A very straightforward news about the tension between these 2 superpowers. This will help you better understand and apply to contextual questions for international trade.
Pls do post your comments, with the reading from earlier post or even upload another useful video for your peers to view
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Hi Ms Lee!!!!!!
ReplyDeleteLove,
DES
oops, why no sound in the library
ReplyDeleteIf you cant access video, this is the link
ReplyDeletehttp://www.youtube.com/watch?v=1cDtTE5wr1A
Pamela:
ReplyDeleteI think that the video is quite informative as it gives us an overview of the situation.
In my opinion, US should improve their technology to make tyres at low cost, instead of inposing the 35% import tax on tyres from China.
Lucas 09S52:
ReplyDeleteActually, I think the tariff is a good short-term measure, provided that the US government encourages its tyre-making industry to become more competitive and to produce at a lower cost.
Once they have done so, the tariffs should be removed, resulting in a stronger and improved domestic industry.
Alternatively, if the domestic tyre industry simply cannot produce at similar costs as the Chinese because of their disadvantage caused by more costly labour, the US could retrain workers, helping them to gain skills necessary to find other jobs. Meanwhile, the tariff would save jobs in the short run, minimising structural unemployment. Once these workers have been successfully 'shifted', the tariffs could be removed.
Neither the China tyre industry nor the US tyre industry is at fault. The reasons behind the low price of China tyres include many comparative advantages that China holds in comparison with US, which include the easy access to raw materials, the skills and technology required for tyre-making, the lower unit labout costs, etc.
ReplyDeleteIf US wants to improve its technology in producing tyres and start specialising in the tyre production, it can simply do so-after all US is very much of a technology-intensive country. However, there is apparently no point in doing so as the unit labour costs in China is much lower than that of US. Very often when cheap goods are imported into a market (US in this case), i think we need to understand that the goods are cheap because labour in the exporting country (China in this case) is paid a very low wage. And this low wage is due to the large supply of low-skilled labour in China which is highly labour intensive, and that is a fundamental reality that can hardly be changed.
The issue on China's currency manipulation in fact has made the situation worse. The tyres are already sold at a low price, and they seem to be even cheaper when China refused to allow its currency to appreciate against the US dollar.
The imposition of the tariff may protect the US workers. However, it will in turn make the problem of low wages in China worse. The falling demand for tyre exports in China will decrease its demand for labour and make wage rates fall even lower and cause unemployment problem in China. It is necessary for both countries to give way to each other in order to avoid a lose-lose situation.
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ReplyDeleteActually I disagree with Lucas. The tariff will not exist as a short-term measure, as economically speaking, it is likely for the tyre industry to become complacent due to government-erected entry barriers that help the domestic market weed out their competitive firms. That said, the political ramifications of removing the tariff will be tremendous. Given the culture of US, I think it is highly likely that protests and campaigning will ensue, and frustrate Obama even further.
ReplyDeleteBesides that, the implementation of the tariffs to protect the domestic tyre industry may end up hurting related industries, such as those in manufacturing industries like cars. The costs of their factor inputs will be raised significantly, and similar to the issue of the US steel industries in our tutorial, such firms may end up shifting production to other countries where production is much cheaper and more cost efficient. The repercussions of having major industries (tertiary at that) losing their ground in US will affect the entire economy, as well as the firms' respective employees, who will probably lose their jobs.
I think that a reasonable solution would be for US to gradually move their resources out of the tyre industry (a sunset sector) and shift resources towards their tertiary industries, like other developed countries, as I believe that US possesses the technical know-how as well as quality of resources to successfully produce goods of first-world quality e.g. in biomedical sector like how Singapore has done. This will hopefully salvage diplomatic relations. China’s strengths lie in that she has extensive natural resources as well as cheap labour, allowing her to reap massive EOS when it comes to catering to the global market, both of which the US unfortunately cannot match up to. Comparatively, its knowledge-based economies have a better chance in challenging in the global arena. Thus I feel that US should wield its best weapons when it comes to competing globally, as hanging on to industries that it has an inherent disadvantage in does no one any favours, and may affect social and political ties between other countries instead.
Extensive retraining and structural unemployment may be inevitable as a result of such a move, but as these are merely short-term effects, I believe that it is worth it for US to invest in developing its economy further.
To resolve the issue of dumping that China seems to be practising in the US, I think that the tariff should be retained, but maybe reduced to a more reasonable 20%. This is to prevent the US from becoming overly reliant on China for such products, and diversify the sources of its imports. This will also prevent China from taking hold of the US market for tyres and establish a monopoly, instead allowing firms to compete internationally for the US tyre market.
Tadaaa!