Question

With your team, imagine that the United States slapped an anti-dumping duty of 30 percent on aircraft parts imported from China that it believed were being dumped in the U.S. market. Imagine that China then slapped a 35 percent countervailing duty on U.S. auto imports, saying that a recent federal bailout is tantamount to an unfair subsidy for U.S. automakers. You will need to do some research on anti-dumping and countervailing duty to discuss the questions.

1. What political, economic, or cultural motives do you think are behind the U.S. anti-dumping duty against China’s aircraft parts?

What motives do you think are behind China’s countervailing duty against U.S. autos?

2. Should countries experiencing economic difficulties be allowed to erect temporary tariff and non-tariff barriers? Explain.

Answer 1

Anti-dumping duty is applied upon goods that is considered to be dumped or exported by another country at a very lower price and it is intended to harm the domestic economy. Here, the lower price is achieved by subsidies given by the government of the country whose firms are dumping in another country. To apply anti-dumping duties against China's aircraft parts has the political motive to meet the commitment of making America great again and renegotiate the trade with different countries including China in the world. It was a political promise, made by the president and with this action, he sends a message that he is protecting the best interests of the USA. The economic motive is to save the jobs and industry of the US producing aircraft parts, as application of anti-dumping duties will raise the price of the chinese parts and level playing field will be created. It will protect jobs and domestic industries will get time to become efficient. With this, political motive of gaining popularity and votes are also achieved as this action may save some jobs in the short run. The cultural motive is to ensure the supremacy of US cultural values of equity in trade and opportunities for everyone and not accepting any measure of trade that can harm the domestic people and their best interests. So, the USA has applied antidumping duties against Chinese aircraft parts.

China's countervailing duty against U.S. autos is more of a retaliation policy in response to antidumping duties applied against their own aircrafts parts. It is true that bailout packages were offered to the US automakers, but it was for their turnaround and remain operational. It was not intended to give subsidy to dump in another country. So, China's response is a retaliation policy as US companies sell their automobiles in many countries and no country have take such measures as taken by China.

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2.

Countries facing economic difficulties should be allowed to make tariff and non-tariff barriers on a temporary basis, because it helps them get some time, to reorganize their domestic industries unable to face competition, make regulatory reforms and develop a setup that can deal with the international trade. Afterwards, countries should open up slowly and gradually as their own economy becomes able to compete in the international market. It is applied to many developing nations and countries like India has done it successfully.

If not done, then it can destroy the domestic industries and domestic economy can suffer a lot. It is a reason that many African nations complain of policies by IMF and WB for opening up their economies without barriers and their own economy is unable to grow as required.