Various impositions of tariffs have been announced by Trump which is not unusual. Every country and state is being guided and protected by a certain amount of direct from the government and there are maybe many schemes like the common external tariff-free trade agreement, where tax is imposed upon all the imports of the customs. This essay will look into the serious disadvantage cost to America due to the protectionist tariff imposed by the Trump government. Various factors related to the economy of America will be analyzed by keeping in par with the world trade organization and its relationship with the International Business Law. The essay will also reflect light upon the doctrine of comparative advantage and its relation as to how it had created an impact upon the scheme and its result in the United States of America.
It is important to understand that David Ricardo in his theory on the principles of political economy and taxation which was published in the year 1817, had observed that the trade will take place even between the countries where one country is at the absolute advantage of producing all the goods and product-related commodities1. What is important is the comparative advantage which must be followed by every nation. Under this theory when a single country produces all the commodities at a cheaper rate than any other state then under such circumstances every country will be benefited. Relative efficiency is a method under this theory of comparative advantage. This theory was then developed by Bertil Heckscher and Eli Ohlin who was the Swedish economist, they have contended that the country must read and produce the commodities which are in relative abundance and will import such commodities that the country does not have in abundance.
Therefore it can be understood that the theory of comparative advantage is the milestone of international trade law2. According to the doctrine of comparative advantage the problem with general motors and its scope of escape from the protectionist tariff regions by the Trump government can be understood in such a way that it can be seen that mostly e companies are highly dependent upon the supplier and its provided supply base. This creates a relatively greater impact on the success of local companies like general motors in the United States of America. According to the theory when the steel and aluminium are imported from China or any other state, it means that these countries are producing search products and elements in abundance. Under such a scenario the tariff must be much lesser if the product is being produced in abundance and the increase in the tariff price will also hike the prices of vehicles and will consecutively reduce the sale. The increase in the rates of aluminium and steel tariffs will also result in the uterus from the closest allies and will negatively create an impact upon the economy of the US3.
The major reason why China is not getting affected by the announced aluminium and steel tariff was because of the countervailing tariff introduced by President Obama for the protection of the United States from dumping. According to the World Trade Organization, various countries are permitted to pay the importance of their national security requirements, and they're allowed to protect their local industries whenever they feel the need of doing so. However certain passages in the w it had also provided certain limited provision for the products essential for national security. This trade dispute will cause unnecessary long-standing International agreements to be unravelled. The administration and imposition of aluminium and steel by the Trump administration on the grounds of national security is a matter of wearing included of the NATO Allies. The arbitrary tariff imposition will lead to the retaliation from other countries as well and announcing A final set of tariffs rules by President Trump will be deemed as announcing a different set of measures of tariff under section 301 of the US Trade Act.
It is important to understand that the World Trade Organization centres the entire global trading system which is governed by the member Nations and administers the international trade rules. World Trade Organization can be deemed as a place to negotiate any relative changes in the existing agreements and documents between the member countries. The United States of America can be considered as a major architect governed by the system of the World Trade Organization but the administration of Trump governance has to turn out to be very critical for WTO. The major legal issue which arises due to the 25% rise in the import prices was the garden with the contention of the security of the state. The major issue which can be analyzed through the entire dispute is that the World Trade Organization per se does not allow countries to protect their essential security interest during the time of either emergency in international relations or at the time of war4.
The major issue and question which arises here are whether the decision of the term governance is similar to the condition laid by the World Trade Organization for protecting the essential security interest. In the year 2003, the World Trade Organization had ruled the Steel tariffs imposed by George Bush5. The World Trade Organization had contended that the Bush administration had not proved any evidence that the tariffs would have saved the American manufacturers. A clause in the world trade organization rules applies and provides the opportunity to countries to apply a certain amount of tariff for their country. The contention laid by the term government was that to protect the job opportunities in the manufacturing department it was important for the United States to apply tariffs. If the World Trade organization allows this then this bill pushes the limits of the rules provided under the guidelines of WTO.
The law that applies to the present case is the International Law and the customary international common law. General agreement on tariffs and trade under article to which provides limits on tariff is analyzed under the circumstance and actions related to the imposition of tariff by the Trump administration. Article 3 of GATT explicitly provides probation to the content requirements and emphasis on creating more trade balance. It can be seen that the arbitrary imposition of tariff under the curtain of national security is completely in violation with article 3 of GATT and the principles and rules laid down under the World Trade Organization under the International business trade law. The protectionism approach adopted by the Trump government will likely to affect the relationship between the United States of America and the ASEAN countries.
There are enormously deeper implications upon the social-economic process of the countries as the protectionism approach adopted by the United States government has all the potential to trigger the trade war between the member states of the WTO6. This protectionism approach will place the nationalism policy in various countries in such a way that each country will start beating its tariff rates for protecting their domestic industries and workers. This will exceed and rice the problem of unemployment over the benefits of various inward-looking policies adopted by the government of various States. So it is not only the local auto motors company that will be suffered or disadvantage due to the imposition of tariffs by the Trump government but the impact can also be seen upon various other East Asian countries7.
In the year 2018 when China retaliated with new tariff rates upon approximate 128 categories of products is a clear sign that the new tariff rates imposed by President Trump under his America first approach are going against the Welfare of the entire state. On April 3rd in the year 2018 again the US government had announced a different list of Chinese products for approximately 1,333 products upon which 25% of the tariff will be applied. On 4th April in the year 2018 again a list of products set out by China8. This evidence is enough to claim that the first step of creating a terrace by President Trump was not justiciable and was against the rules and principles laid down under the Treaty of GATT and the World Trade Organization. This incidence is nothing but a full-scale trade war where both the parties are threatening each other by imposing new tariff rates every day and this is creating a negative impact over the global economy as other European Union and Asian countries are also getting affected due to this as they also have closer economic ties with the China and the United States of America. Article 21 of that provide an exception to impose a tax for national security9. Also, article 8 of the safeguards agreement will be applied in this case as the European trade commission believes that imposing economic safeguards in disguise will not be considered as a measure of national security10.
There are not only the economic and political ramifications but there are also various legal consequences because of the imposition of tariff by President Trump. The imposition of tariff by the term government upon the aluminium and steel imports was based upon the provisions of section 232 of the Trade Expansion Act which brought with itself various replications for both the international trade as well as the United States of America. President Trump had contended that Mexico and Canada will be temporarily exempted from the imposition of tariff still the time the negotiations upon the North American free trade agreement is in process. The investigation by the commerce department clearly shows from its finding that there is a dubious connection between the national security of the country within the economy as well as the legal perspective. The economic repercussion was set out by Robert Williams based on the recommendation of the commerce department where the reciprocal measures will be placed upon the United States by other countries in the name of national security. The issue is the legal authority upon which President Trump was acting11. Section 232 allows that any executive branch with a due process can formulate certain actions to safeguard the country from different exports that are likely to threaten the security of the nation12.
However, according to section 232 sub-clause b, the process has been laid out which determines the effect of national security upon a particular import. Under any situation where the department of commerce identified that such quantity or any article is imported to the United Nations which are causing a threat to the national security then it is upon the president of the country to agree or to disagree with the opinion of the department. Once the investigation is initiated by the department the interested party can provide notice to the department and within 270 days a report has to be submitted to the president. Within 90 days the president has to determine whether he or she is agreed upon the finding of the department and then within 30 days the final National will be determined13. However, in this present case, the announcement of the tariff made by the president was not according to the provisions of the act. The courts have to consider whether the imposition and living of tax were authorized under section 232 of the act or not. The section does not provide the remedy but the legal claims must be based upon the section14.
Therefore it can be concluded that the tensions between China and the United States of America had not only created a negative impact upon the local industries but also created a global impact upon the economy of various other countries. The protectionist approach adopted by Trump was against the rules and principles laid down by the world trade organization and GATT. The term government was unable to prove the substantial ground of imposition of arbitrary tariffs upon various products from all the competitive markets. The threat to the security of the country was not a sufficient ground to impose arbitrary tariffs as this has triggered the trade war between the United States of America in other countries. The essence of globalization and liberalization was disregarded with this act of Trump government.
Amiti, Mary; Redding, Stephen J.; Weinstein, David E. (2019). "The Impact of the 2018 Tariffs on Prices and Welfare". (Fall 2019), Journal of Economic Perspectives.33 187–210.
Dongwei Wen, “Domestic Value Added in China’s Exports to the World and Its Partners,”, 51(1) (2018), Chinese Economy, 45-68
Fajgelbaum, Pablo D.; Goldberg, Pinelopi K.; Kennedy, Patrick J.; Khandelwal, Amit K. (October 2019). "The Return to Protectionism, 135, The Quarterly Journal of Economics, 1–55.
Gary Clyde Hufbauer and Cathleen Cimino-Isaacs, “How Will TPP and TTIP Change the WTO System?, 18(3), (2015), Journal of International Economic Law, 679-696
Harold Hongju Koh, “The Trump Administration and International Law, 56 (2017), Washburn Law Journal, 413-469
Jacques de Lisle, “China’s Rise, the U.S., and the WTO: Perspectives from International Relations Theory,” University of Illinois Law Review (2018): 57-71
New paper articles
A. Beattie. How the EU could outflank Trump and his tariffs. Financial Times 30/04/2018.
Jagdish Bhagwati, In Defense of Globalization, Council on Foreign Relations Report (New York: Oxford University Press, 2004), 230.
Jeremy Diamond, “Trump: ‘We Can’t Continue to Allow China to Rape Our Country,’” CNN, May 2, 2016, https://www.cnn.com/2016/05/01/politics/donald-trump-china-rape/index.html
Kevin Granville, “What is TPP? Behind the Trade Deal that Died,” The New York Times, January 23, 2017
Stephen D. Cohen, Robert A. Blecker, and Peter D. Whitney, Fundamentals of U.S. Foreign Trade Policy: Economics, Politics, Laws, and Issues (Boulder, Colo.: Westview Press, 2003)
Lydia DePillis, “Everything You Need to Know about the Trans-Pacific Partnership,” The Washington Post, December 11, 2013
National Treatment, UNCTAD Series on issues in International Investment Agreements, UNCTAD/ITE/IIT/11 (Vol. IV) (United Nations, 1999).
The President’s 2018 Trade Policy Agenda. https://ustr.gov/sites/default/files/files/Press/Reports/2018/AR/2018%20Annual%20Report%20I.pdf
World Bank. “Potential Implications of the Trans-Pacific Partnership,” Global Economic Prospects, January 2016, http://pubdocs.worldbank.org/en/287761451945044333/Global-Economic-Prospects-January-2016-Highlights-Trans-Pacific-Partnership.pdf
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