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International Microeconomics Trade Dispute: US-China dispute on Exportation of Raw Materials Case Study


Background

This dispute involves the United States and People’s Republic of China. The two nations are members of World Trade Organizations and are bound to other international trade agreements such as the GATT. The US accuses its trade partner for violating various rules that relate to the exportations of variety of raw material.

Indeed China has resulted to stockpiling of critical raw material such as manganese and steel among many others (Men and Balducci 71). This in turn has led to a significant comparative advantage of Chinese industries in production of the specific products at the expense of American firms that have to pay high prices for importation of the raw materials.

History

According to Feenstra, these unfair trade tactics have prevailed in the international trade for a long time (71). Usually, countries apply such tactics to have considerably higher advantage of their locally manufactured products. China is among the leading producers of fluorspar, manganese and steel.

These products rarely have substitutes despite their global demand increasing exponentially. To that end, American companies that specialize in manufacturing have to contend with high production costs mainly emanating from high importation prices (Trebilcock and Howse 79).

As such, the final products of the American firms are expensive in comparison to the Chinese products (Feenstra 11). Worse still, the Chinese government has a growing tendency of instituting export quotas, duties and other related export restraints (Men and Balducci 31).

By so doing, the Chinese produces cheaper products since it controls the raw materials. President Obama warns that were the trend let to continue within the framework of the international trade, American manufacturing industry is poised to lose substantial competitiveness.

The effect is cyclical in terms of increased unemployment owing to the imminent collapse of the sector (Feenstra and Taylor 17). For example, Granite City, Illinois, has seen many steel industries closed amid the increasing government pressure to address the unstable and high rates of unemployment. This contravenes the notion that all nations stand to benefit from international trade.

Government’s Response

In response to this dispute, the American government has explored various options. First, through legislation the government could move in to save its local industry by instituting protectionism measures. This would be in an attempt to counter the glaring collapse of manufacturing sector.

Import subsidies could be an alternative to increase the local companies’ competitiveness at the global stage. However, this would translate to increased government spending which is unrealistic since the government is struggling to counter the increased spending.

On June 2009, the government forwarded the dispute to the WTO and cited instances that it felt China had violated international trade rules and protocols (Reuvid and Sherlock 41).

Status of the Dispute

Following the complaint forwarded to the WTO by the US, other countries joined in the consultation at the organization. They included Canada, Mexico and Turkey to mention but three.

China accepted their interests to join in the consultation and consequently, the US sought an establishment of a panel to deliberate on the dispute. On July 2011, the panel presented its findings on the dispute.

It stated that China was causing instabilities of key raw materials such steel, silicon and coke. The panel also identified inconsistencies by China in its commitment to eliminate majority of export duties and excessive quotas in line with WTO protocols.

Despite the defense by China that it had applied export duties in justifiable and reasonable situations, the panels found the justifications as seeking to explain misconduct and unfair trade tactics. China was not contented with the findings and sought to appeal the decision. Besides, the US also found some findings as unsatisfactory and consequently appealed.

On January 2012, the second presented their findings that also indicated clear violations of the international trade violations. The case now awaits a ruling from the WTO after the evidence indicated violations of exportation rules that govern the international market.

Evidently, the dispute falls within WTO rules and GATT agreements. Particularly, the dispute is subject to the protocol of accession of the former. Besides, the United States complains are entrenched in article VII, X, and XI of GATT agreement (Feenstra and Taylor 53). The agreement was reached in 1994 and binds all members to uphold fair trade tactics.

Works Cited

Feenstra, Robert and Taylor, Alan. International Trade. New York: Worth Publishers, 2008. Print.

Feenstra, Robert. Advanced international trade: theory and evidence. New York: Worth Publishers Incorporated, 2004. Print.

Men, Jing and Balducci, Giuseppe. Prospects and challenges for EU-China relations in the 21st century: the partnership and cooperation agreement. San Francisco, California: Peter Lang, 2010. Print.

Reuvid, Jonathan and Sherlock, Jim. International Trade: An Essential Guide to Principles and Regulations.. New Jersey: Wiley & Sons Publisher, 2011. Print.

Trebilcock, James and Howse, Robert. The Regulation of International Trade. Boston, Massachusetts: Sage Publisher, 2005. Print.

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IvyPanda. (2020, July 3). International Microeconomics Trade Dispute: US-China dispute on Exportation of Raw Materials. Retrieved from https://ivypanda.com/essays/international-microeconomics-trade-dispute-case-study-us-china-dispute-on-exportation-of-raw-materials/

Work Cited

"International Microeconomics Trade Dispute: US-China dispute on Exportation of Raw Materials." IvyPanda, 3 July 2020, ivypanda.com/essays/international-microeconomics-trade-dispute-case-study-us-china-dispute-on-exportation-of-raw-materials/.

1. IvyPanda. "International Microeconomics Trade Dispute: US-China dispute on Exportation of Raw Materials." July 3, 2020. https://ivypanda.com/essays/international-microeconomics-trade-dispute-case-study-us-china-dispute-on-exportation-of-raw-materials/.


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IvyPanda. "International Microeconomics Trade Dispute: US-China dispute on Exportation of Raw Materials." July 3, 2020. https://ivypanda.com/essays/international-microeconomics-trade-dispute-case-study-us-china-dispute-on-exportation-of-raw-materials/.

References

IvyPanda. 2020. "International Microeconomics Trade Dispute: US-China dispute on Exportation of Raw Materials." July 3, 2020. https://ivypanda.com/essays/international-microeconomics-trade-dispute-case-study-us-china-dispute-on-exportation-of-raw-materials/.

References

IvyPanda. (2020) 'International Microeconomics Trade Dispute: US-China dispute on Exportation of Raw Materials'. 3 July.

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