SOUTHERN CROSS UNIVERSITY LISMORE

SCHOOL OF COMMERCE & MANAGEMENT

Management Development Institute Singapore

Assignment Cover Sheet

MASTER OF BUSINESS ADMINISTRATION

Student Name : Duanmu Yilong

SCU Student ID Number : 21861110

Unit Code : MNG00723

Unit Name : International Business

Local Lecturer : Dr Keith Ng

Assignment Title : IB – Assignment 1 (Journal Reviews)

STUDENT’S COMMENTS/FEEDBACK:

Student’s Signature : Date : __________

Local Lecturer Signature :

Assignment Mark/Grade :
Local Lecturer Comment:
Content Page
Assignment #1 - Government Intervention In International Business – Topic #2
1 Abstract 2
2 Introduction 2
3 Review 2
3.1 Protectionism 2
3.2 Tariff 3
3.3 Dumping 4
4 Conclusion 5
5 References 5
6 Annexes
Journal: ‘A Game of Trade Chicken’

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Assignment #1 - Government Intervention in International Business – Topic #2

1. Abstract
Despite the value of free trade, government often intervene international business to
achieve political, social, or economic objectives. Intervention can take many forms.
The government may impose tariffs and quotas, restrictions on international
investment, bureaucratic procedures and red tape, and regulations that restrict types of
business and value chain activities.
I strongly agree that market liberalization and free trade are best for supporting
economic growth and national living standard.

2. Introduction
This assignment will describe should government promote ‘free’ or ‘fair’ trade. In the
attached article, we can see that China's Commerce Ministry impose duties ranging
from 50% to 104% on import products such as chicken feet from US. The reason
behind the antidumping is actually to reflect the House of Representatives aiming to
vote this week on a bill to impose duties on Chinese goods if Beijing doesn't revalue
its currency against the dollar.
Because of this government intervention, we will see China consumer will pay high
cost for their favourite food and USA producer will lose a good market.

3. Review
3.1 Protectionism
Protectionism refers to national economic policies designed to restrict free trade and
protect domestic industries from foreign competitors.
In contrast with protectionism, free trade will significantly help grow the GDP. Study
shows the country adopt free trade enjoy 4.49% average annual GDP growth rate
during 1945 to 1995. But those protectionism countries only scored 0.69% per year
(Sachs & Warner 1995).
In this study case, we can see the trade war between US and China started because of
protectionism. From Figure 3.1, we can see the huge trade deficit in US trade balance
with China. It means US imported much more than they exported to China. According
to classical theories – Mercantilism view. A trade surplus is beneficial, in the contrast;
trade deficit is harmful to a country’s economic. That was happen in US, then

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different kind of Labour Unions, trade organisation and special interest groups keep
pressure on their House of Representatives to force them reduce the import products
from China. That is protectionism start. For example, the people in US tyre industry
criticized that China competitors export too much tyre to US at very low price. That
caused the tyre manufactures in US lost the market and the employee in US tyre
industry lost job. As long as the pressure keeps rising, the US government imposed
duty on China imported tyre to protect their tyre industry. The same story happened
in Seamless Steel pipe industry and copper tube industry. To reflect the US
protectionism, China starts to impose duties on US poultry products such as chicken
feet.
Figure 3.1

Trade with China: 2010

NOTE: All figures are in millions of U.S. dollars on a nominal basis, not seasonally
adjusted unless otherwise specified.
Month Exports Imports Balance
January 2010 6,888.8 25,185.1 -18,296.3
February 2010 6,855.1 23,363.8 -16,508.8
March 2010 7,403.6 24,300.2 -16,896.6
April 2010 6,591.2 25,905.7 -19,314.5
May 2010 6,752.7 29,036.8 -22,284.1
June 2010 6,715.0 32,866.5 -26,151.5
July 2010 7,344.7 33,260.0 -25,915.3
TOTAL 48,551.1 193,918.2 -145,367.1
(Foreign trade statistics 2010)
If China and U.S. can’t find a proper way to solve the trade balance and adopt
protectionism, we will see more and more such trade war between the two countries.

3.2 Tariff
Despite the value of free trade, governments often intervene in international trade. A
typically intervention from government is to impose tariffs. A tariff (also known as
duty) is a tax imposed by a government on imported products, effectively increasing
the cost of acquisition for the customer. Such government intervention can help
government pursue broad-based economic, political, or social objectives.

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Also import tariff can generate substantial revenue for local governments. For
example, US charges tariffs on many consumer, agriculture, and labour intensive
products. The European Union applies tariffs of up to 236% on meat, 180% on
cereals, and 17% on tennis shoes (Smith 2002).
The import tariff rates are different on different products. It tells people which
products are not encouraged importing to the country. The tariffs increase cost to the
importer, exporter and usually the buyer of the products. In buyer point of view, if the
price of imported products increased. They will look for alternative products produced
by local manufacturer or reduce their consumption. Then the demand on the imported
products will drop. As shown in Figure 3.2
Figure 3.2

From the analysis we will see the poultry products from US will export lesser and
lesser to China. In one hand, China consumer will pay higher price to get those
chicken parts. In other hand, US poultry producer have to find channel to dispose
those parts which US consumers don’t like to eat. We can see higher duties suffer
both importer and exporter; there will be no winner in trade war.

3.3 Dumping
The main instruments of trade intervention are tariffs and non-tariff trade barrier,
other than that, governments also grand a firm or group of firms with subsidies. The

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purpose of the subsidies is to increase the competitive advantage of the grantee while
diminishing the competitive advantage of those that don’t receive the subsidy.
With subsidies from government, a manufacturer is able to charge a lower price for
exported products, sometimes lower than it charges its domestic or third-country
customers or below manufacturing cost (Glossary 2007). This pricing method is
defined as dumping. Dumping is against WTO rules because it amounts to unfair
competition. Many countries impose antidumping duty to respond dumping. The
WTO allows governments to impose antidumping duties on products that are deemed
to be dumped and causing injury to producers of competing products in the importing
country.
In this study case, China unveiled its final order in an antidumping investigation
against U.S. poultry. In my point of view, there is nothing relate dumping issues in
trade of chicken. Because the main products export from US to China is Chicken parts
such as chicken feet, which is no value at all in US. So whatever price US poultry
export the parts to China, they can get extra benefit. Since they can get benefit from
the trade itself, dumping is not suitable for this case. This is just a pretext for the trade
war only.

4. Conclusion
The United Nations estimates that trade barriers alone cost developing countries over
US$ 100 billion in lost trading opportunities with developed countries every year
(Financial statistics 2007). Nowadays world become a global village, any countries
fall into economic problem will affect the others. Developed and developing countries
must co-operate with each other to grow together, only such growing together can
maintain in long term.
Protectionism always falls into endless trade war and hurt the global economic
growth. Let’s put our effort together to more free trade.

5. References
Smith Dustin, 2002, The Truth About Industrial Country Tariffs, Finance and
Development 39, no.3, International Monetary Fund, Washington DC, accessed at
www.imf.org.
Sachs Jeffrey D. & Warner Andrew, 1995, Economic Reform and the Process of
Global Integration, Brooking Papers on Economic Activity, Issue no. 1: Heritage
Foundation, Brookings Institute, Washington, DC, Accessed at the Heritage
Foundation Website at www.heritage.org/research/features/index/.
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U.S. Census Bureau, Foreign Trade Statistics, viewed 27 September 2010
www.census.gov/foreign-trade/balance/c5700.html.
United Nations, Financial Statistics, viewed 2007,
www.un.org/reports/financing/profile.htm.
World Trade Organization (WTO), Glossary, viewed 2007, www.wto.org.

6. Annexes

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