US, EU considering world's biggest free trade pact

 U.S. and European officials are in talks to join together to create the world's largest free trade agreement.  The agreement would help boost both economies, but it is just in the preliminary stages right now.  Negotiations could begin as early as next year.  Two issues that are currently holding negotiators back are the EU's carbon trading scheme that could penalize airlines for not meeting EU standards, and also the EU restrictions on genetically modified foods and pesticides.  US labor unions are supporting this deal because the European social welfare and the environmental standards are better than those in the US.  They favor a trade agreement with the EU more than they would a developing country because American workers would be at a competitive disadvantage due to the lower wages and inferior labor standards in those countries.  In five years, this trade agreement could add up to $180 billion to both countries' economies.

I think it would be a good idea for both countries to keep moving forward with this deal.  It would help both countries when they are both struggling with their economies.  It says that it would help the US a little more than the EU, but both can use all the help that they can get.  I also think that since the EU has restrictions on genetically modified foods and pesticides that it could help make natural foods more affordable in the US and make it easier for Americans to eat healthy.

http://www.usnews.com/news/politics/articles/2012/12/11/us-eu-considering-worlds-biggest-free-trade-pact

Senate Passes Russian Trade Agreement

This article discusses how the senate agreed to pass a Russian trade bill that is expected to assist the United States in our struggling economy. Despite slow growth in our domestic economy, if Obama signs the bill then most analysts affirm that there would be a boost in American jobs. This is not the only benefit for the creation of jobs, but would also expand new markets and U.S. exports of goods and services to Russia would also increase and is expected to double over the next five years. This is a great chance for us to expand our economy and would greatly benefit American exports. Although many trade restrictions were eliminated between the U.S. and Russia, the main concern of this bill was condemning Moscow for human rights abuses. Moreover, this has infuriated Russia because the our government will freeze their assets and deny Russians visas if there were further implications of human rights abuse. This past summer Russia joined the World Trade Organization which was also beneficial to the United States because Russia then lowered tariffs for other member countries. As we have learned in class, by eliminating tariffs and quotas, or in this case lowering them, will decrease the amount of deadweight loss and increase consumer surplus. Personally, I believe this is great news for our domestic economy, but will come at a hefty price to Russians because they will ultimately lose a lot of revenue with increased imports. Not to sound selfish, but the fact that Russia has one of the strongest economies as of today, I believe they can ultimately suffer a small loss in export revenue. 

 http://www.nytimes.com/2012/12/07/business/global/senate-passes-russian-trade-bill-with-conditions.html?_r=0

The Solar Panel Industry

The solar panel industry is a very competitive market. The US as well as China see this industry as a valuable thing to have for different reasons. This lead them to a trade war with both sides passing tariffs and subsides in an effort to get an advantage over the other. The result is very cheap goods which is good for whoever is buying them but not so good for the 2 governments and the producers who have gone into debt to produce them.  It is this trade war that lead to prices being so low and it is irrational. Both countries should stop all government help to the industry and let free trade do its thing by letting markets pick winners and losers.


http://www.nytimes.com/2012/11/08/business/energy-environment/us-affirms-tariffs-against-chinese-solar-companies.html?_r=3&

Chinese Shop Abroad, Buying Luxury Products

The Chinese luxury buyers are the major group to help the bullish performance of the U.S. and the Europe luxury market over the past couple years. According to the report on China's luxury market in 2011 says China's luxury market is worth than $16.03 billion, is growing by about 25% a year, and soon replace Japan as the top luxury product consuming country by 2015.

On the crazy Black Friday in the U.S., you may notice that there are lots of Chinese consumers staying in line and waiting for buying luxury products at a cheaper price. Now, more and more Chinese luxury buyers go abroad, especially go to Europe . Chinese shoppers aren't spending money the same way they once were.

As shown in the article, "the Federation of the Swiss Watch Industry figures that in September's the total values of Swiss watch export was 2.7 percent lower than in the same month a year earlier in 2011 The biggest downturn in sales came from China, where sales are down around 27 percent, while in Hong Kong sales were down 19 percent.""Chinese payment processing company UnionPay recorded foreign transactions were up 33 percent from a year earlier, which is a sign that Chinese are making more and more luxury purchases abroad "

The export data of September show that the worst down of the whole luxury industry export not only just the Swiss Watch Industry, and the weakened Chinese luxury market. It has been cause by the China's export tariffs, product pricing strategies, Chinese desire of luxury goods make the huge difference on the prices of the same product in two different countries. "Sometimes in excess 300% up to four-fifths of Chinese luxury goods consumption reportedly takes place overseas", according to Why Are Luxury Goods So Expensive In China.

"Louis Vuitton's Speedy 30 handbag, for example, retails in China for 5,750 yuan (US$907) but costs US$763 in Hong Kong and US$632 in France. A 30 ml bottle of Estee Lauder's Advanced Night Repair Synchronized Recovery Complex sells for 1050 yuan (US$165) in China but for just US$52 on the company's official American website."

High duty is the major factor that keeping the luxury product at a much higher price than other countries. "According to HSBC's China Luxury Tax Report, there are three types of taxes on imported luxury goods in China: consumption tax, VAT and custom duty. For example, the current consumption tax, VAT and custom duty for cosmetics are 30%, 17% and 10%, respectively, which are high compared with elsewhere.""In China, imported gold, silver and jewelry attract a duty of 10 percent. Clothing and watches are levied at 20 percent. The highest tax rate is for cosmetics and liquors, 50 percent."

Now, very few Chinese will buy luxury product in China unless they are very rich and don't care about the huge differences of the price. Since the prices of luxury product in the U.S. and Europe are much lower than China, Chinese have spent lots of money on luxury goods when they go abroad. And then, the money goes abroad,too.

In conclusion, when a country put high duties on a imported good, it will hurt the country itself. There is not much possibility and not much help to reduce the duties. What China should do is to have its own luxury industry and luxury brand culture.

Source:

Luxury Watches and China's Slowdown
Written on November 1, 2012 AT 9:44 AM BY ADMIN

http://www.jewelryne.ws/luxury-watches-and-chinas-slowdown/

Why Are Luxury Goods So Expensive in China?
http://www.wantchinatimes.com/news-subclass-cnt.aspx?cid=1502&MainCatID=15&id=20120321000001