Discussion Questions:
1. What are tariffs? Why did President Obama""?s decision to impose tariffs on imports of tires from China create so much controversy? Who benefits from the tariffs? Who could lose?
Merriam-Webster Dictionary defines tarriff as “a schedule of duties imposed by a government on imported or in some countries exported goods.” Obama’s imposition creates so much controversy because the tariff on tires contradicts the provisions in the WTO. China did not specifically violate any trade law or policy. Hence, Obama’s action is taken as a political one. However, the imports of tires from China has affected the local economy and the employment of American tire workers and thus, the U.S. President is putting his put down on this imported good.
According to WTO Website, tariffs allow a price advantage to domestically-produced goods against the same goods which are taken from other countries. Tariffs also raise duties or income for the government. The WTO’s last round of talks at Uruguay specifically admonish the imposition of tariffs and enjoined member nations to cut it and make their customs duty rates to reasonable levels. This adds political color to Obama’s imposition of tire tariffs.
2. China claims that the tariffs recently imposed by the United States on Chinese tire imports is a direct violation of World Trade Organization agreements, and has threatened to invoke retaliatory measures of its own. Is China justified in making these accusations? What could occur if China imposes restrictions of its own?
Under the general WTO rule of sound and free trading, China seems to have a reasonable cause for making accusations that the U.S. violated the WTO Agreements. However, Section 421 of the Trade Act of 1974, 19 U.S.C. 2451 support the trade remedy as so executed by President Obama. It states that if there is a market disruption to U.S. economy of the imported product, the U.S. can impose additional duty on this item. In the case of the Chinese tires, it was actually investigated and found out that the tire imports “likely or directly compete with” a local U.S. tire product and is significantly causing material injury or threat of material injury to the local industry. China’s retaliation through the same trade imposition could be detrimental not only to the US economy but also to the global economy. For instance, if China imposes tariffs on polysilicon, the principal raw material for panel manufcaturers, then the prices of products using this material will rise.
3. The United States claims that it is justified in taking action against China. Do you agree? Is the United States simply following sound trade policy, or is it trying to protect certain industries and trade groups?
The trade remedy which President Obama has executed is both a legal right and a political act to defend its own domestic tire industry. I personally believe that it is an inherent right and a necessary measure. Given the statistics on the threat and material damages brought about by the imports of Chinese tires, it really proves that the President’s action is justified. There are specific WTO provisions which justify this trade remedy and the U.S. President has no other alternative but to execute it. We must not forget that the country is still at the heels of recession and this action would definitely promote the local economy, specifically through job generation. Whether or not the U.S. is simply following a trade policy, inciting a trade remedy or simply protecting its local industry, it has every right to. This makes all its action justified. There is also nothing wrong with a political move to protect certain industries or interest groups.
4. Reflect on the timing of President Obama’s decision to impose tariffs on the imports of Chinese-made tires. Could Obama’s actions derail the shaky economic recovery currently underway across the world?
The timing of the President’s decision to impose tariffs on the imported Chinese tires has nothing to do or has little effects on the economic recovery experienced by major economies worldwide. In the first place, the U.S. has cited the clear trade violations and this is central to the US-China trade relationships. There would be issues and glitches along this trade relationship and I firmly believe this is just a process of ensuring that free and legitimate trading occurs. I do not think this is catastrophic and/or threatening, especially for the whole global economy. To illustrate, China’s goods have impacted American jobs and workers and this is unfair because intellectual property violations and “indigenous innovation” were committed in the process.
Meanwhile, the trade imposition also produced positive results for the U.S. economy. For instance, the tariffs had helped local producers improve on their production. This has also allowed for job preservation, which is crucial for the U.S. economy at this point. It has led to investment considerations as well.
5. As a leader, what factors must president Obama balance, as he considers his actions and options? Do these factors compete?
As a national and a global leader, President Obama must seriously consider the economic, political and social implications of his actions and/or policies. Hence, the U.S. President must always considered sound and balanced trade policies and/or actions. As the present trade policy environment is influenced by various political and economic forces, the President needs to balance between public opinon, specifically the opinions of the nation’s major stakeholders such as the business, employment, agriculture, and non-government organizations sectors. He also needs to consider the opinions of the U.S. Congress. More importantly, he needs to consider the economic forces such as the global economic depression, the emergence of the new economies such as China, Brazil, and India, the expansion of global production networks, and the growth of free trade agreements and other preferential trade relationships between nations. He must also consider the basic limitations of trade policy, the growth of trade barriers and the country’s deficits.
