International Trade in Services.pdf - DSpace at Khazar University

Market Structure, Liberalization, and Trade 149
monopolies in the sale of goods such as gasoline, pharmaceuticals, tobacco, and
alcohol. Privatization in the distribution sector has therefore not produced the
large opportunities for the foreign direct investment (FDI) that have arisen in
many other sectors. There has been little cross-subsidization and price control by
governments apart from price setting for a few basic foodstuffs and the types of
products mentioned above.
In assessing the impact of trade liberalization on consumer experience, the
governments of developing countries could consider whether they wish largely to
follow a typical pattern of retail market development by permitting the top global
grocery firms (that is, mainly the major European retailers) to expand into the
local market. Such global chain supermarkets would likely act as gatekeepers for
food production that puts profit before quality, the environment, or public health
because they make more money by selling bland processed food. Such products
would be sourced from a few large and captive suppliers, and the terms and prices
imposed on farmers would encourage intensive farming rather than more qualityconscious
producers. This approach rewards volume and standardization, not flavor
or biodiversity. These supermarket chains would eventually also place convenience
outlets on main streets, typically stocking prepared foods with a rapid
turnaround and a low proportion of fresh unprocessed food. This would make
shopping in city centers an anonymous experience without attraction. Although
many fruits and vegetables do not naturally stay fresh for more than a few days,
they are offered because supermarket advertising teaches suppliers to harvest
green and backward produce that looks acceptable on shelves and does not rot
quickly even if it is tasteless. Few supermarkets stock the raw materials for traditional
home food preparation, instead offering restaurant-like instant meals so as
to improve profitability, with the added value to the basic raw ingredients provided
solely through food processing and packaging.
Market liberalization in the distribution sector often entails
significant adjustment costs
The positive effects of increased foreign participation will be greater if there is
adequate regulation and if trade liberalization is carefully sequenced. If regulatory
policies are not in place or are poorly coordinated with trade policy, the potential
gains and sustainable development are likely to be compromised. The social risks
arise from the crowding out of the mom-and-pop stores operated by families in
urban areas. This can have a severe social impact through the unemployment generated
following the establishment of more productive supermarkets, and it can
also create a gap in the provision of retail services between city centers and outer
urban and rural populations. The smallest food producers may lose their retail
clients and thus their livelihoods.