US-China Trade War

Most analysts characterize current US-China relations as complicated and multifaceted. The United States and People's Republic of China are usually neither allies nor enemies. The US government does not consider China an adversary , but a competitor in some areas and a partner in others.

The United States always refused to maintain a relationship with the  Communist Regime of China Until in midst of the Cold War, the China-Soviet split provided an opportunity for the US to establish ties with mainland China. As of 2012, the United States has the world's largest economy and China the Second .

One of the controversial events in the history of trade between the two countries happened in 2009. Newly elected President Barack Obama, despite his predecessor's policies in trading with China, announced that he would impose a 35% tariff on automobile and light-truck tires imported from China. A decision which was applauded by the "United steelworkers" , the union that represents American steel workers.

This was the first time the United States would invoke a safeguard provision that was a part of its agreement to support China's membership in the World Trade Organization in 2001. Under the safeguard, American workers or companies harmed by imports from China , can ask the government for protection.

The International Trade Commission had already decided that Chinese tire imports were disrupting $1.7 billion market and recommended that the President impose new tariffs. High rate of American imports of Chinese tires caused four American tire factories close down in 2006 and 2007 and several others set to close down in near future. As a result, Thousands of American Workers lost their jobs.

China, on the other hand, was antagonized by President Obama's decision and decided to kind of "Retaliate" that by imposing a high rate tariff on imported American chicken feet. Chicken feet are considered a delicacy in China and  there is a huge demand for them in Chinese market. The demand is too high that China can not produce enough chicken feet for domestic consumption and as a result, they have to import from the United States.

Following President Obama's decision, China's ministry of commerce announced it would begin imposing anti-dumping tariff ranging from 43.1% to 105.4% on imports of chicken parts from the United States. The China Animal Agriculture Association asked for an investigation into chicken prices in August 2009, after its members complained of being undercut by American imports.

American poultry producers say the fact that chicken feet sell for much higher prices on the Chinese market compared to the US market, proves that they are not being dumped or sold below cost.  A claim which seems to be rational in my opinion.

I personally believe , China's decision to impose high tariffs on US chicken parts was a political decision in reaction to President Obama's decision to increase tariff rates on Chinese tires and not necessarily a decision to protect domestic poultry industry.
                                     

Unintentional Trade Barriers

If we walk into a supermarket in Boston and are able to buy Indian spices, Colombian coffee and Ecuadorian Bananas , we are experiencing the effects of International trade.

International trade allows us to obtain products we need in our day to day life from other countries and with a lower cost and also to sell our products to them. International trade is the reason why we  can choose between driving an American car , a Japanese car or an Italian car. As a result of International trade there is a greater competition in the market and therefor more competitive prices which allows people with different purchasing powers to find goods and services that best fit their needs.

Trading internationally gives consumers the opportunity to obtain goods and services not available in their own countries, or available, but very costly. Today, pretty much every kind of product and service can be found on the international market : Food, clothes, jewelery etc and also services like : banking, consulting, tourism and transportation.

International trade allows countries to use their resources (land, labor, technology and natural resources ) more efficiently and focus on producing products and providing services that they are better in doing them or their resources allow them to produce. If a country can not produce a product efficiently, it can obtain that item by trading with countries that are better in producing that specific product.

But trading internationally is not always easy. There are rules and regulations which have to be followed and sometimes these regulations get over-complicated for different reasons and act like barriers for Free trade. These barriers , however, are not always intentionally created by governments to protect the domestic producers but can happen unintentionally and because of an unpredictable event.

For example, after 9/11 and beginning of "War on Terror" by the United States and Allies, America's share of world exports has decreased significantly . The number of export related American jobs has declined. In order to counter terrorism, random number of ships, airplanes and trucks have been constantly inspected which has caused the delay in delivery of goods. 9/11 was an unpredictable event which had  inevitable effects on the international trade.

The other example can be fluctuations in the price of crude oil in past few years because of political tension between the Iranian government and Western governments on the issue of Iran's nuclear program. In response to a possible attack on Iran's nuclear facilities, Iranian government threatened that they would block the strategic strait of Hormuz , a narrow strait  between the Gulf of Oman and Persian Gulf  through which a significant portion of world crude oil is delivered.
This threat led to an immediate rise in the price of oil which subsequently increased the prices of oil-related products including Gasoline. A blockade, not only effects Western countries economies,but it would punish , China , Iran's most important oil customer and a major consumer of Persian Gulf oil. China has invested heavily in Iranian oil fields and besides Russia, has opposed Western countries efforts to sanction Iran over its nuclear program.

Effects of Globalization on U.S Auto Industry

The 2008 Financial crisis had a huge negative impact on the American auto industry . Not being able to meet their obligations, the Big Three ( Chrysler, Ford and General Motors ) asked Federal government for help. In December 2008, they asked the government for a $34 billion bailout to avoid bankruptcy claiming that their failure would create a 3 million layoff in about a year and plunge the economy further into recession.

In January 2009, the Federal government used $24.9 billion from $700 billion bank bailout fund to help the big three and it was paid as follows:

• $17.4 billion for Chrysler and GM
• $6 billion for General Motors Acceptance Corporation (GMAC)
• $1.5 billion for Chrysler Financial   

Ford, On the other hand, decided to use "Term asset backed securities Loan Facility (TALF) ", a government program for auto, student and other consumer loans.

Many opposed the bailout. Critics said the Federal Government should let the Big 3 go bankrupt to  benefit from the concessions they would be given under the chapter 11 of Bankruptcy law which is about "Reorganization" of the struggling companies filing for bankruptcy.
Chapter 11 gives the debtor a fresh start, subject to the debtor's fulfillment of its obligations under its plan of reorganization. For Automakers , the benefits of using chapter 11 would be great.They could gain the power to reduce their long term liabilities, restructure their dealership network, get rid of unnecessary brands and reform their obligations to retirees. Out of bankruptcy law, The automakers wouldn't be able to enjoy these concessions since they do not have the legal authority to do so.

Many critics blamed the big three's lack of innovation in an energy efficient era where almost all the big automakers all over the world are trying hard to come up with new models which are energy efficient and attractive to consumers. The fact is, for a long time the Big 3 had dominated the American auto market and they would dictate to American consumers what to drive. They were confident that American consumer would buy their product anyway and that led to a kind of laziness in working on new technologies. As soon as European and Asian cars came to the American auto market, Consumers found these newly arrived models very attractive and that's where the trouble began for American auto makers.

The new rivals were so innovative and their models were so attractive to the American consumers that the Big 3 almost failed to compete with them. So, we can mention the "Lack of enough  Innovation and creativity" as one of the most important factors in the downturn the American automakers are facing today besides the worldwide financial crisis.

How open to openness are you?

We are living in a world that is increasingly becoming smaller and smaller. Political, cultural, religious and economic borders do not fence people in anymore and tremendous technological advances and the free flow of information enable people from different backgrounds to interact with one another at anytime. In order to survive and be able to live successfully in such a world, One needs to be open to the changes which happen almost everyday and keep themselves up to date and try to learn more and more about these changes and instead of resisting, try to adjust themselves with them. In my opinion, the most successful people are not necessarily those who are economically stronger, but they are the ones who are most adaptable and responsive to changes.