Summary on Part I of Rivoli's Book

Compared with an idealized, pure market theory, the American cotton market that Rivoli discussed in his book is protected from competition. Unlike in a perfectly competitive market,  the US cotton producers are guaranteed the supply of labors at a reasonable wage rate, despite the market supply and demand for labor, especially during harvest period when the market demand for labor peaks. Also, the US cotton producers are protected from a multiple of market risks with government subsidies that ordinary cotton farmers face in other countries. As a result, the US are able to preserve a dominance in the world cotton market with high comparative advantage.

Rivoli distinctly denotes that many American farmers demonstrate remarkable adaptability and entrepreneurial spirits, as opposed to the tradition-bounded farmers in poor countries. He specifically narrates the story of Eli Whitney, who famously invented machine upon the stated needs of farmers and tremendously improved the productivity of cotton farmers. As an interesting contrast, Rivoli immediately made an investigation into how India and China, the two supposedly strong competitors in cotton industry, did around the same period in history. It turned out that these two oriental countries were reluctant to give up old methods and explored new ones, however more efficient the new ones might be. The entrepreneurial characteristics in American farmers gives rise to the technology boom in the US, which makes the US dominance on cotton possible.

What surprises me the most in this section is the persistent use of subsidy by the government in the US. As I have learnt in International Trade, production subsidy will create production distortionary cost, implying that though more farmers are engaged in the production of cotton, not all of them producing most efficiently; some of them might simply be more productive if they work elsewhere. Thus, the entire country's relative productivity in cotton should be reasonably assumed to lower. This should hinder the US from continual dominance on cotton. However, Rivoli concludes that since the US plays a big role in the world's market for demand and supply, the US can influence the world price effectively. The decreasing world price resulted from increasing world supply crowds out competitors from other countries who do not benefit from a production subsidy. Thus, the US are able to enjoy a sustainable dominance on cotton. This is quite different from the traditional international trade theory that I have been exposed to, and I am eager to read more on subsidy in the other sections of the book.