USA and China “Trade War”

President Obama imposes additional 35 percent on Chinese made tires to support the U.S. tires industry. American market for Chinese tires between 2004 and 2008, the Chinese market share went up 16.7 percent from 4.7 percent. The Chinese tires were severely impacting the domestic tire market and this dispute aims to slow China’s rapid export growth and protect American jobs in the tire sector. By increasing the tariff rates, the American administration used safeguarding provision where government do not have to worry about country is competing unfairly however, only need to demonstrate that American producers have suffered.

In the U.S. Chicken feet usually end up being ground into parts for feed. However for China, they are delicacy and the Chinese consumer prefer the taste of meat in the bone. Due to Chinese poultry are not producing enough chicken to meet the market demand, the U.S. has been the source of about half of China’s import of feet. Since China is not happy with U.S. decision of imposing 35 percent tariff, Chinese minister announced imposing anti dumping tariff ranging from 43.1 percent to 105.4 percent on Chicken feet where Chinese administration claims that the American’s are dumping their products at cheaper rate than domestically. The U.S. exported $677 million worth of chicken to China where half of those exports were chicken feet, which worth $0.60 to $0.80 per pound on the Chinese market but just pennies in the U.S.

In my view, the trade war between U.S. and China, they both are protecting their domestic market. U.S. imposed tariff on Chinese tires to protect tire industry in their home country but what about the consumer? The most affected are the consumers, who will be forced to buy expensive tires, which will again create demand for cheap tires. Same goes to China, as Chinese administrators attacked the chicken industry of the U.S. which will not only affects U.S. poultry but also affects the Chinese food service industry. Where they have to import from other country and this will again lead to be more expensive as they wont be able to meet demand of the product.

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Sources

http://www.nytimes.com/2010/01/12/business/global/12trade.html

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

                                                                                                                     

How open to Openness are you?

Openness in trade refers to the countries that permit or have trade with other countries or economies. The trading activities can be export and import, foreign direct investment, borrowing and lending etc. A country must be open to trade because it will have more greater market opportunities, which will lead to greater competition in the business with other countries. There are no such goods and services that a single country can produce therefore specific country have to trade with others and have comparative advantage by selling or trading with other countries. Each country has to trade with other country and this will create globalization.

Openness can create economic development by improving quality of goods in cheaper price also it helps to spread innovation and technological advancement around the globe. If a specific country is lacking technology advancement then they can distinguish by participating in trade with other countries, which is advanced in technology. Being open in trade will also lead to more employment opportunities for the people and increase their standard of living, which automatically increase economic growth of the country.

Are All Barriers on Trade Intentional?

What is Trade Barriers? Is it a Government imposed restriction on the free international exchange of goods and service? There are different ways in which trade barriers can be created unintentionally. After the incident of September 11, not only United States but also countries around the world have tightened their security on trade policies with their trading partners.  Due to which, government have to spend millions of dollar for the security of its people and business from major airports, seaport and harbors to domestic security that has increased the cost of countries economy. This shows that one country is loosing its comparative advantage since each has to go through security clearance and checking when entering into another country.

In today’s world, Majority of traders is getting affected since they have to face cross-border transactions, tough security in airport and seaports. The costly inspection and monitoring adds up which automatically makes the product to be expensive compare to the domestic manufacturing companies. This result the firm to be less productive and lead to decrease overall economic efficiency.

In context of Nepal, The trade weighted average tariff rate is very high at 14.3 percent, with pervasive non-tariff barriers further suppressing freedom to trade. The political instability has harmed the private investment and due to inefficient investment, government wishes much of foreign direct investment (FDI). Since Nepal is land lock country, it faces challenges in doing trade due to lack of territorial access to the sea, remoteness and isolation from world markets. Nepal has been facing problems such as high transit transportation costs due to landlocked and mountain terrains, declining trade volume, decreased foreign direct investment and high inflation, unemployment and economic development.

Therefore, not all barriers are intentional. It is create unintentionally due to situation and by nature.

Retrieved from http://www.heritage.org/index/country/nepal

http://usnepalonline.com/english/nepal-on-needs-and-problems-of-landlocked-developing-countries.html

U.S. Automakers and their competition with International Market

U.S. auto industry faced tremendous competitive challenge with the foreign market due to huge economic crisis. The U.S. automakers such as Ford Motor Company, General Motors were dominating the auto industry few decades back. However, foreign carmakers have expanded their share from 0.4% to 40% of the total share in the early 2000. The reason behind for the Big Three to face these obstacles is its cost and production quality. And at the same time, the industry faced the problem of developing new products to meet the changing market demands of customers such as small compact and fuel-efficient. 

Beside these rising health care costs are huge burden for U.S. automobile business where they compete globally with International automobile companies where their health care costs are lot cheaper. Therefore, U.S. manufacturers are facing difficulties to compete with foreign companies. For foreign car makers, their comparative advantage is their cost of production where they can make their production lot cheaper and firm can avoid the cost of employee health insurance because it is paid by the government. Whereas, the U.S. manufacturer have to bear large unfunded pension obligations and health care costs for all retirees and that's the reason American big three are not able to make more investment in technology and innovations.

Likewise, another comparative advantage for foreign carmaker is they are more fuel-efficient. Since the price of gas is rising, customers look for those cars, which consume less gas. And cars like Toyota, Honda and other foreign cars are more durable, fuel efficient than those American big three cars. 

In my opinion, the most important thing is to meet the consumers’ expectations and their needs. Recent crisis and the layover made consumer to buy inexpensive cars with fuel-efficient. US automakers can gain the market by setting the plant and production in low labor cost foreign country to produce low cost cars and the saved money can be used for technology advancement. This may lead to unemployment but if government wants then they can reduce the high medical cost.

Chart Retrieved from http://mjperry.blogspot.com/2012/01/big-threes-dramatic-u-turn.html

Source: http://www.cfeps.org/health/chapters/pdf/Rising%20costs%20and%20US%20competitiveness.pdf