Tariff Research Paper
most firms did not switch to sourcing already finished products to overseas- it looks like there are different reporting dates
"A large number of steel-consuming firms (399 of 450 or 89 percent) reported that they did not shift to sourcing finished parts from overseas and most (399 of 445 or 76 percent) reported that their customers did not shift to sourcing from foreign plants or facilities since implementation of the safeguard measures. With regard to relocation of production facilities, 93 percent of steel-consuming firms (432 of 465) reported that they have not relocated or shifted U.S. production to foreign plants or facilities. Almost two-thirds of responding steel-consuming firms (270 of 430 or 63 percent) reported that they or other steel-consuming firms did not relocate or shift production to foreign plants or facilities after the implementation of the safeguards."
postive affects- buying from domestic companies
"Almost one-half of steel-consuming firms (219 of 467 or 47 percent) shifted some of their purchases to domestically produced steel from imported steel after the safeguard measures were implemented. Overall, direct purchases of steel products from domestic producers increased from 65 percent to 73 percent of all purchases, while direct purchases from importers fell from 32 to 23 percent of all purchases." Is it worth the decreased efficiency?
Price effect of the 2003 tariff
"Although varying by industry, about one-half of responding steel-consuming firms faced increases in both contract and spot prices after the implementation of the safeguards. About 43 percent of responding purchasers (162 of 381) reported that they could not pass on these price increases while about 19 percent (71 of 381) of purchasers reported that they were able to pass the price increases on to their customers."
"How Long Can we Last"
"As Lawrence H. Summers, a top economic adviser to Presidents Bill Clinton and Barack Obama, quipped at a conference in China a couple of weeks ago, the trade moves amount to "a bit of a 'Stop, or I'll shoot myself in the foot' kind of strategy."
What You Need To Know About President Donald J. Trump's Actions Responding To China's Unfair Trade Practices
"In order to develop the initial proposed list, USTR worked with other agencies to identify products that unfairly benefit from China's industrial policies." "Instead of addressing its misconduct, China has retaliated against American farmers and manufacturers. President Trump has therefore directed USTR to determine if an additional $100 billion worth of tariffs would be appropriate under section 301." "The President is for free trade, but it must also be fair trade. Addressing unfair trade practices and ensuring that global trade is free, fair, and reciprocal will have a significant positive long-term impact on the U.S. economy." Chinese trade policies cause..."tens of billions of dollars in damages to the United States every year."
STATEMENT OF HON. ROBERT ZOELLICK, U.S. TRADE REPRESENTATIVE, WASHINGTON, DC
"Mr. Chairman, you mentioned trade adjustment assistance. I would be pleased to talk about this more, although obviously the Department of Labor is the lead on this. I know they have been working with your staff, quite constructively, I hear. But I am in total agreement about the importance of trade ad- justment assistance. I know it is something that you, the Majority Leader, and Senator Bingaman have played an important role on, and Senator Snowe as well. Obviously, there are going to be dif- ferences about how to approach this. But in terms of the thrust of doing it and the need to get it reau- thorized in an improved fashion, I will certainly do what I can, Mr. Chairman, to work with you to get it done. I have always said that if we are going to have a free trade system and people will need to adjust, it is certainly appropriate to try to help them do so." - argues for trade adjustment from the loss of industries (relocating workers after jumps are lost to outsourcing) For the new launch of the negotiations at Doha, there is already a University of Michigan study that just said, well, if you cut the tariffs in industrial goods and agriculture, it does not even look at the services area, you can produce an annual benefit of about $2,500 a year for a family of four. So that is real money, when peo- ple talk about tax cuts.
Tariffs on steel aren't new, they go back to Nixon
"President Ronald Reagan established a limited pool of imports that it apportioned among foreign producers. The first President George Bush renewed it. Mr. Clinton deployed diplomacy and antidumping measures to protect American steel makers. And in 2002 President George W. Bush put a new ring of "safeguards" around steel that lasted 20 months, until the World Trade Organization ruled them illegal." "Almost 500 steel consumers responded to at least some of the questions asked by the commission. About half of respondents reported paying higher prices. And roughly half reported problems procuring steel of the quality and quantity they needed. Over a third reported delayed deliveries; 132 reported steel shortages. About one in six said these problems had reduced sales, and one in three said they had cut into its profitability. A total of 82 companies — including 11 makers of auto parts, nine welded-pipe producers and five makers of fasteners — said they had lost sales to foreign competitors because of the higher cost of steel."
President Donald J. Trump is Standing Up for American Innovation
"President Trump's Administration will propose for public comment adding 25 percent additional tariffs on certain products that are supported by China's unfair industrial policy. Sectors subject to the proposed tariffs will include aerospace, information communication technology, and machinery."
Collective Carnage
"President Trump's trade proposals and actions to date reject the theory of comparative advantage, the liberal political belief in the stability economic interdependence achieves among countries, and the commitment to open markets in American grand strategy. As seen in the Inaugural Address and other statements, President Trump conceives of trade as a ,zero sum" game in which the United States is losing.20 His thinking on trade shows few, in any, traces of the "win-win" outcome associated with the theory of comparative advantage. 21 The president's perspective is mercantilist, the approach to trade Adam Smith and David Ricardo critiqued."
contract abrogation
"Some responding steel-consuming firms (134 of 456 or about 29 percent) reported that contracts that they had in place to purchase steel were either modified or abrogated"
"How Long Can we Last"- protectionist policy is a tax for the steal industry
"This is what economists mean when they warn about the costs of protectionist policies. A tariff to protect one industry amounts to a tax on all of its customers. The steel tariffs tax the nation's more high-tech manufacturing — carmakers, aerospace companies, makers of vessels to store hydrogen for use in fuel cells — to pay for a ring of protection around an aging industry that makes a raw material." the tariff is to protect the steal industry but manufacturers are still going to get there steal from China, the price will just be higher
termination scenario quotes
"Three things [would occur], first of all, the pendulum would probably swing back on our use of U.S. steel in our Mexican plants. We would slow down the migration over to Mexican suppliers, if not reverse it. Secondly, we would probably end the discussions with the Chinese suppliers, at least for imported steel as a raw material. Thirdly, our company is carrying a huge amount of debt right now. It would help us pay down some of that debt, which would make us a healthier company."16 In addition, a representative from the tool and die industry reported that "the elimination of the tariff will definitely give us a reprieve to get the costs, get the process improvements, get the capital going that we purchased in the last six to nine months at these auctions to try to drive down costs. So yes, it would make a huge impact whether that business - it has about 80 employees, would be viable for the future or not."17
"How Long Can we Last"
"What most sticks in the executive's craw is that he will probably end up losing business to the company's main rival in China, Enric Gas Equipment Company of Shijiazhuang, which also makes jumbo vessels. Noting that Enric's goods are imported under a classification not subject to the tariff" Chinese tariff gives buisness to Chinese company
Collective Carnage
"[F]or too many of our citizens," the president asserted, "a different reality exists. . . . [R]usted out factories [are] scattered like tombstones across the landscape of our nation." 5 President Trump expressed anger that the "wealth of our middle class has been ripped from their homes and then redistributed across the world" and that: We've made other countries rich, while the wealth, strength and confidence of our country has disappeared over the horizon. One by one, the factories shuttered and left our shores, with not even a thought about millions and millions of American workers that 6 were left behind. "We must," President Trump declared, "protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs." At his inauguration, President Trump portrayed U.S. trade policy as a form of political violence against the American people. Trade policy reaps death on U.S. manufacturing. Trade policy permits U.S. companies to rip wealth from Americans to spend elsewhere in the world. Trade policy allows foreign countries to ravage the American economy, steal American companies, and destroy American livelihoods. - trump doesn't support trade period. He views all outsourcing as an evil for the nation, imports are not viewed positive sign of specialization and reduced prices, but rather as a loss of American opportunity and jobs for the middle class.
The Myth of Free Trade (unemployment factor)
"even if one concedes the possibility that there may be a sustained revival of growth on a more or less global basis, three is powerful evidence to suggest that this will not solves the problem of unemployment" pg. 167 "the LDCS....will continue their effort to obtain a bigger share of world markets- for services such as shipping and insurance as well as manufactures. While this will continue to benefit OECD suppliers of capital equipment of the more sophisticated type it will inevitably continue to have the opposite effect on manufactures of consumer products and of intermediate goods such as steel and petrochemicals." pg. 168
the steal industry is dying, companies that rely on steal manufacturers are not just going to switch to buying from American manufacturing companies
"it makes little sense to force the company to obtain its steel domestically. For starters, no company in the United States produces pipes big enough to make its trademark six-ton containers." A tariff does not close the gap, creating an incentive to buy from American steal manufacturers, it just makes the price higher "Pipes from China delivered in Philadelphia cost $1,680 per metric ton, while U.S. Steel is charging $2,728 per metric ton at its works in Lorain, Ohio. A 25 percent tariff will not close the gap." CP industries might just move it's manufacturing overseas to avoid the tariff
The Myth of Free Trade (the military factor)
"the linkage between economic and military capability has become so clear and indissoluble in this age of high technology that it is inconceivable that any country seriously committed to securing its military independence will refrain from engaging in...industry out of consideration for.....international comparative costs of production" pg. 164
Pro: Buying exemptions: Donald Trump's tariff deal
'If you don't want to pay tax,' extolled Trump, 'bring your plant to the USA. There's no tax.' Trump just doesn't tax Chinese manufacturers but any steel made by American companies in China He used the 1962 trade expansion act (an archaic policy) The White House advisor Peter Navarro said exemptions were out of the question
U.S. International Trade Commission
- Of the steel-consuming industries examined, the motor vehicle parts and steel fabrication industries reported adverse changes in competitive conditions and firm performance after the implementation of the safeguards more frequently than did other industries. We may not also lose buisness to Chinese steal manufactures, are car-making industries will also suffer and will more frequently go abroad. - Industries such as distributors or steel product producers generally reported that they expected no change or positive results from continuation of the safeguards and no change or negative results from termination of the safeguard measures. If there is not net positive affect why are we continuing the policy?
THE ROLE OF TRADE AND TECHNOLOGY IN 21ST-CENTURY MANUFACTURING
. Just to say that the evolution of trade in the global economy is that, as countries have reduced their tariffs to trade, they have surreptitiously replaced them with these types of non- tariff barriers. I think you correctly called out localization barriers to trade that force U.S. companies to either locate their production offshore or to sacrifice their intellectual property as a condition of exporting to foreign markets as one of the key challenges we face. - Even if we work to eliminate trade barriers, countries can use non-tariff means to avoid agreements. A true level playing field will never be established so we mine as well enter this trade war.
steel availability
A little under one-half of responding steel-consuming firms (229 of 471 or about 49 percent) reported some difficulty in obtaining steel in the quantities or qualities they desired since the implementation of the safeguard measures. The steel fabrication, motor vehicle, motor vehicle parts, steel barrel and canning, and home appliance industries had a higher percentage of firms reporting these difficulties than other industries.
longer delivery times
About 32 percent of steel-consuming firms (150 of 472) reported longer lead and delivery times
competiveness for manufacturers decreases, but a very small group (produces) increases the number of producers currently existing is too small to make a net welfare impact on the nation
Almost 38 percent of reporting steel-consuming firms (156 of 412) indicated that if the safeguard measures were terminated in September 2003, their international competitiveness would increase. For several industries, most firms indicated that their international competitiveness would increase, including steel barrel and can manufacturers and household appliance manufacturers (both 56 percent), fabricators (55 percent), motor vehicle parts manufacturers (54 percent), and welded pipe manufacturers (53 percent). One motor vehicle producer representative explained that "lower material costs resulting from termination of relief could be passed onto potential customers, therefore making us more competitive." A much smaller group of about 11 percent (47 of 412 firms) indicated that, with termination of the safeguard measures, their international competitiveness would actually decrease. Most notably, 7 of 19 producers of hot/cold-rolled or coated forms indicated that termination would reduce their international competitiveness.
Pro: ONGOING U.S. TRADE NEGOTIATIONS (Bush Steel Tariff)
America's steel companies, steel communities and related industries have lost tens of thousands of real jobs over the past 4 years due to unfair and disruptive steel imports sold in violation of international rules and U.S. laws. It will serve the long-term interests of U.S. steel using industries. It was supposed to help U.S. industries in the long term, but was only in place for 21 months. the problem is that restrictions on U.S. imports have already hindered free trade, and steal production the U.S. is not playing on a level field Is it worth losing the steel industry in support of "free trade" to foreign nations that artificially raise U.S. steal prices? trade is not "free" currently since rules and regulations are not being abided the tariff would help American industry be competitive
Collective Carnage
Approaching trade and investment liberalization regionally and multilaterally increases the impact of the economic and political benefits such liberalization can produce. However, President Trump has decided his administration will not pursue multilateral or regional agreements, and his actions to end U.S. involvement with the TPP and TTIP agreements underscore this choice. The president has indicated he will negotiate only bilateral agreements. - multilateral agreements spread out the risk and bring more countries under our wing (being of influence) - bilateral agreements through all of the capital into the most successful companies, when tariffs are removed less successful companies can't compete (don't produce enough to sell at a low enough price) - multilateral agreements allow more companies to enter the market
NY TIMES to the free-trader the national security issue should be treated on a case by case basis (ad hoc) the protection of industries may prevent the development of new technology to replace that manufacturing industry
As for national security, exceptions might have to be made; even The Wall Street Journal has recently editorialized against the takeover of the United States communications chip manufacturer Qualcomm by the Singapore-based Broadcom on national-security grounds. But free-trade ideologues say exceptions should be made only case by case, with the benefit of the doubt falling on the side of trade and foreign deals.
Pro: ONGOING U.S. TRADE NEGOTIATIONS (Bush Steel Tariff) STATEMENT OF HON. ROBERT ZOELLICK, U.S. TRADE REPRESENTATIVE, WASHINGTON, DC
At the heart of our strategy is a competition and liberalization, with the United States as the cen- ter of a network of initiatives that, frankly, enhances our leverage. - wants the market to be more competitive but also wants the U.S. to lead the competitive market The European Union has 29 free trade and customs agreements, 22 of which they have negotiated in the past decade, and they have got 12 more. If you look in Financial Times today, even China, just coming into the WTO, is now exploring a free trade agreement with the ASEAN countries. - free trade agreements instead of tariffs for protecting U.S. industry
The tariff is just a price advantage to China and would not allow American companies to drive out competition by momentarily selling at a lower price
Dumping — selling below cost in order to drive rivals out of business and gain market share — is not necessary when you are suddenly granted a 10 percent cost advantage.
GTAP model
By 2015, the country's share in United States total trade value was 16.2 percent (see Figure 1), a rapid surge from merely 6.1 percent in 2000. Conversely, United States was also the country's top trading partner country in 2015 as the country made up 14.2 percent of China's total trade value in 2015 - As China is taking over our trade capital, through American businesses, and selling our products back to us. While the overall price goes down, American dollars are exported, and filtered back into the American economy into the hands of big businesses, rather than the hands of producers. While China's export has gotten more compatible with United States' import structure, the opposite occurred for United States' export to China. This situation had contributed to deteriorating United States' trade balance deficit with China. - The U.S. has a trade balance deficit with China, we buy a lot of China's trade, but we don't have a comparative advantage in trade exported to China
The Potential Fallout From Trump's China Plan
China might even hinder the export of certain critical items to the United States, just as it hindered shipments of rare earths to Japan when tensions flared in 2012 over the Senkaku/Diaoyu Islands. This, too, could lead to job losses - U.S. manufacturing could shrink if China hinders exports of regional-specific resources
Collective Carnage
Collectively, what he has promised, suggested, and done constitutes a comprehensive attack on economic and political theories supporting liberalized trade and investment and on U.S. commitment to open markets as a critical component of American "grand strategy" in international relations. The scale of the assault is astonishing and represents a "scorched earth" strategy against how the United States has managed trade in economic and foreign policy for decades. - radical policy could have damaging effects in the adjustment period - is trump just trying to strengthen the military? The theory of comparative advantage has long been, and remains, a powerful rationale for countries to stay committed to trade, even amidst the difficult politics trade produces, especially in democracies. Second, the U.S. government has long acted on the belief that increasing economic interdependence among countries helps produce more orderly, stable, and peaceful conditions in international relations. As a superpower, the United States has many policy instruments through which to pursue its interests and exercise its influence. Its commitment to open markets has been a pillar of American strategy in international politics. For the United States, support for liberalized trade and investment has been not only a principled way to exercise American power but also a pragmatic means to achieve national security and economic well-being in an often turbulent world. - protectionism is dangerous because the market is more liable to uncontrollable fluctuation in the economy (such as resource deficiencies)
eco-tarriff concerns for developing nations
Concerns about the impact of EG liberalization on domestic industries may be relevant even to goods that are beneficial for climate change mitigation. Many developed countries and developing countries such as China and India have domestic industries engaged in the manufacture of goods such as solar panels and wind turbines (often with the aid of domestic subsidies). Any package for liberalizing climate-friendly goods may also need to respond to these concerns and take into account subsidies and other measures put in place by governments to encourage the domestic renewable energy sector. - also prevents entry of developing countries into climate control organizations
GTAP model
Domestic consumer will suffer from decline of consumer surplus equivalent to area a + b + c + d. - An import tariff puts a wedge between the world price and importing country's domestic consumer price. - the world price is lowered because of the decrease in consumer demand for the import but the domestic price is raised, the import quantity is reduced - by artificially lowering demand, the tariff reduces consumer surplus - companies may buy less steal and manufacturer fewer products, forcing them to raise their price and wages
NY TIMES the policies also overlap on wanting to strengthen prosperity, but the economic nationalism is willing to sacrifice a higher GDP for a stronger middle class tradeoff between wealth and equality
Economic nationalists do not accept the claims made by extreme free-traders that any degree of industrial protection must inevitably lead to less national wealth. But so what if it does? If the price of national security and a durable, free middle class is a modest reduction in gross domestic product, the economic nationalist is willing to pay it.
The Potential Fallout From Trump's China Plan
Effect on East Asia. The countries of East Asia would likely be hurt even more than the United States. Exports from Japan and the rest of East Asia depend more on China's own exports to the United States than on China's internal growth.
The Potential Fallout From Trump's China Plan
Financial Market turmoil. The stock market and currency markets would react -- possibly in a more drastic way than in the second half of 2015 because of fears of a China slowdown. - investment in technology could decrease because we are selling less to China, American buisness would suffer--> there would be less growth - investment in other products outsourced to China would decrease out of fear of retaliation on our products
continuation scenario quotes - since international competitiveness decreases, employment decreases - there is no point in isolation the market because although certain steal manufactures will get increased buisness industries that rely on steal and make steel based tubes and vessels to sell to other industries will have to pay more and not be able to compete on an international scale - we live in a global world in their are more buisness will be exported as a result of tariffs than will be moved to American steel producers
For example, a representative from Caterpillar reported that "[i]f we are forced to continue to do business under these circumstances, we'll continue to reduce costs to offset that. It creates uncertainty for employment. We'll continue to use our offshore manufacturing sources to satisfy the demand around the world."2 In addition, a representative from the Precision Metalforming Association reported that "if the tariffs continue, there's no question there will be fewer people employed. There will be lower profits in the industry, less equipment will [be] bought and more plants will close."3 4
Collective Carnage
For too long, a small group in our nation's capital has reaped the rewards of government while the people have borne the cost. Washington flourished, but the people did not share in its wealth. Politicians prospered but the jobs left and the factories closed. - Trump views American government as a plutocracy Free trade agreements and NAFTA are to trim indicative of the corrupt connection between U.S. government and businesses, free trade is a capitalist ploy - ironically Trump the benefits from free trade; Trump apparel, beverages, furniture and hotel items were all outsourced (Trump shirts were made in China, Bangladesh, Honduras and Vietnam) - Trump seems to support a mercantilist policy
NY TIMES free traders believe economic efficiency will lead to a stronger middle class--> for them a growth in overall industrial profits is a growth for the middle class perhaps a growth for producers is the way to strengthen the middle class What if the factory/plant closes? the price of manufactured goods will be cheaper but the consumer will not be able to afford them anyway without a new job
Free-traders tend to believe that only by making economic efficiency the supreme goal of public policy can those other ends be achieved. Division of labor produces greater wealth, and so free trade makes everyone better off, with the harm to those whose manufacturing jobs are lost outweighed by the good that comes from, say, cheaper flat-screen televisions. Dollars decide. The figures are the outward and visible signs of the fundamental economic truth.
Collective Carnage
German, and Japanese governments. into a long-standing concern in trade policy about the devaluation of currency values in order to boost exports and reduce imports. The United States has voiced concerns that the Chinese government manipulates its currency to gain trade advantages many times after China became a member of the WTO in 2001. However, the United States has not imposed tariffs on Chinese imports on the basis of its allegations of currency manipulation. Part of the reason for no trade action is the lack ofgrounds in international trade law for sanctioning currency manipulation. Countries have not crafted trade remedies for this issue. The Trump administration's focus on currency manipulation suggests it might be willing to act unilaterally in trade policy-another potential rupture with how the United States has handled trade diplomacy for decades. - American currency is overvalued in comparison to Chinese currency because the official bank of China manipulates the exchange rate between local banks and Chinese buisness, who need Yuan to pay their workers. The U.S. dollars are then reinvested in the American economy. - Thus, American goods can be sold in a Chinese market for a higher price than they are sold in the U.S. market since U.S. dollars are worth, and Chinese goods can be sold at a lower price.
Pro: ONGOING U.S. TRADE NEGOTIATIONS (Bush Steel Tariff)
I know there is some unhappiness with the U.S. steel industry. I would suggest they spend a little more of their energies and initiatives in recognizing the opportunities here in the United States. If this gas line is built—and it will be built—it will use about 3,000 miles of steel that will either be built in the United States because U.S. steel can be competitive, or it will be imported in from Japan, Korea, Italy, and other nations. That order, Mr. Ambassador, is worth in excess of $5 billion. Now, it would seem to me that the United States' steel industry should make a determination of whether it wants that business, whether it can gear up for that business, whether it can be competitive for that business and support, the development of domestic energy resources in this country as we recognize the legitimacy of supporting, if you will, the domestic industry here at home, par- ticularly when the development takes place here at home.
eco-tarrif: https://www.finance.senate.gov/imo/media/doc/hrg102-566.pdf
I've been asked to comment on S.984, the International Pollution Deterrence Act, under which goods produced abroad under environmental standards less strict than those here would be subject to a countervailing duty equal to the cost not so incurred. The proceeds of any such duty would be used to finance the sale of American pollution control equipment (administered by AID) and the Pollution Control 'Research and Development Fund (administered by EPA) to assist US firms in developing pollution control technologies. It also would require EPA to prepare and update yearly an pollution control index for our top 50 trading partners, comparing their attainment of air, water and solid waste pollution control standards with our own. I believe that the concept provides an innovative approach to deal with environmental issues, which in my view is more effective than the "command and control" regulatory approaches often put forward. It is an approach which would use a market forces to help achieve environmental goals. It is much more effective that the outright bans, quotas and other trade restricting efforts which are prevalent in the world today and which are being considered in the environmental area. counter argument: leads to economic colonialism
tariffs are taxes
If we put sanctions on other countries depriving them on imports, we impose sanctions on our own country
If we are importing more foreign steal after the tariff isn't that bad?
Imports of steel-containing products declined about 9.0 percent from 2000/01 to 2001/02 but then increased by about 6 percent the year after the safeguards were implemented (2001/02 to 2002/03). Exports of these products declined steadily from 2000/01 to 2002/03, falling about 11 percent from 2000/01 to 2001/02 and then an additional 3 percent the year after the safeguards were implemented (2001/02 to 2002/03). Except for a few industries, such as motor vehicles, metal cutting and forming, pipe, and bar producers, the growth in imports of steel- containing products was greater than the growth in exports in the year after the safeguards.
Collective Carnage
In contrast to traditional U.S. grand strategy, President Trump wants to pursue "America First" through protectionist policies. In his Inaugural Address, the president declared that "[e]very decision on trade . . . will be made to benefit American workers and American families. '29 President Trump argued that "[p]rotection will lead to great prosperity and 30 strength.", In his Joint Address to Congress on February 28, 2017, President Trump cited Abraham Lincoln's argument that "abandonment of the protective policy by the American government ... will produce want and ruin among our people" as support for his embrace of protectionist 31 trade policies. - Trump wants to go back in time from a post labor world to a pre-industrial world, but doing so will decrease incentive for innovative technology that creates new market, thus expanding the economy and increase incentive to improve pre-exisitng markets, thus limiting America's ability to participate in a global market and trade for desirable goods produced outside of the U.S.. - the American people will have less technology and more needs-based items, thus decreasing the efficiency of our skilled workers
GTAP model
Judging from high intensity and complementarity between United States and China, it can be inferred a priory that any trade protectionism measures between two countries will lead to large trade pattern change in both countries. "trade deflection" - the U.S. could change trade partners has a result of the high tariff
GTAP model (findings)
In the United States, net export was projected to decline with subdued decline in investment, consumption and government expenditure. - trade balance increases but GDP decreases - the US will not necessarily buy more American goods but resource to another nation - it is a punitary measure on China and will have a negative affect on GDP but will not positively affect the nation until China comes to an agreement on fair trade policy, which may not happen - If China imposes retaliatory tariffs on American manufactures (technology) it will likely import much less from America
GTAP model
In the presence of a single domestic monopolist firm, tariff increase will have another distinctive aspect: it allows domestic monopolist to price above its marginal cost and domestic consumption to decline while the monopolist domestic marginal revenue increases. The monopolist will take advantage of the difference between marginal cost and domestic price by selling the gap between its production and domestic consumption to world market at world price, creating a dumping policy - if cartels are created, the U.S. could be the one dumping steel into other countries, by creating merges to sell at the lower world price in trade deflection the U.S. can be expected to export more to another country
eco-tarrif
International Pollution Deterrence Act of 1991 - Amends the Tariff Act of 1930 to declare that a country's failure to impose and enforce effective pollution controls and environmental safeguards shall constitute the bestowal of a bounty or grant (subsidy) by such country on its manufactured products and require the imposition of countervailing duties on such products.
THE ROLE OF TRADE AND TECHNOLOGY IN 21ST-CENTURY MANUFACTURING (innovation follows the shop floor, when production goes overseas our ideas go overseas)
It is pretty apparent, it is pretty obvious, that U.S. trade policy and tax policy have encouraged jobs, American companies, to relo- cate overseas. It is pretty interesting. The last 20 years is the only time period I can think of in economic history around the world where companies will shut down in Cleveland and move production to Wuhan and then sell their products back to Ohio, or back to Cleveland, or back to the United States, and it has become a busi- ness plan for a number of U.S. companies. There are other factors of course, but trade agreements and tax policy seem to have played into that. What happens is we, the most innovative country probably in the history of the world, with a great system of research and development and universities, we lead the world in innovation still. But when the production goes over- seas, both in terms of process and product, the innovation takes place on the shop floor, making a production more efficient and making a product itself that is manufactured better. What do we change about U.S. trade policy? What does TPP do, what does TTIP do, to begin to change that whole view that is part of many companies' business plans: to shut down here, move over- seas, and sell back into the United States? How do we change trade policy, tax policy? This is for both Mr. Ezell and Ms. Sturm. How does that play with these proposed trade agreements, and what do you suggest we do to encourage companies to no longer do that and to begin to re-shore jobs?
Tax hike during lackluster recovery
It would disrupt the operations of all the firms involved in US trade with China and Mexico. Unless Trump returns that money to US firms and consumers through other tax cuts, his plans would remove 1.5 percent of purchasing power from the US economy. That's the kind of hit that could cause a mini-recession, such as the 1.4 percent peak-to-trough decline in US GDP seen in the 1990 recession. The size of the hit to GDP depends not only on the direct "multiplier effects" of such a tax hike, but also on what economic uncertainty does to business investment.
NY TIMES: The Case for Trump's Tariffs and 'America First' Economics Economic Nationalism is good for the military and war
Likewise, there would not have been a Western Front in World War II if the United States had not had the industrial strength to back Britain's defiance of Nazi Germany. That the United States could wage war on Germany and imperial Japan simultaneously was a function of the rapidity with which civilian industry could be adapted for military needs. The United States had the raw resources, the energy capabilities and the factories necessary to conduct a two-front war. Such capacity in the service of national defense will sooner or later be needed again. Strength has to be held in reserve.
GTAP model
Mahadevan et al. (2017) dynamic CGE model simulation of Indonesia's rising mineral and general trade protectionism projected negative impact to GDP, household consumption, and employment. Noland et al. (2016) conducted a Moody's DSGE model simulation of United States economy in the presence of Donald Trump's tariff increase policy on Chinese and Mexican imports. The study found out that under the full trade war scenario employment will fall more than 4 percent with largest job loss suffered by non-trade services sector. The rising unemployment will cause drop in domestic consumption and investment. Their simulation study of bilateral United States-China tariff war predicted shrinking world trade, welfare loss in both countries, and trade diversion. - if world trade shrinks the U.S. will move away from globalization and become more isolated as an economy, a drop in investment would cause the U.S. economy to shrink, living standards may go done as prices go up The adverse effect brought by tariff increase will cause Trump to "face vigorous court challenges by adversely affected US firms and possibly some states, arguing that the president had exercised powers and invoked statutes in ways that the Constitution or Congress never intended".
U.S. International Trade Commission
Many responding firms had difficulty distinguishing between the effects of the safeguard measures and other changes in market conditions. Overall, changes in competitive factors after the safeguard measures were implemented varied in nature across steel-consuming industries and often across firms within industries. The price was higher in multiple industries canceling the effect out; it was higher when they bought the steal but also higher when they sold it
Collective Carnage
Nor has President Trump demonstrated much interest in economic interdependence as a source of political stability in international relations. Indeed, he has gone out of his way to attack sources of international stability grounded in economic interdependence. Perhaps the most famous, and successful, manifestation of the belief that economic interdependence produces better conditions for peace is the EU, a project borne from Europe's experience with two world wars. 23 However, President Trump is no fan of the EU. trumps policy could hurt the EU, a trade war could bring in allies to the U.S. and China, nations are less connected, have more resentment towards each other--> peace begins with economic prosperity contradiction: The U.S. would have less influence over the world market by encouraging other nations to become protectionist
Senator from Oregon https://www.finance.senate.gov/imo/media/doc/93516.pdf 2014 hearing (Intellectual Property)
Now, I think I have established that American manufacturing has a lot of room to grow, and I think every member of this com- mittee—we have Democrats and Republicans here—can also attest to the fact that in their home states there are thriving, cutting- edge manufacturers that are winning in tough global markets. The investments these manufacturers make support stable, healthy communities, and they create good-paying jobs for our hardworking middle class. The bottom line? The right policies, especially on trade, can help launch a new era defined by successful, sustained manufacturing in America. Those policies ought to reflect what American manu- facturing looks like today and where it is headed in the future, and not in effect be tethered to what was done 10 or 20 years ago. Our new policies have to dismantle trade barriers American manufac- turers face abroad, like tariffs on high-tech products, requirements to relocate factories, intellectual property theft, and anti-competi- tive subsidies for state-owned enterprises. New policies have to foster an environment in which American manufacturers of all sizes can grow and create good-paying middle- class jobs. The challenge ought to be, colleagues, to make things here, add value to them here, and then ship them, ship that Amer- ican brand around the world. Today's hearing gives the Finance Committee a chance to, on a bipartisan basis, develop those trade policies that can meet those objectives. Senator Hatch has been a close partner in all of these issues. For those of you who were not here yesterday, Senator Hatch made some extremely important points yesterday with re- spect to protecting American intellectual property.
impact backfired- the termination would have a positive impact
On March 5, 2002, (Bush) following affirmative determinations of serious injury or threat of serious injury by the Commission under section 202 of the Trade Act of 1974 (the Act), the President implemented safeguard actions to facilitate efforts by various domestic steel industries and their workers to make a positive adjustment to import competition with respect to certain steel products. Purchaser responses were split over whether profitability would increase or decrease if the safeguards continued with slightly more firms indicating that profitability would increase with termination of the safeguards than those who indicated that profitability would not change.
GTAP model
On global level, the policy was projected to lead to decline in GDP, terms-of-trade, and welfare; and increase in trade balance for United States and China. Trade diversion phenomena would occur, predicting steep decline in bilateral trade between the two countries and increasing export towards their third trading partners. - less trade would occur between China and the U.S. and more would occur between third parties, plants wouldn't necessarily be renationalized, but rather restationed in countries with steel producing machinery and with cheap labor, such as Mexico
Protecting U.S. steel industry shouldn't be partisan issue
Our small town as seen the impacts of the aggressive over-production by China and Russia and the subsequent dump- ing of this cheap steel into the U.S. market. It's important to remember that these foreign steel companies aren't somehow more e cient or intelligent about making their steel — the bottom line is that they are openly and substantially subsidized by the government. To ask compa- nies like Arcelor Mittal to compete with the government of China or Russia is simply an outlandish posi- tion and if something isn't done to level the playing eld, I'm fearful that towns like Steelton will reap the consequences.
How could sales and profits possibly increase? If capital investment fell, then they have less money to continue production.
Overall sales and profits increased, while capital investment fell, for most steel-consuming industries in 2002/03 (the year following the imposition of the safeguard measures) compared with 2001/02 (the year preceding the safeguard measures).
The Potential Fallout From Trump's China Plan
Price shock/tax hike. The "first order effect" of a 45 percent tariff on all imports from China would be equivalent to a tax hike of 1.2 percent of GDP. This would likely cause job loss, not job gains. - A shrinking economy= shrinking supply= fewer jobs
Trumps threats working on china What extreme does protectionism have to go to for it work?
Protectionism helped China grow rich. In 1997, GDP per capita was $800. Since then, incomes have gone up to 10 times that. Twenty-five percent of all manufacturing production takes place in China. The country accounts for 18% of global exports and 30% of fixed capital formation.
The Effect of Chinese Imports: http://economics.mit.edu/files/6613
Rising imports cause higher unemployment, lower labor force participation, and reduced wages in local labor markets that house import- competing manufacturing industries. In our main speci cation, import competition explains one-quarter of the contemporaneous aggregate decline in US manufacturing employment. Transfer bene ts payments for unemployment, disability, retirement, and healthcare also rise sharply in more trade-exposed labor markets.
https://www.cbp.gov/trade/trade-community/programs-outreach/convict-importations - Child labor tariff
Section 307 of the Tariff Act of 1930 (19 U.S.C. § 1307) prohibits the importation of merchandise mined, produced or manufactured, wholly or in part, in any foreign country by forced or indentured child labor - including forced child labor. Such merchandise is subject to exclusion and/or seizure, and may lead to criminal investigation of the importer(s).
China Steeling Trade Secrets- Ohio Senator
Senator BROWN. Thank you, Mr. Chairman. Recently—and this question is for you, Ms. Sturm—DOJ indicted five Chinese military officers for the cyber-theft of trade secrets from U.S. manufacturers and the United Steelworkers. The steal- ing of trade secrets by the Chinese military underscores just how valuable IP and trade secrets of U.S. manufacturers are to the Chi- nese government. We know, or we think, that there has been a long-term pattern of that kind of abuse of the rule of law.
Steel, aluminum shares jump on tarrif optimism after Cohn resignation
Shares of domestic steel and aluminum makers are higher after Gary Cohn, the Trump administration's key economic adviser, resigned yesterday.
Collective Carnage
Similarly, in Asia, President Trump has blasted China for abusing international trade agreements and threatened to change U.S. policy on. These steps challenge the U.S. approach of integrating China into global markets as part of peacefully managing the growth of Chinese economic and political power in Asia. - Trump discourages China from entering the E.U. and abiding by international trade rules. It turns China into a victim and labels it as an aggressor.
NY TIMES to the economic nationalists the American free trade policies amount to a preemptive (premature) surrender in the trade war
Steel towns throughout the Northeast and Midwest have been losing a trade war for decades because they cannot count on their leaders in Washington to fight for them.
The Potential Fallout From Trump's China Plan
The U.S. gets 2% of its steel from China and the largest majority, 17% from Canada, which is exempt from Trumps tariffs. China is not steeling American jobs from the steel industry since the U.S. has long since been outsourcing its steel production to other nations. Chinese steel exports to the U.S. underwent a drop i 2014 and another sharp drop in 2016. While import penetration of steel has increased from 22.7% in 2009 to 32.6% in 2017, resulting in 134% steel import growth, China's share of this growth is actually negative. In 2009 China owned 20.9% of the U.S. imports of steel and only 3.94% in 2017. Today both Canada and Mexico have a much greater share of the market and both are exempt from Trump's tariffs. - Must jobs haven't been outsourced to China so a tariff on Chinese steel would not bring back employment to the U.S.
https://www.arnoldporter.com/en/perspectives/publications/2017/04/understanding-the-us-ban-forced-labor-goods certain tarifs are implemented, despite the impact on the market, because of ethical reasons would America allow the import of foreign made candy bars? Does the tariff need to be increased to make companies such as Hershey's switch their manufacturer?
The United States Government since 1930 has prohibited the import into the United States of goods "mined, produced, or manufactured wholly or in part" by convict, forced, or indentured labor. Congress, on a bipartisan basis, repealed the so-called "consumptive demand" exception to the import ban. That exception had allowed goods into the United States, despite their production by forced labor, if the domestically produced supply of the goods was not sufficient to meet domestic demand for the goods. On February 24, 2016, President Obama signed the Trade Facilitation and Trade Enforcement Act (TFTEA), which eliminated the consumptive demand exception.
figures of the effect of Chinese imports
The coef cient of −0.75 in column 3 indicates that a $1,000 exogenous decadal rise in a CZ's import exposure per worker is predicted to reduce its manufacturing employment per working-age population by three-quarters of a percentage point. (1990-2007). These correla- tions provide little evidence suggesting reverse causality. Our preferred speci cation with full controls in column 6 of Table 3 implies that a $1,000 per worker increase in import exposure over a decade reduces manufactur- ing employment per working-age population by 0.596 percentage points. Appendix Table 2 shows that Chinese import exposure rose by $1,140 per worker between 1990 and 2000 and by an additional $1,839 per worker in the seven years between 2000 and 2007.30 Applying these values to the Table 3 estimates, we calculate that rising Chinese import exposure reduced US manufacturing employment per popula- tion by 0.68 percentage points in the rst decade of our sample and 1.10 percent- age points in the second decade of our sample. In comparison, US manufacturing employment per population fell by 2.07 percentage points between 1990 and 2000 and by 2.00 percentage points between 2000 and 2007 (Appendix Table 2). Hence, we estimate that rising exposure to Chinese import competition explains 33 percent of the US manufacturing employment decline between 1990 and 2000, 55 percent of the decline between 2000 and 2007, and 44 percent of the decline for the full 1990 through 2007 period.
impact varies on industry--> decline in total welfare but increase in profit of limited industries
The economy-wide analysis, designed to focus on those impacts that arise from the relative price changes resulting from the imposition of the safeguard measures, estimated that the effect of the safeguard measures on the U.S. welfare ranged from a welfare gain of $65.6 million to a welfare loss of $110.0 million, with a central estimate of a welfare loss of $41.6 million. Overall, the simulation results indicate that returns to capital fall by $294.3 million and returns to labor, based on the net effect on all labor in the U.S. economy, fall by $386.0 million as a result of the safeguard measures, but tariff revenues increase by $649.9 million. The offsetting impact results in an estimated annual GDP loss of $30.4 million. The model estimates that earnings in industries where returns to capital fell, including steel-consuming industries, would decline by $601.2. million (0.01 percent), while earnings in other industries where capital income increases (e.g., iron ore mining, ferroalloy and related product manufacturing, coal mining, custom roll forming, energy and services) would experience increased capital returns of $67.4 million (0.04 percent). The impact of the safeguard measures varies by steel- consuming industry. Industries that are particularly affected include motor vehicle parts and several steel fabrication industries (metal tank manufacturing, railroad rolling stock manufacturing, and power boiler and heat exchanger manufacturing). These industries also reported larger impacts from the safeguard measures in their questionnaire responses and also exhibit market characteristics suggesting that they would be among the most affected steel-consuming industries.
Tax hike during lackluster recovery
The most immediate effect of Trump's tariffs against China and Mexico would be a tax hike of about 1.5 percent of US GDP. A tariff is a tax paid by those importing goods from China and Mexico. It goes from the pockets of US firms and consumers straight into the vaults of the federal government. Doing this in the midst of a lackluster recovery would be a "job-killer."
Kyoto tariffs
The results discussed in table 2.6 suggest that the United States would lose up to 7 percent of its exports to the EU if such tariffs were implemented. But the energy-intensive industries, such as the steel and cement industries (which will be subject to this tariff), would be most severely affected and could suffer up to a 30 percent loss. Even this is an underestimation, as it does not take into account the trade diversion effects that could result from the EU shifting to other trading partners whose tariffs now are much lower than the tariff on the United States. The simulation exercise thus suggests that if the EU goes ahead with the proposal to introduce border taxes to compensate for the climate change policies, it could significantly affect the U.S. trade balance. We did not attempt a similar exercise for developing countries (e.g., China), since the current EU debate is still an indus- trial-country issue mainly targeted at the United States.
GTAP model (methodology)
This study utilized Global Trade Analysis Project (GTAP) Database version 9A from Center for Global Trade Analysis, Purdue University. The database covers 140 regional units and 57 sectors (Aguiar, et al. 2016) with reference year 2004, 2007, and 2011. 1. Full trade protection scenario: United States imposes 45 percent import tariff on all commodities obtained from China. China retaliates by imposing similar percentage point of tariff increase. 2. Manufacturing trade protection scenario: United States imposes 45 percent import tariff only on manufacturing commodities ("ProcFood", "TextWapp","BasicInd", "MetalInd", and "HighInd"). China retaliates by imposing similar tariff rate increase on manufacturing import from United States. Although both scenarios simulated symmetric tariff increase in both United States and China, impact on China's GDP is larger than those of United States'.
Senator from Oregon https://www.finance.senate.gov/imo/media/doc/93516.pdf 2014 hearing (Intellectual Property)
The success of our manufacturing sector is vital. Nearly 12 mil- lion Americans are directly employed by manufacturing. That is nearly 1 out of 10 American jobs. This is true in my State, where nearly 10 percent of working Utahans are employed in manufac- turing. That is 120,000 jobs in Utah alone. That is one reason I am happy Ray Kimber is here with us today, and we welcome all three of you with us today. I often talk about the small, innovative company that begins in a garage and grows to become the driver of economic growth and a source of jobs. That is Kimber Kable. Twenty-five years ago, Mr. Kimber figured out a way to weave audio cables to reduce un- wanted noise and improve fidelity. He founded Kimber Kable to manufacture those cables, and now he employs 30 people in Ogden, UT. He sells his cables to the world. Today, two-thirds of Kimber Kables are shipped to customers overseas. Ray is not only a friend, he is also an outstanding example of a larger truth, that the U.S. manufacturing sector is the most inno- vative in the world and American workers are unsurpassed in man- ufacturing productivity. Because of U.S. innovation and produc- tivity, in those areas where U.S. manufacturing competes on an equal footing, it succeeds. Our manufacturers maintain a trade surplus of $60 billion per year with the 20 countries where we have a free trade agreement in place. Per capita, the consumers from those countries purchased nearly 13 times more U.S. goods than consumers from the rest of the world. When you find a market that is open and secured by strong international trade rules, you will find goods like Mr. Kimber's that are manufactured in America. But using the Internet to market, sell, and transmit digital prod- ucts is only part of the story. These companies are also innovators, and their innovations must be protected. Our witnesses today have experienced first-hand the destructive impact of intellectual prop- erty theft. Mr. Kimber, for example, has had to contend with coun- terfeiters stealing his company's name to sell inferior products. Our TPA bill also requires that U.S. trade agreements reflect a standard of intellectual property rights protection similar to that found in U.S. law, and it calls for an end to the theft of U.S. intel- lectual property by foreign governments, including piracy and the theft of trade secrets, and for the elimination of measures that re- quire U.S. companies to locate their intellectual property abroad in return for market access.
Tax hike during lackluster recovery
The tariff hikes would cause a big disruption beyond the macroeconomic ripple effects of the tax hike. It would disrupt the operations of all the firms involved in US trade with China and Mexico. In the case of China, 80 percent of all manufactured goods that the United States exports to China are made by US firms to their subsidiaries, affiliates, joint venture partners, or related firms in China. Most manufactured goods -- 77 percent -- the United States imports from China come from related firms. The tariff would affect joint companies and firms that U.S. steel to make manufactures, like canned beverages. A retaliatory tariff would trade relations with China, since the U.S. has contracts with Chinese companies that buy our goods--> the goods are just distributed into the market directly. Steel is an intermediary good that US firms need to run their production processes in the US. There are more people employed by companies that incorporate steel into their products than by steel producers in the U.S. he same goes for US firms importing semiconductors and other parts for their computers (made of aluminum)
NY TIMES free-trade only regards value in economic terms, as dollars, but other factors must be considered
The value of the middle class has to be weighed in political terms, not merely economic ones, and national security has a strategic logic all its own that springs from different and darker assumptions about human nature than the hopeful logic of economic efficiency. "Mr. Trump's steel and aluminum tariffs may not work. But they are a first attempt at finding an alternative to a free-trade system that has built up the People's Republic of China while hollowing out the factory towns that once made America great."
Senator from Oregon https://www.finance.senate.gov/imo/media/doc/93516.pdf 2014 hearing
This hearing is going to show that it is too soon to hang the crepe on American manufacturing. There is genuine reason to be optimistic, because many American manufacturing companies— many American manufacturing companies—now succeed in tough global markets. Manufacturing accounts for more than $2 trillion in the American economy, it supports more than 17 million Amer- ican jobs, and it drives three-quarters of all private sector spending on research and development. There are many more players in the manufacturing game worldwide, but the bottom line is, America is more than holding its own. Now, that is not to say there have not been significant changes in recent years, and it is not to say that it is going to be exclusively smooth sailing from this point on. U.S. manufacturers have run up against greater competition today. Some of it is unfair, and 50 or 60 years ago the United States was the world's factory, accounting for 40 percent of the world's manufacturing goods. Today, the U.S. accounts for less than 20 percent. Yet, American manufacturing has real strengths and opportuni- ties to build on. For example, technology is an area where it is ''ad- vantage America.'' The same is true in finished products and pro- duction methods. It is important for the Finance Committee to identify and examine which policies have stifled manufacturing and learn the lessons of the past. So the focus today is going to be on how to come up with fresh trade-related policies that can unleash the full potential of American manufacturers and give our manu- facturers—American manufacturers—a new springboard to good- paying, middle-class jobs. So there is a tremendous opportunity before American producers. There are going to be about a billion new middle-class consumers in markets around the world with significant sums of money to spend. That number is only going to grow as more people rise from poverty. Many of those consumers prize American products. They look for the American brand because the American brand rep- resents top-notch quality, safety, and reliability. The American brand is a winner. Furthermore, American manufacturers are at the forefront of a number of fields, innovative fields, that are going to lead our economy in the future: clean energy, health care, and information technology are just a handful of examples.
Collective Carnage
This unilateralist approach threatens the U.S. government's support for resolving trade and investment disputes through rule-bound dispute settlement established within treaties. Starting with the dispute settlement provisions included in the original GATT in 1947, the United States has backed and actively participated in dispute settlement mechanisms negotiated in trade and investment agreements. - the U.S. has previously adopted an ad hoc approach to treaty violations by pursing individual companies that steal U.S. intellectual property or participate in unfair trade practices. The cases are disputed amongst(between) a settlement body. (settlements are disputed between a body of representatives) - encourages(fosters) multilateral agreement to (upholding of) trade practices (standards)
(waterborne imports) There is an overall decline in imports of steal, but we are importing more from countries except from the tariff.
Waterborne imports of steel of the types covered by the safeguard measures declined by 10 percent prior to the implementation of the safeguard measures (2000/01-2001/02) and by 10 percent after implementation (2002/03), for a total decline of 4.0 million short tons. However, imports by land from Canada and Mexico (countries exempt from the safeguard measures) rose by 1.1 million short tons after implementation of the safeguard measures. Overall, imports of all steel products, declined almost 7 percent in the year after the safeguards.
Collective Carnage
While Obama's solution to rising Chinese power was to bring China closer to the U.S., incorporating under the TPP and encouraging to abide by trade rules given international pressure, Trump's has responded to Chinese power by combating Chinese power. He has turned the international market into a war between the two most powerful nations, rather than a possible comradeship. (collaboration) - response i war rather than collaboration. For President Trump, protectionism defines his outlook on trade with the Asia-Pacific region. In its 2017 Trade Policy Agenda, the Trump administration declared that it rejects "the notion that the United States should, for putative geopolitical advantage, turn a blind eye to unfair trade practices that disadvantage American workers, farmers, ranchers, and businesses in global markets. - does not want to make peace, throw up his arms, until an agreement in favor of the U.S. is made (testing American power)
trumps threats working on China
Xi's concession on cars does not mean the U.S. and China "trade war" story is over. China filed a complaint with the World Trade Organization challenging Trump's tariff hike on imported steel and aluminum last month. The WTO will give both sides 60 days to reach an agreement. If no agreement is reached, Beijing could request an aribitration panel hearing against the U.S.
THE ROLE OF TRADE AND TECHNOLOGY IN 21ST-CENTURY MANUFACTURING
Yes. Let me brag about a fellow CEA member. MiTek manufactures speakers in Ennis, TX. They have about 150 employees there. They also manufacture in Kentucky and Phoenix with about 100 employees each. They recently outfitted the Shang-hai airport and the Shenzhen ferry station with U.S.-made paging systems, even in the face of a 40-percent tariff. Can you imagine how good those products are to overcome that kind of price barrier? Imagine how much more innovation and how much more sales we would get if that trade tariff was even-handed on both sides. So it is important. We are overcoming it, and we can see how the technology can do it, but it is—— (the answer is free trade agreements not a tariff war)
NY TIMES tariffs can help strengthen the middle class, which only exists in an industrial nation the tariff debate is a debate over the middle class: can the middle class grow in a post-industrial nation, is the better answer to pursue policies that shrink the wage gap and level the playing field, such as a gradation tax
a middle class is hard to imagine in a postindustrial nation consisting of a tiny capital-controlling elite and a vast population of Amazon warehouse workers.That a sort of postindustrial middle class might be sustained by universities and hospitals, as it is in places like Pittsburgh, is not a comforting thought to the conservative kind of economic nationalist.
Tariffs on steel aren't new, they go back to Nixon
companies shifted from importing steal to pre-assembled steal parts or moved their industries to foreign countries where they could attain cheaper steal
The Myth of Free Trade
controlling trade will allow for a more equitable distribution of the economic pie controlling trade is an inevitable process in regulating "the world economy in the interests of a greater proportion of its people" pg. 171
"How Long Can we Last"
costs of protectionism, president trump placed a 25% tariff on steel from China the tariff will add over half a million to raw material costs over six months alone (PA CP industry) the tariff will add up to 10% to the cost of their steal cylinders so American businesses are paying foreign rivals are trying to ween away some of the company's biggest clients
The Myth of Free Trade
modern factors, such as technology, cause comparative advantage not just to focus on resources and factors of production, such as land and labor, but also on capital and research (it is harder to attain a comparative advantage in these fields) we are giving up our industry without the cultivation of a comparative domestic industry whose products we may export Our GDP is growing but our industry is dropping since it takes time to establish a product that there is demand for in another country "comparative advantage inevitably tends to be less obvious and inherent and more artificial. Above all it depends on the ability to deploy large amounts of capital on research and development and other assets designed to give countries (or companies) a superior capability in key areas of advanced technology...state subsidies play a crucial role in creating these advantages" pg. 172-173
GTAP model (conclusion)
short-run effects of full-protection and manufacturing protection with appropriate retaliation response from China GDP and welfare decrease, greater trade balance with China, the U.S. will find substitutes for imports in other countries, not leading to the cultivation of domestic markets - since the U.S. doesn't have a comparative advantage in steel instead of modernizing its technology and expanding its own plants, it will look to other nations as a source for steel (the easiest option is substitution, not an increase in capital for the U.S. market) - unemployment increases (doesn't believe that imports will decrease) - which could possibly raise employment (the economy is too globalized for isolation to be a viable option for U.S. manufacturing companies, the cost would be too high) - it is a strictly punditry measure on China that will lead China to become more isolated, decreasing World Trade and shrinking the economy - while trade policy will be more fair, since the U.S. will be less of a dumping ground for steel for China, American technology will suffer and so will American consumers - it will hurt the Chinese economy most acutely, and will damage are economy less sharply, but will not benefit either nation or the world
tariffs are taxes
steel tariffs may save 140,000 jobs in the steel industry but they put at risk 5 million jobs in industries that use steel steel 20% above the world price and steel and aluminum 7-10% higher steel and aluminum users and consumers lose tariffs are a regressive tax on low income families
tariffs are taxes
tariffs have almost never worked as intended bush tried to save the steal industry with tariffs "Canada and Mexico are now threatening retaliatory tariffs against America." "In the early 1980s President Ronald Reagan invoked anti-dumping provisions against Japanese steel. It was one of the few decisions he later confessed he wished he hadn't made."
The Myth of Free Trade
there is an oversupply of labor "the relevance of orthodox trade theory (laissez-faire theory) is limited by the chronic and massive excess of supply over demand for productive factors- particularly labor" pg. 173
Collective Carnage
threats to impose increased tariffs on imports made by U.S. companies in other countries. The president believes that trade and investment agreements have provided U.S. corporations with incentives to outsource manufacturing to foreign nations. In his opinion, this outsourcing is responsible for shuttered factories in the United States "scattered like tombstones across the landscape of our nation." 47 His anger about outsourcing, and his desire to punish imports made by U.S. companies in other countries, challenges U.S. government policies that have facilitated global flows of foreign direct investment. - the U.S. has come to (produced) bilateral agreements in its pursuit of liberalized trade, which have encouraged foreign investment in U.S. owned enterprises and the investment of U.S. enterprises in other countries
The Effect of Chinese Imports:
trade theory identi es low-wage countries as a likely source of disruption to high-wage labor markets In 2000, the low- income-country share of US imports reached 15 percent and climbed to 28 percent by 2007, with China accounting for 89 percent of this growth. In 2000, the low- income-country share of US imports reached 15 percent and climbed to 28 percent by 2007, with China accounting for 89 percent of this growth. account imbalances: US industries have thus faced a major increase in import competition from China without an offsetting increase in demand for US exports. comparative advantage myth TAA grants are however temporary
GTAP model
trump offers a protectionism to reclaim American "economic independence" China has a premier position in WTO that leads to some of the "greatest job thefts in history" it uses subsidies to lower prices and dump excess steel into the U.S. Almost half of our entire manufacturing trade deficit in goods with the world is the result of trade with China" (Trump, 2016). trump believes that the only way to get through to China is through trade, that is the only power we have over them - it will trigger a trade war - other countries will become protectionist since the U.S. is the leader in trade liberalization - the market will shrink as a result and cause a rise in global prices, hurting consumers and discouraging capital investment - if trump makes steps towards renegotiating NAFTA in terms of the U.S. labor force other countries may be discouraged from following free trade rules
VRA
voluntary restraint agreement enacted by Reagan with European steel producers