I'll Trade You

(Followers please read this forward before this entry to understand a bit what is going on:
http://schooled-related.blogspot.com/2011/05/just-forward-before-i-go-on-with-my-new.html)

Hello ITA members,

Thank you for choosing me to help you for choosing me to help out with the decision of expanding the United States' trade agreement with other countries. I'm happy to tell you I have done my part of this deal and have chosen to countries to decide from to be part of the US' trade agreement, these countries are Honduras and Hungary. But first, a little background on the countries to give you an idea of what we're working with...

Honduras:

Honduras is a country in Central America, much of the country lies along the Caribbean Sea. The country is mountainous with some coastal plains and because it is fairly close to the equator, in comparison to the US, it has subtropic climate resulting in a variety of tropical fruits and vegetables the US cannot produce. 

The country's economy is still developing, with a GDP of $33.77 billion as of 2010 and a growth rate of 2.5%, and is ranked 99 on the world ranking and considered to be mostly unfree. The current unemployment rate, as of 2010, is 5.1% but 36% of the population is unemployed or underemployed, making this a big issue for the country. The goals of the country are just like any other developing country's goals, to have a more open economy and to have economic growth.

Prominent in Honduras are mining industries, agricultural-based companies and industries, textiles, wood products, and cigar industries. Most of the people in the country work within these industries or agricultural industries; as mentioned above, Honduras does have many tropical species of plants and animals to that not many other parts of the world (excluding countries within the tropics, though, each country or continent has its own unique species) can't offer.

Honduras has absolute advantage over many things the US does not produce itself such as coffee beans or other tropical agricultural products or animals (example would be certain types of fish). Honduras has comparative advantage over the US in manufacturing clothing and textiles due to the fact they can produce it just as efficiently for a cheaper price.

Hungary:

Hungary is a landlocked country in Europe with relatively flat to rolling plains and few low mountains. The country has 2 main rivers the run through the country; one of them, the Danube River, runs through Budapest. The country's land is fairly fertile, 85% of the country suitable for agricultural purposes.

Hungary's economy, like Honduras, has a moderately free market economy and is still developing with a ranking of 51 on the world ranking; the GDP being $132.3 billion as of 2010 and has a growth rate of 0.8%. The goals of the country are to lower the unemployment rate, reduce debt to 65-70% by 2014/2015, and continue economic growth.

Industries prominent in Hungary are mining, construction materials, processed foods, textiles, chemicals, parts for tvs and computers, and automobiles. Most people in the country work for one of the industries mentioned above or other industries in connection with those. Hungary produces many of the same things the US, and many other parts of the world, produce and provide to our country for less.

Hungary would have absolute and comparative advantage over products such as textiles (comparative only) and pharmaceutical chemicals.  

1. Which country do you think would increase its success more in meeting the economic goals from expanding trade with the United States? Explain.

The country that I think would increase its success more in meeting the economic goals from expanding trade with the United States would be Honduras. My reason for this being that the country has decent products and items to offer to the United States that can't be produced there. We buy bananas, coffee beans, textiles, apparel, palm oil, gold, etc from there and many of those items the US can't produce because they're special products that are grown or found more abundantly in that country or sub-tropic/tropical parts of the world. Even if the US could produce it it would not be worth it because we can buy it from other countries, such as Honduras, for cheaper. So not only are we benifitting from it by obtaining new products but when we buy from the country it helps stimulate their economy and they benefit from this just like any other country would.

1. Based on your information about comparative and absolute advantage, explain which country the United States would benefit from most and why.

Based on comparative and absolute advantage, I think the United States would benefit more from Hungary than Honduras. Despite the fact Honduras produces more unique products, to a certain extent, Hungary provides us with materials and products that are more useful and for a cheaper price, such as pharmaceutical chemicals, machinery, parts for electronics, food products, etc. So with that in mind, you can see how it's more beneficial to us.

1. Considering your discussion and data on barriers to trade and free trade zones, which country would be easier to trade with from a political point of view? Explain.

Honduras would be easier to trade with from a political point of view because Honduras is part of the WTO, trade agreements (free trade agreement actually) with them are already present and we have fairly good foreign relations with Honduras. All countries part of the WTO benefit from lowered trade barriers, peace promotion, and stimulates economic growth for those countries involved.

1. Are any of these countries experiencing high inflation? How does inflation affect exchange rates with U.S. currency and, ultimately, the cost of trade? How else may inflation impact a society and the world economy?

Both Honduras and Hungary's inflation rate is between 4-5% as of 2010 (Honduras being 4.6%

 and Hungary 4.9%) , according to the CIA's website, while the United States is at about 1.4%. So both countries are experiencing a larger inflation rate than the US but not by too much; actually if you look at Honduras' inflation rate from 2009 to 2010 it has decreased. Inflation affects exchange rates in many ways, it can affect the USD by causing its value to decrease which not only affects the US but other countries too. As for the exchange rate and how inflation affects it increases it because the USD would be now be worth less so more many would be needed to match the old worth. Now countries have to pay more because their currency is worth less.

1. Are there other issues in either country that the United States should consider before entering trade negotiations? Discuss them. Examples may be human rights concerns, war, geography, other political issues, malnutrition or disease, transportation, or climate.

Hungary is fairly stable on the topics mentioned, the only thing I can think of that might have an impact would be some recent issues Hungary's having with the EU regarding some changes to their media laws and constitution. It's not that big of an issue that would require the US to really be cautious about. Honduras, on the other hand is a third world country that has many issues to consider. Perhaps the biggest ones are the facts that much of the people living within the country are unemployed or underpaid and as a result starvation and malnutrition are a big issue and disease too since those people probably can't afford treatment either. The country's living conditions are really beginning to improve compared to a couple decades ago. Another big issue are drug wars, which many Central and South American countries are having issues with which is posing danger to people within the countries and those coming to it.

1. To finalize, which country do you think would be a better trade partner for the United States at this time? Explain.

Despite the fact Honduras would probably benefit more from this the United States isn't really gaining much from it besides products, I think Hungary is the better choice because both Hungary and the United States benefit from it. Hungary's products are more beneficial to the United States since they are things we need to produce other products; in other words, many of their products are land resources for us. Not only do we benefit from their products but since they're more important and probably in higher demand the country would make more money. On top of this, the country is much more stable than Honduras politically and economically, although the country, much like the rest of the world, is feeling the effects of the recession they're doing much better than Honduras.

Citations used for this entire project:

1. Nepszava. Accessed April 4, 2011. http://www.nepszava.hu/articles/article.php?id=410989 .Honduras News.
2. Accessed April 4, 2011. http://www.hondurasnews.com/honduras-receives-five-years-of-aid/.
3. Honduras News. Accessed April 4, 2011. http://www.hondurasnews.com/honduras-invests-in-new-coffee-plantations/.
4. The Heritage Foundation. Accessed March 20, 2011. http://www.heritage.org/index/ranking.
5. Central Intelligence Agency. Accessed March 20, 2011
6. . https://www.cia.gov/library/publications/the-world-factbook/geos/hu.html#top.
7. Kormany.hu. Accessed March 20, 2011.http://www.kormany.hu/download/6/93/20000/Hungary%27s%20Structural%20Reform.pdf.
8. Trading Economics. Accessed March 20, 2011. http://www.tradingeconomics.com/hungary/indicators/
9. Central Intelligence Agency. Accessed March 20, 2011https://www.cia.gov/library/publications/the-world-factbook/geos/us.html
10. Nations Encyclopedia. Accessed March 20, 2011http://www.nationsencyclopedia.com/Americas/United-States-FOREIGN-TRADE.html
11. Trading Economics. Accessed March 20, 2011. http://www.tradingeconomics.com/honduras/indicators/
12. Central Intelligence Agency. Accessed March 20, 2011.https://www.cia.gov/library/publications/the-world-factbook/geos/ho.html
13. FPC. Accessed March 20, 2011. http://fpc.state.gov/documents/organization/47138.pdf.
14. CIA
15. . Central Intelligence Agency, n.d. Web. 22 Mar. 2011. <https://www.cia.gov/library/publications/the-world-factbook/geos/hu.html>
16. 16. Interntional Trade by Suit 101. N.p., n.d. Web. 22 Mar. 2011. <http://www.suite101.com/content/hungarys-top-exports-imports-a48064>.
17. 17. Productfrom. N.p., n.d. Web. 22 Mar. 2011. <http://www.productfrom.com/country/HU,0,0/0/0/1/>.
18. 18. Wikipedia. N.p., n.d. Web. 22 Mar. 2011. <http://en.wikipedia.org/wiki/Economy_of_Honduras>.
19. 19. US Department of State. N.p., n.d. Web. 22 Mar. 2011. <http://www.state.gov/r/pa/ei/bgn/1922.htm>.
20.  
21. 20. CIA. Central Intelligence Agency, n.d. Web. 22 Mar. 2011. <https://www.cia.gov/library/publications/the-world-factbook/geos/ho.html>
22. 21. Euro-Lex.Europa.eu. Accessed March 23, 2011. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:1994R3286:20080305:EN:PDF.
23. Foreign Trade Exchange. Accessed March 23, 2011. http://www.foreigntradeexchange.com/countries/hungary.html.
24. Trade Compliance Center. Accessed March 23, 2011. http://tcc.export.gov/Trade_Agreements/All_Trade_Agreements/exp_005349.asp.
25. Wiki Answers. Accessed March 24, 2011. http://wiki.answers.com/Q/Advantages_and_disadvantages_of_wto.
26. WTO. Accessed March 24, 2011. http://www.wto.org/english/thewto_e/countries_e/honduras_e.htm.
27. Foreign Trade Information Center. Accessed March 25, 2011. http://www.sice.oas.org/ctyindex/USA/ftbhon2006_e.pdf.
28. Wiki Answers. Accessed March 25, 2011. http://wiki.answers.com/Q/What_are_the_Advantages_and_Disadvantages_of_the_European_Union
29. OANDA. Accessed April 5, 2011. http://www.oanda.com/currency/converter/.