USA and China Trade Tensions

                      First of all let’s be clear about one thing; imposing a tariff as part of a protectionist measure never works. A protectionist policy from one country always triggers a reaction from the other country.  

                     In early2009 President Obama imposed a tariff for the import of Chinese tires of about 35 percent. The tariff’s ultimate goal was to even the playing field for American producers of tires because at the time it was perceived that China was disrupting the 1.7 $ billion market. The tire industry was dead set against the measure arguing that tire-producing companies in China will just move their companies to lower-wage-paying countries. As a response, China began imposing their own tariff on chicken feet of 43 percent to 105 percent. China argued that the United States was dumping their chicken feet in the Chinese market and that chicken feet were selling for less in China that what they worth in the United States. It goes without saying that the tariff imposed by the United States did not produce the results expected. In the end, American companies producing chicken feet stood to lose revenue because there was no other market for their product.

                  If China and the United States continue this way they will end up hurting each other. The political season in the United States is in full swing; both Romney and Obama are trying to be perceived as being the tough guy on China. Unfortunately, more than ever, the United States and China need each other to survive. China needs the United States to buy its products and the United States needs China to lend them money. Although China bashing is very popular in Washington and in the media, we should never forget that the Great Depression of the 1930s was created because of trade wars. Going down that path is very dangerous for both countries and for the rest of the world. 

                Both China and the United States need to come to a fair conclusion of who they are and where they stand. Both countries need to play by the rules. China needs to let its currency appreciate; which in their defense has been appreciating in the last seven years; and the United States needs to stop blaming China for everything that is wrong with the economy.  

 

Works Cited 

Ramzy, Austin, and Beijing. "Chicken Feet: A Symbol of U.S.-China Tension." Time. Time, 08 Feb. 2010. Web. 30 Sept. 2012.

http://www.time.com/time/world/article/0,8599,1960825,00.html.

 

Andrews, Edmund L. "U.S. Will Add Tariffs on Tires Made in China." The New York Times. The New York Times, 12 Sept. 2009. Web. 30 Sept. 2012. <http://www.nytimes.com/2009/09/12/business/global/12tires.html>.

 

 

 

 

 

 

 

The war on terror has become an unintended trade barrier.

                 I remember the days when all you needed to go to Canada was a driver’s license and a smile, but 9/11 changed all that. Since September 2011 the war on terror has drastically altered the trade system in the United States. Before 9/11 U.S Customs and Border Patrol was more of an enforcement agency, but because of the war on terror the agency has become part of homeland security and is considered one of the first lines of defense in the country.

                       Trade barriers come in many forms like tariffs, quotas and embargo. A trade barrier can be defined as restrictions on movement of goods between countries. For each action there is a reaction; the war on terror is America’s reaction to 9/11. Directly or indirectly 9/11 has changed the lives of more than half of the planet’s population.

                       The benefits of trading are many, and trade barriers are a detriment to investing and production efficiency.  The consequences of the war on terror as a trade barrier are invisible and unintended and will be felt for years to come. The emotional impact, the decision making impact and the security impact that the war on terror has on trade is incalculable. This invisible barrier has put the United States at a comparative disadvantage in the world market because it adds to the cost of doing business in all areas, from the production of goods, to the flow of goods between countries to the consumption process. Consumers are losing because of these unintended trade barriers; as investing has become more expensive because companies seek to protect their workers and their bottom lines. Today the war on terror is one of the greatest obstacles to trade, and it is tougher to resolve because it is unintended and we are not addressing it properly. It is not out of pure coincidence that most industrialized nations have been in some form of recession in the last five years. Our very life fabric is changing in front of us and we are watching it happening powerlessly. I follow the news somewhat closely and to my knowledge our elected officials address the situation or offer possible solutions. Perhaps the bigger question we should be asking ourselves is how the war has on terror has changed trade among countries and what is the real nominal impact of 9/11 on trade?

Reference

Carbaugh, Robert J. Global Economics. Mason, OH: South-Western, 2010. Print.

 

 

GM and Chrysler management's blew it

     Once upon a time Ford, GM and Chrysler were the only automobile companies in the United States. With no other competitor they made thoughtless business decisions that led them to file for bankruptcy. Eventually new players Japanese and European car manufacturers got into the game; the big three were rigged with high the cost of employment and legacy costs that were negotiated with the UAW (United Auto Workers). Health benefits and other negotiated benefits were over one thousand dollars greater per car than they were for their competitor (Newsweek April 2008).

     After securing the bailout of over 17 billion in 2008 from the US Government, Chrysler and GM were ordered to trim costs and debt. With virtually no big concession from the worker’s unions, GM and Chrysler filed for bankruptcy.

     I blame management for the mess, but that does not mean I am giving a free pass to the Unions. You see, management’s job is to think for the future; workers will always want more, but it is management that has the final say. These leaders made weak decisions that led their companies to file for bankruptcy. While negotiating with the Unions, GM and Chrysler made moment-in-time decisions with no regard for new models such as economies of scale and comparative advantage. If managers of GM and Chrysler were visionaries they would have been proactive in using economies of scale for cheaper labor and they would have increased their international presence prior to the arrival of foreign competition in the U.S market.

 

Week 1 Openness

  Openness refers to the degree to which a country is receptive to economic trade, import, export and investment. Openness is the way of the future, but a country must also be careful not to lose its culture. A small trading partner can be treated unfairly because it has less bargaining power than large trading partners. Large trading countries like the United States and China tend to dictate their will in the international market.

     Openness started in the late 1800 with the invention of railways, which facilitated interstate commerce and has been taken to a whole new level in the last three decades thanks to technology. Openness is here to stay whether we like it or not. No country is completely open or completely closed. How economically open a country is depends on the policy the political leaders choose to institute. Just like everything in life, openness has its benefits and its problems. The benefits include increased access to customers, cheaper goods, and global investment opportunities. The problems of openness include fear of job loss and loss of self-identification for a country. Any society that is not open economically is destined to fail. The Soviet Union and China both failed because they were closed economies; today, they both are pursuing some form of capitalism. It is not a coincidence that the richest countries in the world are those that are more open to trade with one another.

     The world is quickly becoming an open forum where all points of view are welcome, and this very thought scares politicians and religious leaders. The seven billion people living on this planet are starting to get a better understanding of each other thanks to openness. In the end, openness should create a place where there is less war and more competition, tolerance and acceptance. Wait! Someone pinch me; maybe I am dreaming, like John Lennon said “You may say I am a dreamer, but I am not the only one”.