The paper "Global Food Prices Rising" is a wonderful example of a Macro and Microeconomics Case Study. Policies relative to international trade investment are coordinated to take on even greater significance in this era of globalization. Economically, globalization has impacted trade unions through trade in goods and services, as well as through financial flows and the movement of persons, all together as linked to cross-border economic activity. Different governments across the globe, including the Australian and Ukrainian governments, have approved a number of legislative initiatives to increase the production of bio-ethanol in the automotive fuel market.
Such initiatives and policies are aimed at helping respective countries to reduce dependence on imports and so come close to aligning their legislation to given trade unions. Internationally recognized trade policies aim at making given regions competitive in foreign markets. Most of these regions represented by these policies are of open economies that seek to secure improved market access for its industries, services, and investments. They also advocate for the enforcement of the rules of free and fair trade in both local and international markets. Ethanol producers are the most obvious beneficiaries of these government policies to promote the production of ethanol because they look for more options to be able to prepare and sell this fuel.
On another perspective, different types of raw materials viable for production into a substitute for gas have palpable impacts on the price of all goods. As written by Staley and Sagaian (111), as the production of ethanol increases, so does the prices of corn and other input raw materials need to prepare the fuel. The Australian government has also implemented policies that place tariff barriers on imports of sugar cane and justification to such policies can only have basis the end result and outcomes.
The observable beneficiaries of this policy are the countries that have a higher production of sugarcane as a raw material for ethanol production. They benefit, especially when they produce in bulk because they export to countries that lay subsidies on imported sugarcane. However, producers of sugarcane take advantage of this without considering the fact that increased demand for ethanol and other biofuels leads to an increase in prices for foods.
Hence, due to the tariff barriers placed as government policies, the price of sugarcane has increased and, therefore, it cannot competitively sell and trade as much as the subsidized corn and soybeans and raw materials for ethanol. Globally Rising Food Prices and Its Causes Many of the world’ s poorest countries and people continue to face devastating situations resulting from the sky-rocketing food prices. The main cause of this has to do with the global food system that has been gravely defected. It even worsens the situation that, apparently, the policy-makers responsible for this sector have almost been unable to find a probable solution, or so it seems.
Generally, cheap food has been taken for granted too long that such times have eloped the hands of the people. Subsequently, developing and countries and people living below the poverty line can only brace themselves for worse times of expensive basic commodities. Food prices have been on the rise, especially as it was evident in the global food crisis in the years of 2008 and 2009. In developing countries like Kenya and poor ones like Haiti, at some point, it caused food riots against the government, the policy-maker in this case.
According to Shah (1), most reports on the matter have only concentrated on the immediate causes, yet the core and deeper issues and causes relative to the matter are yet to be discussed as much and accurate response executed. Figure 1 below shows a food price index statistics between April 2007 and April 2008, indicating a sharp rise in prices of given food items. The effectiveness and stability of the global food system have become one of the most important and functional international institutions.
The universal food crises have presented such entities and organizations with difficult situations, and many likely causes have been identified yet with inaccuracy sometimes, hence lack of surety of the best response (Wiggins, 10). This is evidenced by the number of studies that have only estimated the impacts of food crises but with the uncertainty of their importance in determining good responsive measures. The impact of the price increases on poverty varies among countries and within countries. Recently, steep price increases on major crops such as cereals and oilseeds are resultant of a combination of production being below trends, and strong growth of demand due to continuous population growth.
The declining level of stocks adds to the price rise and a significant increase in investments in agricultural derivative markets. Commodity price formation, as a model has also been an implicit contributing factor to the escalation in food prices. This is because the involved entities and international organizations have, as it appears, had little agreements on how to form prices for internationally traded commodities, especially foodstuffs.
Therefore, traditional aspects like the dominance of stronger economies have been allowed to greatly influence food prices. The U. S economy is an example of such, whose internal changes drive international prices. According to Heady and Fan (5), this commodity formation models practically takes the task of price harmonization off the hands of the internationally entrusted policymakers. The other factor with worth-noting effects on food prices is the American dollar. This is different from the influence of the American economy itself in the sense that most commodities have been priced in dollars in the international markets.
Consequently, a sharp decline of the American dollar against other influential currencies exaggerates the rise in food and other related commodity prices. Also in relation to this is the aspect of the huge flow of funds and capital amounts into the financial markets, internationally connected the future of agricultural commodities. Resultantly, many investors have fled other industries to flood the food industry in the search for high returns, which leads to heavy volatility and an increase in food prices.
As a collective effect, rising food prices have relatively reduced or increased poverty differently depending on how poor people earn and spend their incomes. Most of the world’ s poor people live in rural areas, where agriculture is the main economic activity. Therefore, rising food prices tend to alleviate poverty globally in these areas. However, the case may be different for farming households that produce and sell food crops as they benefit from the inflated prices (Polaski, 6).
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