Wednesday, September 30, 2009

about Trade Protectionism

“An escalation for restrictive trade could undermine economic recovery in both United States and China.”
— An official in American Chamber of Commerce in China
Since September 26, a tariff of 35 percent on Chinese tires for cars and light trucks has been imposed, which is about 9 times more than the previous one. According to an anonymous White House official, United States is just enforcing trade laws, not practicing protectionism. Whether the levied tire tariff on Chinese tires is a sign of commercial protectionism or not, any form of such protectionism is widely considered undesirable by world leaders and economists, especially the time period through this global economic crisis. People with a little background of U.S. history of the Great Depression period might know that President Hoover’s Smoot-Hawley Tariff—the highest tariff rates in American history—not only shocked the world but also sparked an international trade war and worsened the U.S. domestic economic spiral. That has been considered a typical and infamous example of practicing trade protectionism worldwide.
Although American Democratic Party somehow has cultural tendency of favoring protectionism, President Obama is the first U.S. president who supports such a punitive duty on U.S.-Chinese trade since President Ronald Regan. Such a heavy duty may not only cause about 100,000 Chinese workers lose their jobs but increase the cost for American consumers, as well.
It is understandable that President Obama’s first step toward U.S.-China trade is mainly driven by domestic political pressure, especially when he is facing difficulties for his health care reform right now. However, let’s think about international trade in another way. If people believe that importation is a disadvantage for domestic economy and local workers, then why bother about being a member of the World Trade Organization? I believe that WTO is such an organization that provides a frame for free global market and supports free global trading system. International trade could be a simply buy-sell process, but most of the time, it is more complicated and sophisticated than that—political tools is a good example.
There is a traditional Chinese saying—if you give me a fist, I will kick you back for sure. An immediate investigation that launched by Chinese Commerce Department on imported U.S. chicken meat products may validate such philosophy very well. Nobody wants to swallow a broken tooth without any kickback. Thus, does it mean that there will be an imminent international trade war in the near future? If there is one, it must be an interesting one.

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