The current era, which shaped by powerful global forces, is changing the global market. The trends in the global market are creating ever-larger winners and losers. Global market forces are offering considerable new opportunities to multinational organizations, nations, and other sectors that embrace them successfully. Global trends are also making companies, sectors, and nations who cannot keep up to grow disproportionately. Global markets are usually affected by conditions created by internal trade institutions as well as international trade policies. In addition, the global market conditions vary from one region to another. Thus, it is vital for business professions planning to invest in other nations to track the global market conditions in foreign markets before investing. This paper will delve at researching a current global market condition trend in the US, Europe, and Japan. More specifically, the paper will cover the United States anti-dumping case against European Union steel industry, Japanese automotive import quotas, and Chinese Tariffs on the United States.
The United States Anti-Dumping Case against European Union Steel Industry
Dumping is the selling of an imported good at a price below the cost of production of the same good in the domestic market (CBO, 2001). The US enacted the Antidumping Act in 1921 to prevent unfair competition of foreign goods with those produced domestically (CBO, 2001). The Act was designed to protect the local industries from foreign forces. One aspect of the fair competition under the Act is that foreign exporters should not be permitted to practice price discrimination between the US local market and his home market. In addition, the producer should not sell his product in the US at prices below his cost of production. If price discrimination exists, a special dumping duty is levied as determined under the Act. The effect of the Act is to consider the physical isolation of the US from the European steel producers. There is no doubt that the steel is being dumped in the US from the European Union.
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In order to take action against the unfair trade practices of the European steel producers, the US government assigned the Treasury Department the responsibility of protecting the local steel producer from foreign steel exporters. The Treasury Department developed a device known as a trigger price mechanism (TPM) to use to determine if it will initiate formal dumping investigations. Product coming into the United States below the trigger price is to be investigated by the authority to determine if the product is being dumped.
Japanese Automotive Import Quotas
In 1980, the US automobile industry entered a deep recession when local manufacturers reported huge loses (Sousa, 1982). The collapse of the domestic automobile industry weakened the industry’s financial structure, which in turn caused the layoff of many American workers. Despite the decline of the local industries, imports continued to set sales records. The Japanese auto industry has the largest market share of the surge in imports. The increase in Japanese automotive import in the United States threatens to cause further loss of American jobs. Given that major western countries have acted to restrict the importation of Japanese automobiles, there were major concerns that the US would likely be the primary market for Japanese auto exports. The local manufacturers contended that if not regulated, the Japanese automotive imports will flood the U.S market and kill the local automotive industry.
In order to adjust to Japan’s rising market share in the U.S market, the U.S automobile industry sought import relief under Section 201 (Sousa, 1982). This section provides relief to domestic industries injured by foreign exporters. As outlined in this section, the President is authorized to impose tariff quotas. An import quota is a restriction placed on the number of goods that can be imported. Import quotas are mostly associated with the issuance of licenses. The Act provides technical adjustment assistance for U.S workers and organizations. The Act further limits each form of import relief to a period of 5 years, in addition to a 3-year extension. Any party that wants to import good into the U.S is required to submit a petition for eligibility for import, and the petition is then investigated by the U.S International Trade Commission (ITC). In addition to the import relief, the U.S preference for the voluntary quota approach over legislative action arose in order to control international trade. This legislated quota restricted Japanese auto imports from flooding the U.S. market. The imports from Japan were subject to quota limits.
Chinese Tariffs on the United States
International trade increases the supply of goods in the domestic market, increases competition, which lowers the price of goods, and allows domestic industries to ship their goods and services in the foreign markets. Due to these effects, free trade is not widely accepted as it tends to benefit one part while the other is disadvantaged. It is in line with this that many nations impose tariffs on imported goods. In simplest terms, a tariff is a tax. Countries enact policies such as tariff to control the import of goods as it adds to the cost of imported goods. According to an article posted in Reuters (2019), China raised tariffs on U.S. goods in retaliation for President Trumps decision to increase tariffs on Chinese imports. This has escalated a trade war between the United States and China. According to President Trump, the reason for imposing unilateral tariffs is to combat unfair trade practices by China and other nations trading with the U.S. The Chinese government also retaliated by imposing a 25% tariffs U.S products. The levying of tariffs is often highly politicized. The Chinese tariff on the United States is meant to protect the local industries that China deems strategically important.
However, the main reason China is imposing tariffs on the United States is that the United States is not playing by the rules. Thus, China is using retaliation technique to impose tariffs on U.S products (Radcliffe, 2018). Retaliation technique is often employed if a trading partner, the United States, in this case, goes against the government’s foreign policy objectives. The benefits of tariffs are uneven. The nations that are imposing tariff will see increased revenue, and the domestic market also benefits from the reduction in the competition (Radcliffe, 2018). This is because tariffs increase the price of imports. However, Chinese tariffs on United States goods means that the consumers –both individual consumers and businesses –will have to pay higher prices for goods. In short, tariffs tend to be pro-producer and anti-consumer.
The trends in the global market are creating ever-larger winner and losers. Global markets are affected by market conditions created by international trade institutions and policies. Thus, before exploring the global markets, businesses ought to track trends in global market conditions in order to make informed decisions.
References
CBO. (2001). Antidumping Action in the United States and around the World: An update. [Online]. Retrieved from: https://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/28xx/doc2895/antidumping.pdf . Accessed 21 st July 2019.
Radcliffe, B. (2018). The basics of tariffs and trade barriers. [Online]. Retrieved from: https://www.investopedia.com/articles/economics/08/tariff-trade-barrier-basics.asp . Accessed 21 st July 2019.
Reuters. (2019). Factbox: Tariff wars –duties imposed by Trump and U.S. trading partners. [Online]. Retrieved from: https://www.reuters.com/article/us-usa-trade-tariffs-factbox/factbox-tariff-wars-duties-imposed-by-trump-and-us-trading-partners-idUSKCN1SJ1ZJ . Accessed 21 st July 2019.
Sousa, B. (1982). Regulating Japanese automobile imports: Some implications of the voluntary quota system. Boston College International and Comparative Law Review. Vol 5 (2); 431-460.
