TCEE and SFASU Present: PROTECTING THE U.S. SUGAR INDUSTRY FROM FOREIGN OUTSOURCING: A BITTERSWEET IDEA TO PROTECT OR NOT TO PROTECT… WHAT IS THE ANSWER? What are arguments for protection? What are arguments against protection? DAVID RICARDO Led call to repeal Corn Laws in 19th century England Corn meant wheat then Corn was called maize Who do you think favored protection of corn? Who do you think did not favor protection of corn? Bread and flour bigger parts of diet then than now DR knew that other countries had better weather conditions for growing wheat WHAT HAPPENS WHEN PROTECTED INDUSTRIES ARE NO LONGER PROTECTED? Workers? Machinery? Technology? Consumers? TERMS TO KNOW Barriers to trade: tariffs, quotas, subsidies Competition Special interest issues Trade adjustment assistance Imports and exports Domestic price World price Outsourcing Offshoring OBJECTIVES Students will: Identify the gains to themselves and others, and compare the overall benefits and costs, of policies that alter trade barriers between nations (such as tariff and quotas) Explain why the benefits of trade barriers are highly concentrated, providing higher income and employment for producers of the protected products, while costs are spread widely across millions of consumers and firms that purchase the protected product OBJECTIVES CONTINUED… Students will: Review provisions in several U.S. laws passed in recent decades that provide special assistance to workers who lose their jobs because of international trade, and relate the rationale for providing this public assistance to workers to the distribution of costs and benefits of policies that promote or restrict free trade, as well as the overall gains from trade. DO YOU LIKE ANY OF THESE PRODUCTS? SWEET PRODUCTS What makes these products sweet? What happens to these products if the price of sugar increases? Today you will examine the effects on different groups in the economy resulting from high sugar prices caused by government policies that protect U. S. sugar producers from foreign competition TERMINOLOGY Domestic price of a product is the price that results when goods are traded within a country, with only domestic sources for both demand and supply. This is a closed economy because the market is closed to trade from other countries. World price is that of a product that results when goods are freely traded in nations all around the world, reflecting global sources of both supply and demand. QUESTION??? What happens to the domestic price of a good if imports of the products are reduced or eliminated by laws passed in a country that had been importing the product? What are several policies that restrict imports? TERMINOLOGY… What is the definition of these terms? Tariffs Quotas Subsidies VISUAL 1 Early 19th century, tariffs on sugar to protect Louisiana Purchase Southern plantation owners prior to Civil War demanded continued protection 1930’s import quotas placed on several products and production subsidies paid to U.S. sugar producers By 1945 many international agreements signed to encourage international trade Since 1981 U.S. sugar industry one of the most protected industries OUTSOURCING The sugar industry in the U. S. has a special protection even today. Why do you think? What is outsourcing? View visual 2 and discuss DEFINITION OF OUTSOURCING Outsourcing (or contracting out) is often defined as the delegation of non-core operations or jobs from internal production within a business to an external entity (such as a subcontractor) that specializes in the operation. It is the management and/or day-to-day execution of an entire business function by third party service provider. Source: Wikipedia IS THIS OUTSOURCING? The local hospital has hired a local company called Sanitizers-R-Us to perform all of its housekeeping services, from mopping floors to cleaning beds, surgical areas, and linens. The workers who perform these duties are employees of Sanitizers-R-Us, not the hospital. Is this an example of outsourcing? WHAT IS OFFSHORING? What do you think it is? View Visual 3 (next slide) OFFSHORING Offshoring is the movement of a business process done at a local company to a foreign country, regardless of whether the work done in the foreign country is still performed by the local company or a third party. Typically, work is moved due to a lower cost of operations in the foreign location. ACTIVITY ON SUGAR You will participate in a group activity that explores the costs and benefits of sugar trade restrictions form the standpoint of five different groups: 1. U.S. sugar producers/farmers (1.1) 2. U.S. consumers of sugar products (1.2) 3. U. S. Taxpayers Alliance (1.3) 4. U. S. workers helped by sugar policies (1.4) 5. U. S. workers hurt by sugar policies (1.5) SHOULD US POLICIES TO PROTECT THE DOMESTIC SUGAR INDUSTRY BE PROTECTED? Your handout provides information relevant to your assigned roles. Prepare for your role over the next 15 to 20 minutes A. Read your role B. Discuss important points about your role C. Develop a brief summary in your own words representing your role’s answer to the above question. D. Select a spokesperson to present the summary in one minute. DEBATE Opening statements by spokespersons: identify role and key arguments in your own words while the class takes notes. Debate: all students need to speak at some point. Challenge claims made by other groups but use a civil tone. Attack ideas and not people. Do not call people or groups names. AFTER THE DEBATE: PREPARE CLOSING STATEMENTS Consult with your small group. Prepare a closing statement which explains where they stand on subsidies: Change wording from opening statement and add additional information into your one minute presentation Choose a new spokesperson to present Time: 5 minutes to prepare and one to present WHAT DO YOU THINK IS THE BEST FOR ALL? In your small groups, think broadly now. You are no longer playing your role in real life. You are not playing the role assigned for this activity. What do you think the policy should be for the good of the country and its citizens? SUMMARY OF BENEFITS AND COSTS OF PROTECTING U.S. SUGAR PRODUCERS? As you read Visual 4, answer the following questions: 1. Has sugar production increased or decreased in recent decades? 2. Why? 3. Why can some countries produce sugar at a lower cost than the U. S. producers? 4. Who in the U. S. benefits from the government policies that support the domestic production of sugar? 5. Who in the U. S. is hurt by the government policies that support the domestic production of sugar? 6. From the point of view of society as a whole, are the benefits of sugar subsidies greater than their costs? 7. If U. S. sugar policies result in more costs than benefits, why are they allowed to continue? 8. How do sugar subsidies affect relationships with U. S. trading partners? YOUR FINAL CONCLUSION IS??? After reviewing all of the information one more time, vote publicly whether the U. S. should continue with its sugar protection policies. Would you answers change if you lived in a different region? What if your parents’ income(s) is (are) tied to the sugar industry and all subsidies are ended. What will happen? IF THE GOVERNMENT ENDS SUBSIDIES… Do you believe that the government should help workers who lose their jobs? If so, for how long? Should workers who lose jobs because of international trade issues receive more assistance than workers who lose their jobs for other reasons? TRADE ADJUSTMENT ASSISTANCE The U. S. and other countries have adopted Trade Adjustment Assistance programs to assist workers who are hurt by international trade and, in particular, by the reduction of termination of government policies that protected workers in some industries from foreign competition and imports. ACTIVITY 2 TRADE ADJUSTMENT ASSISTANCE PROGRAMS Besides helping workers, the AA Programs also help reduce opposition to agreements Unemployment tends to be in certain regions and this will help reduce hard impact Overall gains from allowing more trade will help provide for the above measures Politically these were needed to get the measures passed Do you think these measures should be temporary and limited or long term and more expansive? THE HIGH COST OF PROTECTING U. S. JOBS Read the statistics in Activity 3 What trends do you see? What are high trends and low trends? What types of costs are involved? What are secondary job losses? Did the U. S. protection justify these costs? Why or why not? PROCESS What are the key points of the lesson? Who wins and loses when the U. S. sugar producers are protected from foreign competition? If the overall costs of protecting U.S. sugar production are higher than the benefits, why does this program have enough political support to continue? If sugar protection is removed, what types of assistance would be available to workers who are hurt by this policy change?