China and Free Trade
In the International Business class, free trade has been the cornerstone for economic prosperity. But sometimes free trade can flood the market with cheaper products, causing financial problems for companies in this country. Often, the U.S. government will set up a tariff to help the American companies. But is this the best solution? This is the topic of the article, Bushs China-Trade Dilemma by Neil King, Jr. published November 14, 2002 in The Wall Street Journal.
Since China joined the World Trade Organization last year, it has become the third largest supplier of goods and services imported to the United States. Many U.S. companies are complaining that China is selling the items below cost and want Congress to impose duties. They accuse China of breaking the free-trade agreement that it made when it joined the WTO. Trade expert, Gary Hufbauer, says, It is just a matter of time before we have a repeat of the Japan trade battles, but this time with China.
But many in Washington believe that if the U.S. files a grievance against China with the WTO, other countries will follow and the WTO system will become overwhelmed with complaints against China. As one U.S. official stated, Im not sure anyone wants to be the first in line to whack China at the WTO. Overall, China has a good free trade record and is really making an effort to join in the world economy. But Chinas success has hurt some U.S. companies and talk of protectionism has started in the U.S. So what does Bush do? The administration praises free trade, but is seriously considering implementing tariffs for protection on certain items. Is this a contradiction?
There is another complication that needs to be addressed. Many of the companies that manufacture in China are really American owned, such as Motorola Inc. How will this affect what does the Bush administration will do?
Most of Chinas companies are backed by foreign investors. China is eliminating trade barriers, cutting import tariffs, and relaxing restrictions on trading licenses.It is also becoming more knowledgeable of trade laws and has hired lawyers to represent their interest.
This article does not try to solve these global economic problems, it only states that the problem. The free trade problem with China is a good example of how the actions of one country can affect the economy of another. It also shows that issues can be extremely complicated and rarely have easy solutions.