Us Tariffs on Tires Import from China

International Business

Case study

Submitted By:

Ms. Sabina Gautam

Ace Institute of Management

Section: ‘B’

Submitted To:

Mr. Prachanda Man Shrestha

US Tariffs on Tires import from China

WTO is a multinational organization designed to establish and help implement rules of trade between nations. It is a rule based, member driven organization, all decisions are made by the member governments. The major goal of WTO is to reduce trade or eliminate trade barriers and restriction worldwide. In WTO negotiations, members have established five basic principles on which the global trade system can rest.

US government used protectionism policy which limits unfair completion from foreign industries. In order to protect domestic jobs from cheap foreign labor US imposed 3 year tariff on Chinese tire.

This is the trade barrier to China as a result the cost of the Chinese tire increased in the American market. Now the American tire manufacturer does not have to compete with the Chinese market and they can produce the tires by their own. After imposing the tariff, the import of the Chinese tire decreased and the demand for the local tire increases. This expanded the American tire manufacturing company. This policy helped US government to increase the employment opportunity.

Both China and US are the member of WTO so, both country should follow the principles set by WTO. And China claimed that US violated the principle of WTO. As per the Most Favored Nation Principle, trade will be without discrimination. But in the given case US imposed extra tariff to Chinese tire. But US argued that China was developing nation and US was providing Safeguard provision to China. Under Safeguard provision the Trade should be more beneficial for less developed countries, encouraging development and economic reform. But now same provision has harmed the US companies and workers. So, the WTO made the decision in favor of US that it can impose 3 year tariff on Chinese tire.

Philips in China

Foreign Investment can be divided into two components one is portfolio investment and another is direct investment. The Philip adopted direct investment, it directly participate in the management of the firm in addition to receiving a return on their money. The main reason for investing in foreign market is as follow:

• New Market
• Access to raw materials
• Achieve production efficiency, access to new technologies or material expertise
• Respond to competitive and other pressure

China has the highest population in the world and the demand for any product would be high in that market. The labor cost in China is very low as a result the production cost is low. The product could be manufactured at low cost and company could earn more revenue.

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