Posted by: bklunk | April 8, 2007

Tit for Tat

This seems to be a part of general US approach of getting tough with China on trade issues.  The US is also bringing a case to the WTO charging that China is not meeting its WTO obligations in protecting intellectual property rights.

US imposes a tariff on China’s exports

source:http://a.exportfocus.com/index.php/2007/04/05/will-new-china-tariffs-hurt-us-consumers/

 The US has reversed a 23-year old policy that discourages tariffs on Chinese imports

China’s ministry of Commerce did not receive this very well. It is urging the US to reconsider its decision.

Angering China will not be that beneficial for US-China trade relations.

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Responses

  1. Angering China probably isn’t the best to do considering that they are one of the major trading partners. But at the same time, I can see the concern for China not meeting its obligation in protecting its property rights. According to China’s ministry of commerce in China, they think they are keeping a firm hold on enforcing intellectual property rights and making progress, yet the level of piracy and the counterfeiting is still really high. This is a big deal to the US, and it’s not hard to see why, it’s obviously hurting American product. So even though China is considering undermining trade between the countries, it seems as thought the US is already in search of a back up plan. Administration officers are pressing on congress to approve and pass pending trade deals with other countries, including Korea. It could get ugly; we will have to see what happens.

  2. By imposing these tariffs on some Chinese exports, then the United States is explicitly causing an increase in the price of Chinese goods imported into our country. Americans will be swayed to buy fewer Chinese imports and substitute other goods at cheaper prices. It is not implausible to think that the Chinese would be quite angry over these actions taken by the United States. However, it might be more of a message to the Chinese government that they need to take a little more accountability for those things they implement and those things they overlook. It will definitely cause them to take notice of areas the U.S. is weary of because the Chinese obviously do not want a drop in exports. China is a major trade partner for the U.S. so it will be interesting to see how this turn of events plays out.

  3. According to the CNN article, “New China tariff: Are U.S. consumers at risk?” the imposed tariffs on subsidized goods seems to be a response by the U.S. government to the record $232.5 billion trade deficit with China. The U.S. trade relationship with China seems to equal a no win situation. If we tax subsidized goods such printer paper, which is a necessity in the U.S., then American consumers will suffer economically as higher priced imports increase inflation. However, if we continue to increase our trade deficit with China, we will displace more domestic production and jobs, as well as further diminish our previous hegemonic status within the economy.
    On April 10, 2007, the U.S. also declared additional protectionist attempts against China. The U.S. stated that it would file a complaint against China over widespread piracy of copyrighted DVDs and CDs with the World Trade Organization on Tuesday, April 11, 2007. William Tabb described recent WTO cases in “The Amoral Elephant,” such as the banana war between the U.S. and European Union and disputes over genetically modified crops. Although trade conflicts over bananas may seem like minor issues, the precedents of the WTO can “give long term advantage to winners (Tabb132).” Knowing that the U.S. holds a comparative advantage in technological goods, this may also assist in reducing our trade deficit if the WTO rules in our favor.
    The U.S. should rethink its protectionist efforts against subsidized Chinese goods. . First, the U.S. can use other means to discourage imports such as quotas. This will reduce our trade deficit, allow us to maintain low inflation, and reinstall some of domestic jobs. Secondly, we seem to have a legitimate case against China, which may also assist in reducing our trade deficit.

  4. Personally, I find the relationship between the United States and China to be absolutely fascinating. While China is still technically a communist country, and the United States still doesn’t agree with that, the two countries have developed extensive trade relations.

    However, it seems that the Chinese economy has grown beyond what the United States would wish it to be (a source for cheap goods) and into real competition for wealth and resources. Now that China is seriously looking outside of its borders for additional natural resources, the United States seems to have cooled its attitude towards it. I just seems to go to show that competition over trading partners and natural resources do indeed lead to conflict (even if it’s not all that serious right now).

  5. I understand that the Bush administration is feeling pressure from Congress and the US economic sector as a whole to reduce the exorbitant United States trade deficit, and I know China is the main cause, but this is not the way to it. I would argue that protectionism is the main reason for these tariffs or “duties” because at the press conference announcing the tariffs on “coated-free” paper US commerce secretary Carlos Gutierrez stated, “As global barriers come down, it’s critical for our companies and workers to have a level playing field.” Although it is quite evident that China has done poorly in enforcing intellectual property rights as piracy of DVD and CDs are rampant in China, the fight should be fought in a case before the World Trade Organization. That is why it’s there. Now the United States is in danger of being put in front of the World Trade Organization. What it is doing is illegal according to trade laws. It would be one thing if China was dumping products (which it does sometimes and the US has placed duties on those products to keep fair competition) but these products are not being dumped. They are cheap because Chinese companies have to pay only a fraction of what US companies have to in labor. It puts the United States at a disadvantage but it’s fair. China has the comparative advantage in plenty of areas of production, and that’s the way it is. If the United States wants to fix the problem of a large trade deficit maybe a fight over the yuan being pegged to the US dollar which artificially makes Chinese goods much cheaper as they should be compared to American products. Although it will provide a negative shock to the American economy the US dollar is overvalued and must be allowed to lower. In the short-term it will hurt, but in the long-term it will help US exports. These two things are what is killing United States business. The only things that putting tariffs accomplishes is increased inefficiency, higher prices for consumers, and ill will behind the two nations.

  6. When I read this post and the replies I immediately thought, what is the motivation of the U.S. in this situation? I can see the concern of the U.S. with respect to the property rights issue, but on the other hand I don’t like the idea that we are angering not only a world power, but also a member of the UN security council. I wonder if a lot of the motivation for this action comes from not only economic concerns, but also political concerns.
    Maybe we are trying to send a message to China, because obviously our government doesn’t agree with some of the actions of the Chinese government. Also I know our government doesn’t support some of their closest allies around the world, and that may be a part of it. It will be interesting to see what happens in the next few months, but this obviously doesn’t help an already sketchy relationship we have with them.

  7. I think I could see a potential benefit in the promotion of a policy that is considered protectionist, or the increasing tariffs. I won’t pretend that I am well-informed here, but my impression is that the central problem here is that the Yuan is tethered to U.S. currency, and so its value is artificially low, which is why it costs so little to import from China. As relates to DVDs, cds, and intellectual property—what the bootleg market in China would do is take away royalty profits from large movie studios, decreasing U.S. growth, possibly making demand for U.S. dollars smaller than it would have been otherwise. This contributes to the demand for U.S. dollars being relatively low when compared to the artificially low Yuan. In any case, the quick fix seems to be tariffs—make it more expensive for China to export to the U.S., and the trade deficit would possibly be reduced, China might even be forced to ‘un-peg’ its currency from the U.S. dollar. This seems unlikely though, because they impact of the bootleg Chinese market may not really be that huge. Additionally, protectionist policy, as Mitch indicated, may risk decreased productivity, decreased costs, isolation of the Chinese, etc. etc. It might me more important to focus on increasing the demand for dollars in relation to demand for Yuan.

  8. I think that putting tariffs on imported goods from China can be viewed as potentially bad or good. On the good side, the United States may realize how important of a market they are for Chinese goods. Likewise, the United States is well aware of the economic boom in China and how it as a country, could soon rival the United States. So, the United States is worried about this. They are afraid of China, and they know they can at least limit their economic growth by discouraging their goods in our country. Likewise, the United States can start and turn to other countries to trade with beyond China and start to build their relationship with other countries, both politically and economically speaking. On the negative note, the fact of the matter is that the United States is very dependent on Chinese goods, more specifically their relatively low price. Oftentimes, citizens of the United States want the cheapest goods possible, no matter the situation. China is a huge trading partner for the United States; the United States imported 25,635 million dollars of Chinese goods into the country in January 2007 alone. It is obvious how important China is to our economy, and the US government needs to remember our interconnected we are.

  9. We can all agree that China and the US highly depend on each other for their economic growth. Imposing a tariff on China will most likely affect the US as well. US consumers depend on Chinese imports. A US tariff on Chinese imports will hurt both sides. It would hurt both, China’s economy and US consumers.


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