Sample Management Case Study Paper on Predatory Trade Practices

Predatory Trade Practices

China has been engaging in unfair trade practices. It is evident that the value of their currency has been strategized to be low artificially by approximately 15-20% instead of being market determined. This has resulted to China’s unfair competitive advantage in comparison to other nations. China has a key aim of achieving a higher and unfair competitive advantage over all the countries that export goods to their country. The Chinese traders have made this possible through controlled wages, cheap credit, low cost energy as well as subsidized land. China’s predatory trade practices has been found detrimental to the other nations that practice fair trade practices. Thus, leading them to close domestic plants as well as laying off of domestic workers. Similarly, these unfair trade practices resulted to China accumulating $3 trillion in foreign exchange reserves in 2011.

The U.S decided to impose a sliding scale tariff on the imported china tires after realizing how the imports were disrupting the U.S domestic market. The imposed tariff was in a bid to protect the U.S domestic industry from the unfair Chinese competition. Chinese imports had increased from 3-11% between 2004 and 2008 which resulted to closure of four U.S tire industries as well as unemployment of approximately 5200 workers which could possibly cause a great market disruption in the U.S. The U.S decided to impose the above mentioned tariff for only three years on the basis of the law that governs trade practices as outlined by the World Trade Organization.

China retaliated in relation to the imposed tariffs by accusing U.S of dumping auto parts and chicken feet in the Chinese market which was likely to result to China imposing a 50% tariff on the imported U.S chicken feet. If china was to impose the tariff, America will have to increase the interest rates of their exports which was likely result to a high cost of capital in the U.S companies as well as a high debt service and  consequently to a slow economic growth in America.