Intb 300 Portfolio Essay
The article titled “Brazil Seen Beating US in Soybean Trade as China Buys” discusses the rising production of soybeans in Brazil. The US is currently the largest grower of the product and therefore holds a comparative advantage in trade amongst nations. Rising supply from Brazil will create competition for the business of the largest demand which is held in China. “Production in Brazil climbed 53 percent in the past decade, compared with 7 percent in the US” (Javier, Chanjaroean, 2012). In 2012-2013, Brazil is said to produce 81 million tons of soybean as compared to 77.84 million tons in the US which portrays Brazil’s comparative advantage (Javier, Chanjaroean, 2012). China has imported 59.2 tons of soybean in the year ended September 30th of which, 45 percent were produced in Brazil and 39 percent were from the US. China utilizes soybeans to create meal for livestock and fish, and to produce cooking oil. It is clear that the US is losing its competitive edge on the production and distribution of soybeans mainly because it no longer possesses the comparative advantage in production. This analysis will discuss what enables a country to rise above its competition via the creation of comparative advantage in trade. Comparative advantage is the “theory that countries should specialize in the production of goods and services they can produce most efficiently” (Hill, McKaig, pg.170). Many countries are able to produce goods better than others due to factor endowments which are brought out in the Heckscher-Ohlin Theory and in Porter’s Diamond. Factor endowments are the extent to which a country is endowed with resources such as land, labour and capital (Hill, McKaig, pg.177). Costs are lowered if the resource is more abundant. With the case in Brazil, an increase in production due to more land available allowed for the increase in exports to China. This gave Brazil the competitive edge over the US who experienced a shortage in production of soybean due to drought.
References: Hill, C., McKaig, T. (2012). Global Business Today. (3rd Canadian Edition). Toronto: McGraw- Hill Ryerson Limited. Javier, L. A., Chanjaroean, C. (2012, October 31). Brazil Seen Beating U.S. in Soybean Trade as China Buys. Bloomberg. Retrieved from http://www.bloomberg.com/news/2012-10-31/brazil-seen-beating-u-s-in-soybean-trade-as-china-demand-surges.html