Sep 15 2008

Globalization in a Balinese produce market

The summer before last, I spent three weeks exploring the mountains, beaches, volcanoes and temples of the Indonesian island of Bali. While crossing Bali’s central mountain range, I stopped at a produce market where local fruits, vegetables, coffee and nuts were brought in from the surrounding hills to be sold. As I strolled the market snapping pictures, I caught out of the corner of my eye a flash of a familiar shade of red. Upon closer inspection, I was surprised to find a “Blue Chelan” apple from Washington state (my home state!).

Washington apples in BaliI could not help but be shocked to see a fresh red apple grown on another continent in another hemisphere on the Eastern slopes of the Cascade mountain range of Washington state for sale in a farmer’s market in a remote village 60 km from the nearest port. It got me thinking about globalization, trade, specialization and comparative advantage. So I pose these questions to you, my Econ students:

Discussion Questions:

  1. How did a ripe apple grown 9,000 miles away in the United States end up fresh and shiny in a market 1500 meters up in the mountains of Bali? I mean, literally, HOW did it get there?
  2. Why would Indonesia import apples from so far away when surely it could grow apples domestically and avoid the hassle of transoceanic transport?
  3. Where did Indonesians get the dollars to buy US grown apples?
  4. How does trade between Indonesia and the US affect consumers? Producers? Is trade between these distant countries good or bad? Discuss.

About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

25 responses so far

25 Responses to “Globalization in a Balinese produce market”

  1. Caleb Liaoon 01 Jul 2007 at 11:56 am

    A ripe apple grown 9,000 miles away in the United States ended up fresh and shiny in a market 1500 meters up in the mountains of Bali because the producer of the apple, the Blue Chelan company, decided to expand their operations to Bali. Expanding their operations to Bali would mean that Blue Chelan would potentially be able to tap into the south-east Asian fruit market as well as produce apples at a lower cost to be shipped to the United States.

    The cost of the apple does not represent the true cost of growing apples alien to south-east Asia. The true cost of the mere presence of the apple in Bali presents a huge cost to the ecosystem in Bali. The introduction of apple trees to the environment will most likely have an effect on the native plants, as that is the common effect of most introduced species. Even if the apple were imported to Bali, the seeds left behind after the apple has been consumed presents a risk of an apple tree growing in Bali. The true cost of the apple would be 2,000 rupiah plus the cost of a disrupted habitat and loss of native species.

  2. Lucas Tophamon 05 Aug 2007 at 5:32 am

    1. The apple ended up in Bali because the company from Washington decided to sell apples in the Bali, where there are is little competition from other larger companies and the only other competition is from local farmers. Therefore, there is great potential for the Blue Chelan apple company to control the market, but only if the consumers in Bali prefer the apple over local produce.

    2. That apple has seeds within it and therefore has the possibility to grow in Bali, which would disrupt the native habitat because the apple tree would compete for sunlight, water and space against the local plants. The apple tree would also spread across Bali because the local animals would spread the seeds after they have consumed the apple across Bali. Therefore the true cost of the apple is the 22 cents plus whatever measures the Balian government would have to perform in order to remove the apple tree from Bali.

  3. Marco Garofaloon 09 Aug 2007 at 12:48 am

    1. According to the article, "Opening of Indonesia's market bears fruit for U.S. producers", http://findarticles.com/p/articles/mi_m3723/is_n4… after the Indonesian market opened up in 1991, they began importing most of their fruits. Add to this a growing middle class, and you have a perfect business opportunity for a company such as Blue Chelan.

    2. Presumably (mostly because it is not realistic to ship apples half way across the world for less than 22 cents each), the apples are grown in Bali.

    Presumably, they are grown in cleared fields, which would be otherwise used for other agricultural produce, and thus there is no extra direct environmental damage attributed to their arrival.

    If these assumptions are correct, then the price is a fair reflection of the true cost, and the only environmental impact would be the potential new diseases the foreign plant brings (much like the Europeans in the Americas in 15-16th century).

  4. Carloson 10 Aug 2007 at 2:03 pm

    A ripe apple grown 9,000 miles away in the United States ended up fresh and shiny in a market 1500 meters up in the mountains of Bali because it was exported from the US to Bali. Bali does not produce any apples, since apples require a cooler environment to grow., therefore apples need to be imported from elsewhere.

    2. It would probably be inefficient to ship apples from the US instead of other apple producing countries in Asia such as China. The costs and producing apples in the US and shipping them is probably much higher than 2,000 rupiah. The reason why this apple is sold lower than its costs could be because of subsidies that the US government gives to farmers. There are also costs to the environment of farming, which was not counted in the costs of the firm in producing each apple.

  5. Conrad Liuon 11 Aug 2007 at 1:41 pm

    A ripe apple grown 9,000 miles away in the United States ending up in the mountains of Bali can only have gotten there through export. Apples cannot be produced in Bali, and because apples have extreme popularity for its sweet taste, Blue Chelan takes the opportunity to further its influence into the Asian region.

    Furthermore, 22 cents in no way expresses the true cost of the Blue Chelan apple. The impact it would have on the enviornment in Bali could be staggering. Because of the cheap price, it can be assumed that the apples are raised in Bali. However, if this is true, then the fields and space required would be saved for the apples in question, while other native plants now have limited space. Also, by introducing a potentially popular fruit into Bali, other native plants and fruits sold will no doubt decrease in value or in popularity, thus throwing economical issues regarding exports and native foods into question.

  6. Karen Chenon 11 Aug 2007 at 6:05 pm

    The apple that was grown 9,000 miles away from Bali because it was exported there from the States. However, 22 cents is not the true cost of the apples in Washington. The apples in Washington are probably higher than 22 cents.

    Since Bali isn't as rich a place as Washington, they do not need to sell apples that are as expensive. If they do, life will be harder for the local people, even though it might not have as much an impact on tourists. However, the PPP (purchasing power parity) is higher in the USA so the apples are naturally more expensive.

  7. Jonathan Lauon 13 Aug 2007 at 7:41 pm

    1. The only explanation of how apples from Washington appeared in the mountains of Bali is through importation. Yes, apples do have seeds, but the climates of Washington and Bali are vastly different so there is no way the same type of apples could have been produced in Bali. One of the reasons why the Blue Chelan apple company might have exported their apples to Bali could be to expand and further develop their company in one of the fastest growing economies in the world: Asia.

    2. Twenty two cents definitely does not represent the true cost of the Washington apple. The low cost once again brings us to the question of where the apples were produced. If they were imported from Washington, then their price would not be that cheap. Therefore, regardless of the climate, the apples could have come from apple trees planted in Bali. If this is the case, then the apple trees would affect the environment drastically by disrupting the habitat. Space would be required to plant the trees; this would directly impact the native animals and plants in Bali by limiting the space of their environment.

  8. kajon 14 Aug 2007 at 4:55 pm

    1. The company which is based in Washington decided to sell their apples in Bali where there is little competition from other big companies and therefore they send the apple to bali. This much larger company produces many more apples than the local farmers therefore if the local people prefer the American apples, they could control the entire market.
    2. Apples have seeds within it and could therefore also begin to grow in Bali, this would make an impact on the native habitat. The trees would compete with other trees for resources and the apples would provide more food for other animal species. These animals could spread the seeds around the island and cause the apple tree to spread across Bali. Therefore the true cost of the apple is 22 cents and the cost of the measures that the Balian government would take to prevent apple trees to spread.

  9. Dannyon 14 Aug 2007 at 10:59 pm

    1. The company based in Washington saw an opportunity to make money in Bali and is thus now appearing in the fruit market in Bali. There is probably less competition in Bali with other American fruit companies and thus profits are likely.

    2. Seeing that the cost of transfering apples from the USA to Bali would cost more than 22 cents per apple, it is safe to say that the apples were not shipped from America. The Washington company puts the logo on the apples to persuade buyers to buy their seemingly good foreign product.

  10. Jenny Kimon 15 Aug 2007 at 12:07 am

    1. The apples ended up in Bali because the company that produced the apples, the Blue Chelan, thought that they would make more money in Bali, where less competition is required for them to make money. It will also be easier for the company to take control of the apple market in Bali since there are no bing companies to compete against, other than the local people who sell apples.

    2. If the apples were really imported from USA, they would cost more than 2000 rupiah. Thus, it is likely that they were produced in Bali, and then the company put their company lable on it to make it look better. Growing the apples in Bali would affect the ecosystem of Bali since the apple tree itself would have to compete with the local apple trees for more sunlight and nutrition.

  11. Sunny Kimon 15 Aug 2007 at 2:07 am

    1. A ripe apple grown 9,000 miles away in the United States could end up fresh and shiny in a market 1500 meters up in the mountains of Bali because the Blue Chelan company decided to expand their market to Indonesia. Bali is a famous leisure island, and probably thousands of people from various countries visit Bali every year. The Blue Chelan company, knowing that more people equals more demand, exported their apples to Bali, so they can make a big profit in Southeast Asia. Moreover, since it's obvious that Bali is a less competitive area than America, the Blue Chelan decided to target Southeast Asia.

    2.The cost of the apple, 2000 rupiah, does not represent the true cost of the Washington apple. As we know, Indonesian people are not as rich as people in the United States. Therefore, probably the Blue Chelan company have lowered the price of the apples, so Indonesian can afford the apples. Or, the Blue Chelan company have grown the apple in Indonesia with seeds from the apple.

  12. Jessica Ngon 15 Aug 2007 at 8:02 pm

    Discussion Questions:

    How did a ripe apple grown 9,000 miles away in the United States end up fresh and shiny in a market 1500 meters up in the mountains of Bali?

    The apple cost 2,000 rupiah (that’s about 22 cents). Does this represent the true cost of the Washington apple? Describe the environmental implications of that apple appearing in the mountains of Bali.

  13. Jessica Ngon 15 Aug 2007 at 8:15 pm

    1. It can be presumed that these apples must have been imports from the United States to Indonesia. As there are no other huge competitions of apples in the Indonesian market, it is easy for the Blue Cheplan, a successful apple company from the United States, to gain almost a monopoly to the apple business in Indonesia. The other local apple farmers not much of a "threat" to the Blue Cheplan.

    2. 22 cents for a Washington apple does not represent the cost of the Washington apple. A Washington apple cost much more than that in the states. Therefore, one can presume that these apples must be grown in Bali rather than being imported directly from the United States, as that would be quite expensive. Other than the fact that the Indonesians have less purchasing power than Americans, the only explanation is that these apples are grown locally in Bali. However, this might in turn have a negative impact on the Bali local fruit markets as the Blue Cheplan is now a huge competition on the market, thus "in threat" to the other local fruits.

  14. Wan Jin Parkon 16 Aug 2007 at 10:28 pm

    1. As Thomas L. Friedman well and comprhensively explains in his The World Is Flat, the almost terrifying rate of globalization has allowed a food from one part of the world to arrive at its opposite side in its still fresh state. Friedman discusses the example of finding fresh Sushi in an area completely isolated from bodies of water.

    2. 22 cents will represent the true cost of the Washington apple if the seeds of the Washington apple has been grown locally in the mountains of Bali. Even if the apples are grown using cheaper labor and supplies, the apples will still be Washington apples as the seeds used to grow them would have derived from Washington apples. Having said that, I, however, cannot rule out the possibility that the apples are "knock-offs." Can it be possible that local apples have been labled with stolen Washington apple stickers? Having lived in China for 11 years, I find that idea also quite possible…

  15. BjornKvaaleon 15 Sep 2008 at 9:31 pm

    The apples that were grown in Washington State ended up in Bali by some means of international transportation. The Blue Chelan company set up a trade agreement with the Balinese government to export the apples to Bali.

    Indonesia imported the Washington State Apples because international trade is beneficial to everyone. Although one nation might have an absolute advantage in producing products, trade is based on comparative advantage. The United States has a comparative advantage/a lower relative opportunity cost in producing apples over Bali. Indonesia, on the other hand, has a comparative advantage in producing another product than the United States. Therefore, the two nations decide to trade with one another!!!

    Indonesia probably did not get US dollars, but instead traded one of its products with a lower relative opportunity cost for the Blue Chelan apples.

    Trade between Indonesia and USA gives the consumers more variety in products, but more importantly, the products are cheaper. For example, many cheap goods are made in Indonesia and sold for cheaper prices in America than American goods. Trade is also good for the producers because they can export more products to other countries than only inside the United States.

    Trade is beneficial to everyone. Both Adam Smith and Abraham Lincoln believed that trade is not beneficial. Abraham Lincoln believed, "What is the reason to trade with England for railroad tracks when we could produce it ourselves?" The reason is that some countries are better than producing goods cheaper and more efficiently than others. In the end, it is all down to minimizing cost and maximizing profit.

  16. Bastien Vogton 16 Sep 2008 at 3:55 pm

    The apples grown in Washington were transported to Bali. I believe that the "blue chelan" label is expanding and has found a market in south-east asia because there is little competition there except for farmers, whose prices the label can easily beat.

    Growing apples in bali would change there whole agricultural system, at the moment no apples are growing and the people are surviving with there crops and little imports. If apples were to be grown it would take the place of another good being grown in Bali and it would disrupt the habitat. When the blue chelan labels sells in Indonesia they lower there prices, of course the price of an apple in the U.S is more than in Bali.

    I believe that trade between these countries is good but should be kept at a limit. If the U.S would import to much it would many local farmers out of business. On the other hand if the U.S bought more from Bali they could sell it at a high price.

  17. Zac Queryon 17 Sep 2008 at 12:49 am

    How did the Washington-grown apples end up in Bali? Most likely via ship or air freight, but that's not important. The real question is why. Why would Bali want Blue Chelan apples from a country on the other side of the world? Based on our discussions in class, the answer deals with comparative advantage. Initially, it may seem like more of a hassle to ship apples from the US, but take into account all of the resources that Bali would have to dedicate for the production of their own apples and the answer is obvious. It is cheaper for Bali to buy apples from the United States than for them to grow their own apples, so that's what they do. In return, Bali may be better suited for making bamboo furniture than the US, so they'll trade that with the US. Based on this scenario, each country has a comparative advantage with their perspective goods. Therefore, if the US specializes in apples, and Bali in bamboo furniture, trade between them would be mutually beneficial. Where would Bali get dollars to buy American products though? Continuing with this example, they would buy the apples using dollars received from selling their bamboo furniture to the US. This interaction is positive for all parties involved. It is beneficial even for the former American producers of bamboo furniture who can no longer compete with Indonesian quality. The "invisible hand" would simply shift their resources to the apple industry, which is expanding as a result of the increased demand. Trade agreements, like these, based on comparative advantage occur every day, and are found in global, national, and local markets, making it a characteristic of both macro and micro economics.

  18. Justus Poeschlon 17 Sep 2008 at 2:24 am

    Okey the first question is pretty easy. "Blue Chelan" must have exported their apples, per ship, or per plane to Bali, because Apples in Indonesia are scarce, or not as good and "Blue Chelan" can make lots of money out of it, especially, since there isn't a lot of competition going on in that region, except perhaps from different farms. This will also answer the second question, to why Indonesia would import apples from the U.S. They are just sweeter and taste better, than the Indonesian apples would.

    To the third question, where the Indonesions got the money from. Of course they are selling their products on the market as well. Gold for instance is a very valuable resource and will get them lots of money, if they sold that, plus they can make the price very expensive, because gold, or copper is a scarce resource.

    For the U.S. trading with Indonesia is very good, for you don't get gold any day. Indonesia will profit as well from trading with the U.S. because their apple production is not as good, as in the U.S. and so both countries will profit from each other.

  19. Dominic McNameeon 17 Sep 2008 at 3:28 am

    The apples would have probably been shipped to Bali. Then transported by truck to the destination. Although this sounds expensive, with the number of apples being transported the cost would soon be covered.

    India might also not have the best conditions to grow apples, either it would be impossible to grow them or they would not produce enough apples for the amount of space it takes for the company to make money.

    The Indonesians probably got the money to buy these apples by selling manufactured goods to the US,. this would be because it is cheaper to manufacture stuff in factories in Indonesia while it is cheaper to grow apples in the states.

    The trade between Indonesia and the USA is a good thing because it allows the Indonesians to get their apples and the Americans to have their manufactured goods.

  20. Yael Burlaon 17 Sep 2008 at 5:08 am

    The method of transportation that brought the apples from your home town to Bali was through ships or planes. The reason, however, is because the two countries came to a decision which involved each nation specializing in a specific product and then trading with each other so that the maximum could be produced and the costs could be minimal. This is shown through the definition of comparative advantage, where even though Washington State might have the absolute advantage in this trade, it might not have the comparative one. In return, the Indonesians paid for these apples by selling their goods to the U.S., which would be considered as their payment method. This system proves to be effective, since it results in a mutual benefit, where both nations produce the same goods better and for lower prices than if they were to produce them in their own nations without each other's help.

  21. Joelon 17 Sep 2008 at 6:22 am

    To the first question of how did the apple get to bali; the obvious answer is that it was grown in Washington state by some American farmer and sold on to a firm which transported it across the world to bali (after spraying it with goodness knows what, thus the shinyness).

    But why are American apples ending up in Bali. An answer to this can be found in the massive agricultural subsidies which the US government is providing their farmers with. This allows them to compete on the global market, since as subsidies are a payment per unit to produce, apples may be produced by American farmers at artificially low prices. Evidently the price at which these farmers are producing justifies flying apples all the way to bali, as it is lower than that of the domestic market.

    I would refute the question about the "hassle" of importing these apples to indonesia. Where's the hassle when you get an apple for cheaper than at home? With lower prices for American goods such as apples, there is a clear economic incentive for Indonesia to import such products.

    Indonesians must get their dollars through a trade balance, ie. they sell goods to America in which they have comparative or absolute advantage.

    Clearly, what we are seeing here is a negative externality in production caused by government intervention. The government is paying farmers to produce in excess of demand, making it a neccessity to trade abroad. However, this type of globalisation also results in externalities such as pollution from the transport of goods, and possibly the collapse of another domestic market no protected by tarriffs.

  22. Daniel D'Amicoon 17 Sep 2008 at 4:16 pm

    Apples could of gotten there via plane. I am sure the reason it is there is due to specialization and trading. If Washington can produce more apples faster than Bali with less of an opportunity cost then it has the comparative and absolute advantage over Bali in producing apples. Bali could of had the comparative advantage in producing something else and the two could of traded. Indonesia was able to buy the apples with U.S dollars because the United States loaned them the money in order to do trade.

  23. mikewilkeson 17 Sep 2008 at 4:48 pm

    1. How did a ripe apple grown 9,000 miles away in the United States end up fresh and shiny in a market 1500 meters up in the mountains of Bali? I mean, literally, HOW did it get there?

    2. Why would Indonesia import apples from so far away when surely it could grow apples domestically and avoid the hassle of transoceanic transport?

    3. Where did Indonesians get the dollars to buy US grown apples?

    4. How does trade between Indonesia and the US affect consumers? Producers? Is trade between these distant countries good or bad? Discuss.

    1) The quality of applies in bali could be alot worse than in the US, leading for a higher demand of better apples, this could have led to this company spending a good amount of money to ship the apples all the way there, because the profit they would make would still be good, maybe even better than in the US because of the demand.

    2)Maybe they could grow their apples domestically, but it might be the case that it is alot harder to grow them, and it simply uses up too much of their resources so it in the end isnt worth growing their own. They can concentrate on growing something else then that they produce better than the US.

    3)They probably got the US dollars, from selling their products to the US/ or the US has lent them money, which they then use to buy the apples.

  24. Rocio Perezon 29 Sep 2008 at 12:04 am

    I agree with Mike Wilkes in that a reason for why an apple cultivated in America would end up in sale in Bali would be simply because it is in higher demand than the Bali apples due to its better quality. The climate and conditions in the US are probably more suitable for the production of apples, which brings us to specialization, a big reason for trade. Even if two countries can produce the same products, if one country puts most of its effort into the production of a certain product, it will probably result in a better quality product. For this reason, countries trade with each other to attain higher quality products than if they had produced something themselves. Yet another reason for trade could very well be that the US produces a surplus of apples and takes advantage of the situation by selling it to other countries. Of course this affects the consumers because now they can consume better products (and help maximize utility). Producers are also rewarded with trade because a product from another country, could be more demanded than a product in the country itself, so to achieve higher profits the producer must choose whatever is most demanded. Indonesians would have figured out that the American apple is highly demanded and a worthwhile investment regardless of where it comes from (as long as the revenues exceed the expenses, and a decent profit is made).

  25. Flatware Setson 04 Dec 2010 at 2:09 am

    Venus Raj really looks very pretty on the pictures, she is very photogenic .;~