Public
FTAA.soc/civ/127
March 5, 2004

Original: English
 

COMPETITIVE ADVANTAGE: ABSOLUTE OR COMPARATIVE, SO WHAT IS THE TRADE-OFF?

A lot of financiers, traders, business people and even scholars have pointed out and argued that the FTAA has been made up by the USA as a trick to sell outdated, old-fashioned and obsolete stocks to the second and third-world countries associated to this “JOINT-VENTURE” if, so, free trade areas are not worth it !!!

Looking back to the EFTA (European Free Trade Association), though, all of the partners are first –world countries. EFTA never succeeded, it had to tear apart and each individual country went with either the EES (European Economic Space) or the EU (European Union). Now the whole union has a stronger market power

The EU is working because the strongest economies (France and Germany) had to be kind and they gave generous donations to the less developed countries (Spain, Portugal, Ireland and Greece). The good thing on it was that THERE IS NO THIRD WORLD COUNTRIES joining or previously joined the EU (we all know that most European countries have good rates of educational coverage and a decent stock of human resources)

In the case of The Americas and according to the documents provided by the UNDP (United Nations Development Program) we have got the following and thrilling scores: Argentina, Canada, Costa Rica, United States, Uruguay and Cuba, Chile, Bahamas, Saint Kitts And Nevis, Trinidad And Tobago and Mexico
are ranked as FIRST WORLD COUNTRIES. SECOND WORLD COUNTRIES: Antigua & Barbuda, Panama, Colombia, Brasil, Venezuela, Belice, Dominica, Saint Lucia, Surinam, Jamaica, Saint Vincent & Grenadines, Peru, Paraguay, Guyana, Granada, Dominican Republic, Ecuador, Bolivia, Honduras and Guatemala. THIRD WORLD COUNTRIES: Haiti

What is making the difference or where is the break-point ? Taking a look to each ensemble and comparing the elements inside their own ensemble it is clear for us that the competitiveness rate of the USA is so far away from Cuba. In fact, some services or industries do not exist in Cuba or are over regulated. The consumption levels in Canada are too far from those watched in Argentina, currently. The GDP per capita and the quality of life in Venezuela is on the top and such items in Guatemala are on the bottom. Is Convergence Feasible? Having into account all these noises and internal differences, are we playing a long-run game?

According to the classical theory, every economy and/or sub economy has to specialize on such goods it has the best of the best efficiency and cost-profit ratio even if the leader of the pack has the best of the best grades (they called to this phenomena: Absolute Advantage) and a closed economy or protectionism is claimed by all domestic entrepreneurs and local political authorities.

The comparative advantage comes from the monetary effect of the policy or technique named: beggar my neighbour in order to be able to sell local goods on foreign markets, most primary countries (those whose main supply for export is basically composed by commodities, harvests and raw materials) are always on the need of depreciating or devaluating its local currency against the US Dollar. Otherwise, if the real exchange rate remains constant through time, in the long-term the exportable supply would not be CHEAP or at least desirable to buy as it used to be. What is going to be the trade-off or the profit related to FTAA?

The deal and the business is simple. If the USA wants the FTAA for real, so then, the taxpayers will have to pay the price. How? Investing in technology, physical assets and capital, education not only in
those poor citizens in the USA but in the most of the Latin American countries as direct investment the Internal Return Rate will reflect in a lower rate of illegal immigration into USA, Canada or Mexico. The key issue in here is TRADE not CHARITY. Lowering taxes and tariffs (internal and external), elimination of bureaucratic procedures such as quotas, extraordinary levies, loans from government to government will decrease the gap between the poor of a wealth nation and the rich of a poor nation.