Over the last
year the Obama administration has been challenging China to end their export
subsidies in regards to autos and auto parts. The United States has tried to
address this issue at the World Trade Organization, but has had no such luck in
success yet. Advisors currently argue that the export subsidies used by China
are not compliant with WTO regulations. According to this article about 1$
billion in subsidies have been made available for auto producers between 2009-
2011. The main political reasoning for the United States challenging China is
that the Obama administration believes China is infringing on the rights of
800,000 American workers in the auto sector. This would make sense because
terms of trade overall worsen, because of the influx in supply the price of
autos must drop. This then causes a drop in wages that workers can earn. In
this example, the United States. China is also a large country so, we can see
that the Chinese government looses big by the subsidies and the consumers who
have to pay the subsidy. Many of these subsidy problems with China seem to be
reoccurring. This has happened with wind power and raw materials. The WTO is
now in consultation with the two parties. This could result in China ending the
export subsidy or them saying no and the United States retaliates by enforcing
a tariff on Chinese auto imports. Some of the questions that I have is, how
long can The Chinese government sustain and continue to allow export subsidies?
And, besides enforcing a tariff to get back at china, what else can the United
States to economically strike back at China?
The Chinese government maybe receives their subsidy funds from and import tax on other goods. Constantly receiving and constantly giving funds to the sectors are opposites but maybe offset the other.
ReplyDeleteIn order to compete with China's wages, maybe the United States should offshore to China and allow their low-skilled labor to produce and manufacture our autos. Then production in China will grow, total world supply will increase which drops prices. Once prices are dropped, China may not be able to afford having the extra workers or paying subsidies. The wages would likely grow again in China once the world prices drop. The United States could then raise their wages and hire home labor again as well. Instead of enforcing a tariff, the United States should just help production over in China and then the government really won't be able to afford the subsidies.
There are two things in your post i may disagree with you on. Do you not believe that the relatively cheap autos we get from China due to the export subsidies helps U.S consumers. I think we shouldn't say a word to china about it, I believe their export subsidies increase our T.O.T through lower world prices of autos. Secondly don't you think the tariff you want to place on chinese auto imports would make its way to the U.S consumer thus making them worse off.
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