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Foreign Economics and National Economics Council - Essay Example

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Currently, the committee on foreign relations in the Senate is considering a piece of legislation aimed at imposing tariffs against imports from China and countries within Africa and Asia that are considered low-wage. However, countries that are considered as allies to the…
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Foreign Economics and National Economics Council
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MEMORANDUM TO THE WHITE HOUSE ON THE LEGISLATION TO ESTABLISH TARIFFS ON IMPORTS FROM CHINA AND OTHER LOW-WAGE COUNTRIES Memorandum To:
The White House
From:
The State Department
cc:
Department of Defense, Department of Defense Commerce, Department of Defense Homeland Security, Department of Defense Labor, Department of Defense Health and Human Services
Date:
April 8, 2015
Re:
THE LEGISLATION TO ESTABLISH TARIFFS ON IMPORTS FROM CHINA AND OTHER LOW-WAGE COUNTRIES
Currently, the committee on foreign relations in the Senate is considering a piece of legislation aimed at imposing tariffs against imports from China and countries within Africa and Asia that are considered low-wage. However, countries that are considered as allies to the United States such as Japan, Taiwan, the Philippines, and South Korea will not be affected by these tariffs.
Proponents of this legislation are of the opinion that the American manufacturing industry has been overshadowed by these imports to the extent that most people who used to work in these industries are now unemployed. If such legislation is passed, the manufacturing industry would be revived, unemployment would reduce, and the government would reduce expenditure on insurance for unemployment and social security. In case the bill is approved, the United States will not have contravened the provisions of the World Trade Organization (WTO) which provides that members can take any action that is intended to protect its security interests1.
It is the department’s position that although these arguments hold considerable weight, the negative effects of such legislation will by far outweigh the positives. One of the anticipated negative effects is that these countries, mostly China will retaliate by imposing their own duties on the United States. For example, in 2009, the United States imposed a tire tariff on Chinese tires thus reducing the influx of these tires into the country and saving approximately 900,0002. The Chinese responded by exercising antidumping duties on American chicken parts. The antidumping duties cost the United States approximately 1 billion dollars3.
Although more jobs will be created in the manufacturing industry, a same number of people, if not more, will lose their jobs in the retail industry. In addition, if the import tariff is imposed, the manufacturing industry will become crowded with everyone wanting to be a manufacturer, as a result, the quality of products will reduce and the cost of raw materials will go higher. As such, the protected products are bound to cost more if domestic production is inefficient or if the cost of buying raw materials is higher than before, meaning that the United States will not benefit from these tariffs.
On a political front, the relationship between the United States and China will be strained thus derailing the effort by the former to get the latter to convince North Korea to do away with nuclear weapons. As Rosati & Scott write, since North Korea borders China, the support of the latter in denuclearizing North Korea will be very beneficial to the United States4. Rosati & Scott add that considering the historical hostility between China and Taiwan, the role of China in arriving at a peaceful resolution is very crucial to the United States5.
The Secretary,
The State Department.
Bibliography
Gary, Hufabuer and Sean, Lowry. “US Tire Tariffs: Saving Few Jobs at High Cost”. Peterson Institute for International Economics, no. 12-9. (April 2012): 1-14.  
Jerel, Rosati and James, Scott. Cengage Advantage Books: The Politics of United States Foreign Policy, 6th Edition. Boston: Cengage Learning, 2013.
World Trade Organization. “Article X: Publication and Administration of Trade Regulations.” Last modified February 6, 1988. Accessed April 8, 2015. htttp://www.wto.org/english/res_e/booksp_e/art10_e.pdf. Read More
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