Question

Which of the following policy actions taken by richer countries would be most favored by pooer countries? (LO7) a) The elimination of agricultural subsidies b) The climination of tariffs on industrial goods c) More vigorous enforcement of environmental laws d) Government promotion of labor union membership

Short answer

The most favored policy action taken by richer countries for poorer countries would be \(b)\) the elimination of tariffs on industrial goods, as it has the potential to significantly boost their export-oriented industries and create more employment opportunities. This policy action would benefit numerous sectors in poorer countries, making it the most favorable option among the given choices.

Step-by-step solution

Evaluate Policy Actions

First, let's briefly review each policy action and summarize their potential impact on poorer countries: a) The elimination of agricultural subsidies: Richer countries often heavily subsidize their agricultural sector, which might lead to artificially low prices for these goods on the international market. This makes it difficult for poorer countries with unsubsidized farmers to compete. b) The elimination of tariffs on industrial goods: Richer countries often impose tariffs on imported industrial goods to protect their domestic industries. Removing these tariffs would open up the market for cheaper industrial goods from poorer countries, potentially boosting their export-oriented industries. c) More vigorous enforcement of environmental laws: Stricter environmental regulations in richer countries could lead to increased costs for industries, causing them to relocate to poorer countries where regulations are less strict. This could bring more jobs and investments to these countries; however, it might also lead to long-term environmental degradation. d) Government promotion of labor union membership: The promotion of labor union membership could improve working conditions and wages for workers in poorer countries. However, increased unionization might also lead to higher labor costs, making their industries less competitive globally.

Consider the Impact on Poorer Countries

Now, we need to weigh the potential benefits and drawbacks of each policy action for poorer countries: a) The elimination of agricultural subsidies would likely be beneficial as it would make their farmers more competitive on the international market, potentially leading to increased income and employment in the agricultural sector. b) The elimination of tariffs on industrial goods would likely lead to increased exports and employment in poorer countries' industries. This could also result in increased demand for raw materials, boosting their extraction industries. c) The enforcement of environmental laws might attract polluting industries to poorer countries, which could benefit their economies short-term, but it might also cause long-term environmental damage, harming people's health and quality of life. d) Government promotion of labor union membership might lead to improved working conditions but could negatively impact industries' competitiveness, potentially leading to decreased exports and employment.

Determine the Most Favored Policy Action

Comparing the potential impacts of each policy action, it seems that both the elimination of agricultural subsidies (option a) and the elimination of tariffs on industrial goods (option b) would be highly beneficial for poorer countries. Since the question asks for the most favored policy action, we will choose the one that has a more widespread impact on their economies, considering that many poorer countries are export-oriented and rely on manufacturing and agricultural exports. Conclusion:

Most Favored Policy Action

The most favored policy action taken by richer countries for poorer countries would be \(b)\) the elimination of tariffs on industrial goods, as it has the potential to significantly boost their export-oriented industries and create more employment opportunities. This policy action would benefit numerous sectors in poorer countries, making it the most favorable option among the given choices.

Key concepts

Agricultural Subsidies

Agricultural subsidies are financial aids provided by governments to their farmers, aimed at bolstering the agricultural sector. In richer countries, these subsidies help to maintain low prices for agricultural goods, which is a boon for local consumers but a bane for farmers in poorer countries who lack such support. This price advantage makes it challenging for farmers from poorer countries to compete in the international market, where they often face losses due to their higher production costs.
From the perspective of poorer nations, the elimination of agricultural subsidies in richer countries could equalize the playing field. This would allow their farmers to compete more effectively, potentially boosting agricultural exports. By increasing their presence in international markets, poorer countries can elevate their agricultural revenues, ultimately enhancing rural employment and economic stability. For these reasons, ending agricultural subsidies is a key topic in international trade discussions, especially in negotiations focused on development and global trade fairness.

Tariffs

Tariffs are taxes imposed on imported goods and can significantly impact international trade. In richer nations, tariffs on industrial goods are often implemented to protect local industries from international competition. However, these trade barriers can hamper the ability of poorer countries to export their industrial products, limiting their economic growth.

By eliminating these tariffs, richer countries would open their markets to more competitive and affordable industrial goods from poorer countries. This shift could drive higher export volumes from poorer nations, leading to a significant boost in these countries' industrial sectors. As a result, increased demand for these exports might spur job creation and economic development. Without the added burden of tariffs, poorer nations can more readily establish a foothold in global markets, benefiting both their economies and their communities. This makes tariff elimination a particularly appealing action for countries looking to integrate successfully into global trade networks.

Environmental Laws

Environmental laws are regulations intended to protect the environment by controlling pollution and preserving natural resources. In economies with strict enforcement, such regulations increase production costs for affected industries, which may lead these industries to relocate to countries with more relaxed environmental standards.
For poorer countries, this situation presents a dual-edged sword. On one hand, it can result in significant inflows of investment, technology, and jobs as companies seek cost-effective locations. This could facilitate short-term economic growth and industrial development. On the other hand, the long-term potential for environmental degradation remains a genuine concern. The relocation of industries with high pollution levels to poorer countries can harm natural ecosystems, damage biodiversity, and impact public health. Thus, while the immediate economic benefits might be enticing, potential environmental and health costs must be carefully managed, underlining the importance of balanced and sustainable environmental policies.

Labor Union Membership

Labor unions play a pivotal role in representing workers' interests by advocating for better wages, safer working conditions, and fair treatment. In the context of poorer countries, promoting labor union membership could lead to improved labor standards and employment conditions, fostering social and economic welfare.
However, there is a trade-off to consider. Increased unionization might raise operational costs for businesses due to higher wage demands and improved working conditions. This could reduce international competitiveness, as higher costs might lead to increased product prices in global markets. There's also the risk that businesses could scale back employment to offset the cost increases or relocate to countries with more affordable labor markets.

Therefore, while labor union membership can elevate workplace standards, it must be managed with care to ensure it does not inadvertently stifle economic growth or diminish employment opportunities. A balanced approach that aligns labor improvements with broader economic goals can pave the way for sustainable development in poorer countries.