WRITTEN RESPONSE #3 4670: The Political Economy of International Trade, Instruments of Trade Policy and Protectionism
Instructions: Refer to the key concepts covered in Chapter 7 of the text and the power points about instruments of trade policy and how the use of these actions can affect different stakeholders in international business. Utilize this information to answer the questions 1-2 indicated below. Read the Opening Case: “China Limits Exports of Rare Earth Metals” on pages 195-6 and Closing Case “U.S. Tariffs on Tire Imports from China” on pages 219-220 and of the textbook (10th edition) [pages 212-213 9th edition but case is updated in the 10th edition]. Use (cite) case facts to answer Question 3. For Question 4, conduct research on the Internet and follow the instructions provided. Your answers must be typed, double-spaced, size 12 font, in question-answer format with complete answers and approximately 3 pages in length in total.
Due Date: Hard copy to be handed in no later than Monday, April 24, 2017.
1) What is the basic purpose of instruments of trade policy? Identify and define four (4) instruments of trade policy and give an example of each of the four you have chosen to describe. (2 points)
2) Identify and explain four arguments (either political or economic) for governments to intervene and apply instruments of trade policy. (2 points)
3) Read the cases “China Limits Exports of Rare Earth Metals” and “U.S. Tariffs on Tire Imports from China”. Applying the facts of the cases, answer the following questions (4 points)
- a) Do you agree with China’s reasoning for limiting exports of rare earth metals? What problems do the quotas create for China? For other countries?
- b) How might the export quotas imposed by China harm some U.S. companies and workers? How should companies react to this export quota in terms of manufacturing components for their products?
- c) Discuss the implications of the export quotas for U.S. consumers in the “Rare Earth” cases. What impact do the quotas have on prices for iPhones or hybrid cars?
- d) For the tire imports from China into the U.S., which groups benefitted from the new policy? Which groups suffered? What does this tell you about tariffs in general?
- e) How do you think that the United States would have reacted if the Chinese had raised tariff rates on the importation of certain goods from the United States in the same way that the United states imposed the tariffs on Chinese tire imports
- f) What does the rise of tires imports from Thailand, Indonesia, and Mexico
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during 2010 and 2011 tell you about the value and effectiveness of this kind of trade policy?
- g) In your opinion, did the actions taken by the U.S. government on the tire imports from China and the actions taken by the Chinese government on rare earth metals make sense and result in achieving the desired results? Explain and justify your answer for each of the countries.
4) Research task. Go to the World Trade Organization website www.wto.org and look on the left side of the home page for the section “Explore our areas of action”; click on “Dispute section” click on “Individual dispute cases” and then click on “dispute by subject.” Chose a subject of dispute (to your liking or interest) and find one of the dispute cases that was submitted through the World Trade Organization. Click on that particular dispute and it will take you to additional information, summaries etc. Write a brief summary of the case (one paragraph should be sufficient) in which you identify the following: (2 points)
- complainant,
- respondent,
- third parties (if any),
- date the request for consultation was received,
- a description of the measure at issue
- a description of the product(s) at issue,
- an indication if the respondent was found to be consistent or inconsistent with WTO principles and articles of accepted practice i.e. What was the resolution of the case?
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