General economics concepts and principles

¶ … Economics

The issue of "liberal immigration of non-professionals" can be compared to a similar process going on in the European Union. As we know, 10 new countries, many of them from Central and Eastern Europe, have joined the European Union in May 2004. This meant a high increase in the number of non- professionals who now had free access to the European labor force market. Second of all, the countries that have not yet entered the European Union, but are due in 2007 (Romania and Bulgaria), no longer face the visa requirements and many non- professionals from these countries have gone West in search of work. The obvious consequence of this measure was that, similarly to the United States, a certain surplus on the labor market is quite noticeable. Such a surplus and the difference between high offer and lower demand mean a reduced possibility of reducing unemployment, both in the United States and the European Union.

B. Again, the comparison with the European Union comes to mind. Here too, anti-trust and competition regulation find themselves facing the same problem: how can one limit the overwhelming monopoly power on a national basis, but, at the same time, maintain powerful companies for the increasingly competitive global environment?

Any anti-trust legislation needs to best cover and counterbalance these two different aspects. In my opinion, the anti-trust laws are in no way outdated, because we have not seen one single case in which a company was forced to give up some of its assets in order to respect anti-trust laws and has subsequently grown less competitive on a global basis. Of course, we can relate to the famous Microsoft example. However, the application of the anti-trust legislation in this case did not mean that Microsoft's global position was in any way undermined: Microsoft remains the number one global software player and will probably remain number one for the following period of time as well.

C. Both of these statements are clearly correct. Indeed, the sports industry is a leisure industry and, as such, can be deemed as not critical to economical progress or the quality of life. Second of all, this is perhaps not the best example that can be given in this case.

In my opinion, one of the best examples of cartels may come from the European Union, where several pharmaceutical companies, including La Roche, formed a cartel that operated at a continental level and that included price regulation and dividing the suppliers between the members of the cartel. Obviously, this cartel had a direct impact on the competition in the European Union area and the European Commission fined each of the members with significant amounts, the fine for La Roche nearing 400 million euros.

D. Perhaps the most notable example of protected industry in the United States is the steel industry. Indeed, in order to ensure that the industry and products remain internationally competitive, the United States government has placed the steel industry among the highly protected ones. Protection in this particular case includes governmental subsidies.

The role of governmental subsidies is quite simple in its fundamentals: the United States government practices it in order to enable the local steel producers to practice lower prices on the international market and, thus, to be more competitive from a price and cost perspective.

Another industry that could be discussed, at a somewhat more moderate level, is the automobile industry. The increased competition from Japanese carmakers on the international market led the government to provide extra means of protection. This included different import barriers, non- tariff oriented mainly. However, the response on the Japanese part was quite quick and very effective: instead of exporting their products to the United States, the Japanese carmakers preferred direct implantation in the U.S. As such, they succeeded to somewhat evade the protectionist means that were imposed and have subsequently invaded the U.S. car market.

E. In my opinion, the drug industry is somewhat more sensitive than others, mainly because different protectionist measures, most of them less orthodox can be efficiently used to discourage imports and distort free trade. I am considering here different sanitary restrictions, medical related, as well as other technical related obstacles.