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The author of this article argues that the country of Sacchar can best solve its current trade deficit problem by lowering the price of its main export, sugar. The lineof reasoning is that this action would make Sacchar more competitive with other sugar- exporting countries, thereby increasing sales of Sacchar's sugar abroad and, in turn, substantially reducing the trade-deficit. This line of reasoning is unconvincing for a couple ofreasons. In the first place, this argument is based on an oversimplified analysis of thetrade deficit problem Sacchar currently faces. A trade-deficit occurs when a country spends more onimports than it earns from exports. The author's argument relies on the assumption that earnings from imports will remain constant. However, the author provides no evidence that substantiates this assumption. It is possible that revenuesfrom imports will increase dramatically in the near future; if so, the course of actionproposed by the authormight be unnecessary to solve Sacchar's trade deficit problem. Conversely, it ispossible that revenues from imports are likely to decrease dramatically in thenear future.To the extent that this is the case, lowering sugar prices may have a negligible countervailingeffect, depending on the demand for Sacchar's sugar. In the second place, increasing sales by lowering the price of sugar will notyield anincrease in income unless the increase in sales is sufficient to overcome theloss in income due to the lower price. This raises three questions the author fails toaddress. First,will a price decrease in fact stimulate demand? Second, is demand sufficient to meet the increase in supply? Third, can Sacchar increase the sugar production sufficientlyto overcome the deficit? In the absence of answers to these questions, we cannot assess the author's proposal. In conclusion, the author provides an incomplete analysis of the problem and, as a result,provides a questionable solution. To better evaluate the proposal, we wouldneed to knowhow revenues from imports are likely to change in the future. To strengthen the argument,the author must provide evidence that demand is sufficient to meet the propose dincrease in supply, and that Sacchar has sufficient resources to accommodate the increase.
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