Monday, July 31, 2006

Iraq to Join WTO (10/1/2005)

Reprint: October 1, 2005.

According to Omar from Iraq the Model, the Iraqi government has been invited to join the WTO as soon as some conditions have been met. Apparently, Iraq is going to have a free market economy!

The WTO and IMF have promised $40B over a number of years in the form of loans and grants to be used for reconstruction and development. This will also aid them with a hand-up to join the WTO.

In return, Iraq has to meet a few requirements which do not make everyone happy. Then again, any transition usually has difficulties. One of these requirements is to end all subsidies. These include food rations, gas, electricity, etc.

There is a flaw in this move, however. The government is not being transparent. They shall find out soon enough that in a democratic society just how wrong this is! If the people do not trust you, you will not stay in office. That is a good lesson for us here at home, hint, hint.

Another problem is that right now there is a shortage of food and basic items. The government has been discussing, however, giving money instead of food rations. Other than that, when the government is asked about this, they hem and haw.

Now for a little ECON 101. The difference between cost and price is that "cost" is what is incurred in bringing the product to you. "Price" is what you pay for the final product. This is to help with the following discussion. If someone can bring fuel at a lower "cost," it will be a lower "price" for you. That is where the smuggling comes in.

The smuggling of fuel seems to be a very big problem. This is happening because of the terrorist attacks on the oil wells and pipe lines, which increases the price of gas and oil. Also, neighboring countries have less "cost," so Iraq is not making their market share. This is beginning to devastate their economy.

Once the fuel is no longer subsidized, the free market will determine the cost and price of fuel. The government will no longer be able to manipulate the cost and price. Omar believes a free market will solve this problem, as well as many other problems. Have a nice day!

Source: Omar of Iraq the Model.
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