Part II : Protectionism Last year the rapid economic growth in China accompanied by an “open door “ policy on the part of the regime, can be viewed in Western nations as a source of major investment and trading opportunities. However, China's size and its political complexion can also be interpreted as a potential threat. This fear of China leads to the path of protectionist atmosphere. After a introduction about protectionism, the section II will show that Anti-dumping measure is a protectionist measure. Then, section III will present some theoretical models in favor of free trade. Section IV will examine most common fears about China. Section V will sum up with the necessity of using trade as “economic development aid”. I. Introduction: Protectionism Following Wikipedia, protectionism is the economic policy of restraining or distorting trade between states. This section will define and give European's example of the most common forms of protectionism. An import tariff is a tax levied on import. It can be “ad valorem” which means a percentage of the price or fixed duties. Since 1947 the GATT ( General Agreement on tariff and trade), thanks to MFN(most favored nation) principle and negotiations, permit to substantially lower this kind of protectionism1. MFN principle means that countries must apply the same tariff for all. However the EU continues using some import tariff as Anti-dumping. For instance the EU have imposed an anti-dumping tariff for China's and Vietnam's leather shoes of 16,8 % for Vietnam and 19,4% for China.2 Anti-subsidies “are similar to anti-dumping except they specially correct the trade-distorting effect of WTO-actionable subsidies to foreign producers”3 An imported quota sets a physical limit on the quantity of a good that can be imported into a country in a given period of time. Quotas have the same effects ( as tariffs) on welfare. An example is the quota against textile from 2005 to 2007. 4 Subsidies are a financial assistance paid to a business by the government. Export subsidies encourage export of good though low-cost loans or tax relief for exporters This kind of subsidies lead to dumping. The famous CAP distribute a lot of subsidies to farmers.5 European arm industry6 benefit from export credit. A member WTO may take a “safeguard” action (e.g. restrict importation of a product temporarily) to protect a specific domestic industry from an increase in imports of any product which is causing, or which is threatening to cause, serious injury to the domestic industry that produces like or directly-competitive products. An other expression of trade barrier is technical barriers. These non-barrier tariffs have a financial negative impact for the EU. For instance : “Removal of all actionable IPR [intellectual property right] NTMs (i.e. convergence to some degree of IPR regimes between the EU and the US) is expected to result in a yearly increase in national income in both the US and the EU, by €0.8
1( except for AD measures, see section III) 2European Commission imposes anti-dumping duty on shoes from China, Vietnam: Only 3 Member States voted for proposals last week By Finfacts Team; 23, 2006; http://www.finfacts.com/irelandbusinessnews/publish/articel_10005301.shtml 3Europe's trade defence instruments in a changing global economy, 6 December 2006, Brussels, A Green Paper for public consultation, COM (2006) 763 final, Commission of the European communities
4 http://trade.ec.europa.eu/sigl/info_textile.htm 5 http://europa.eu/pol/agr/index_fr.htm 6 European Export Credit Agencies and the financing of arms trade, A report by the European Network Against Arms Trade 2007 ; http://www.antenna.nl/enaat/publications/ECA-ArmsTrade.pdf
billion and €3.7 billion respectively»7 Today European continent is an integrated market, but it has not always been the case. The few lines bellow will take over the historical point of view of protectionism. This point of view begins with the US independence when...
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