December 31, 2009
According to the Financial Times:
The US will impose tough new duties on Chinese steel piping imports, raising tensions with its biggest trading partner and emerging geopolitical rival.
With Chinese piping imports worth $2.8bn in 2008, the case is the biggest against China brought before the International Trade Commission, a US trade body, but follows other US actions to counter a flood of goods that Washington claims China is exporting at below market prices.
Friction between the US and China has been building this year after disputes over tariffs on tyres, cars and chickens. China denounced a move by the US earlier this year to tax imports of Chinese car and light truck tyres as a “serious act of trade protectionism”.
Something is seriously wrong when China denounces protectionism and the U.S. defends it.
December 18, 2009
In their new paper, Mario Larch (University of Munich) and Wolfgang Lechthaler (Kiel Institute for the World Economy) write:
When the world economy was recently hit by a severe recession, governments all over the world reacted by initiating stimulus packages. Some countries (among them, most notably, China and the US) tried to put special emphasis on their home industries by including “Buy local” clauses into the stimulus package. By analyzing the dynamics of transitory changes of trade barriers as a short-run response to an economic downturn, we show that beggar-thy-neighbor policy does not work. We then come up with two rationales that help to understand why countries nevertheless consider protectionism to be a good response to a recession: (i) the relationship between vulnerability and the degree of openness to trading partner countries, and (ii) the lobbying of domestic, non-exporting firms.
Click here to read the paper.
November 26, 2009
The consequences of Obama’s 35 percent tariff on imported Chinese tires are now starting to become apparent. An Associated Press article yesterday (via Pushing Possibilities) identified a few of the explicit and implicit consequences of the tariff.
Explicit costs include:
Under the government’s new tariff, which went into effect in September, a set of Chinese tires that would have cost $280 now cost nearly $100 more.
Implicit costs include:
Jennifer Stockburger, a tire test engineer for Consumer Reports, says six of the top ten all-season tires recently tested by the magazine were made in China by major manufacturers.
To calculate the true cost of the tariff, Pushing Possibilities conducted a cost-benefit analysis:
17% of the tire market is made up of Chinese tires. Tire sales for 2008 was around $27 billion, which means that about $4.6 billion is Chinese tires. With an average price of $280 for Chinese tires pre-tariff, the total quantity of Chinese tires sold would amount to 16.4 million. With a $100 price increase, assuming that domestic tire price increases offset the tariff increase, U.S. consumers are expected to lose out on a net savings of over $1.6 billion. And that of course does not take into account the implicit cost of quality loss.
The tariff was expected to stop the loss of employment in the U.S. tire industry. By assuming there would be a benefit of saving 5,000 jobs in the tire industry, even at the median U.S. income, that only amounts to a very large estimate of over $250 million of saved income.
Therefore, Obama’s tire tariff cost the U.S. over $1.35 billion dollars.
October 21, 2009
China Set to Impose New Tariffs on Nylon (via Greg Mankiw):
China’s Ministry of Commerce has made a preliminary ruling to impose tariffs of as much as 36% on certain nylon imports from the U.S., saying the imports have damaged the domestic industry….The move is the latest in a series of Sino-U.S. trade disputes after the Obama administration said in September that it would impose duties of between 25% and 35% on imports of tires from China for the next three years. China followed that decision with probes of potential antidumping measures on U.S. auto parts and chicken.
October 19, 2009
Jeffrey A. Frankel (Kennedy School of Government, Harvard University) and Andrew K. Rose (Haas School of Business, University of California, Berkeley) have published a study to determine if trade is good or bad for the environment. Below is the abstract:
We seek to contribute to the debate over globalization and the environment by asking: What is the effect of trade on a country’s environment, for a given level of GDP? We take specific account of the endogeneity of trade, using exogenous geographic determinants of trade as instrumental variables. We find that trade tends to reduce three measures of air pollution. Statistical significance is high for concentrations of SO2, moderate for NO2, and lacking for particulate matter. Although results for other environmental measures are not as encouraging, there is little evidence that trade has a detrimental effect on the environment.
October 5, 2009
The International Food Policy Research Institute (IFPRI) has published a new paper called ‘Agricultural trade liberalization and poverty in Brazil.’ Below is the author’s abstract:
This paper addresses the potential effects of a world agricultural trade liberalization scenario on poverty and regional income distribution in Brazil, using an interregional applied general equilibrium (AGE) and microsimulation model of Brazil, tailored for income distribution and poverty analysis. The model distinguishes 10 different labor types and 270 different household expenditure patterns. Income can originate from 41 different production activities (which produce 52 commodities), located in 27 states in the country. The AGE model is linked to a microsimulation model that includes 112,055 Brazilian households and 263,938 adults.
The scenario is generated from a previous run of the MIRAGE model, which assesses the likely impacts of a Doha Development Agenda agreement, based on the draft on agriculture by Crawford Falconer and the draft on nonagricultural market access by Don Stephenson. The results of this global scenario are transmitted to the Brazilian model. Poverty and income distribution indexes are computed over the entire sample of households and persons, before and after the introduction of policy shocks. Model results show that the simulated trade policy shocks have positive effects on poverty and income distribution in Brazil. The simulated effects on poverty and income distribution are positive in aggregate, with benefits concentrated in the poorest households. The results, however, differ across the Brazilian territory, worsening in some important states, where the poverty and inequality indicators increase. The gains in agriculture are found to benefit all the agents involved, from workers to small producers to large farmers, rejecting the idea that just large farmers would gain.