the problem out. Only Germany has to pay 200 billion dollars to help Greece.

Hence, it is not illogical to investigate all of downsides a well as upsides. Without saying, to have a free trade and open economy, nations have to develop their relations with other countries but, reviewing potential risks would prevent countries from paying off for their decisions later on.        

Comparative Advantage: Shipping Industry

Undoubtedly, shipping is one of the major basic components in trade process. To understand the importance of shipping in our lives, we only need to look at the diverse types of goods we use often from the mouse to the computer screen to the fuel that powers our vehicles and factories around the world every day. What we now call basic necessities of modern life is brought to us by world trade which the majority of them are transported by sea.

Therefore, there is more need to have shipping companies in order to handle transportation system both domestically and internationally. Since there are too many shipping agencies, they should have some benefits for customers to choose them which means high competition for shipping companies.

Although the comparative advantage is more common to use for products rather than services, paying attention to it cause better result in every industry. For instance, this concept can be applied in shipping industry as different aspects such as:  

Ø  Geographical considerations: some companies can provide the really great price of shipping due to their accessibilities to the ports particularly Free Trade Zones. As it known, these areas are tax free so the companies could offer lower prices.

Ø  ISO: International Organization for Standardization which is responsible for quality control on management systems for different companies and industries. Obviously, customers would rely on companies which is graded based on ISO rather than entities that do not have any standards.

Ø  Strategic connection and marketing strategy: have effective partnerships would result in strong unity and it also could synergize companies in order to be more efficient.

As it can be understood, opportunity cost which is based on comparative advantage also exists for service provider by overlooking these components.    

International Sugar Agreement: Mutual Benefits

There have been great reductions in trade barriers in front of developing countries. Associated with this has been a shift away from dependence on export to reliance on domestic manufacturing. As a matter of fact, there were some reforms of trade policy in developing countries.

 Prior to the mid-1980s, developing countries just relied on imports from other countries, a situation that exposed them to a higher volatility of prices and high concern about dependency on imported manufactures. However, by the late 1990s, around 80 percent of developing countries’ exports were manufactured goods which cause to lower concern about the role of trade.

Nevertheless, the developing countries were not alone to improve their economic situation. There were many agreements that helped them to reinforce their international marketplaces. One of these agreements is International Sugar Agreement. A brief objectives of this agreement includes:

Ø  Increase the level of international trade in sugar, especially for enhancing the export earnings of developing exporting countries

Ø  Provide enough supplies of sugar to meet other countries’ needs

Ø  Increase sugar production in order to help producers economically

Ø   Provide a growing access to international markets for developing countries

As it can be understood, the International Sugar Agreement is based on comparative advantage and mutual benefits. Although it helps developing countries to be improved, it provides a high degree of assurance for importers so they have no concern for their sugar demands in their domestic marketplaces.