2011 January 16 Sunday
East Asian Trade Protectionism Takes Many Forms

The CEO of Ford is pushing for a lowering of obstacles for Ford car imports in the South Korean market.

Mulally traveled Wednesday to Washington, where he pressed U.S. Trade Representative Ron Kirk and the Obama administration to make sure that a provision to eliminate U.S. tariffs on imported Korean cars was accompanied by countermeasures that would increase access to the Korean auto market for American companies.

Alan Mulally thinks South Korean Ford customers should not be targeted with a tax audit just because they bought a Ford. This should give you a sense of some of the reasons why the US runs a big trade deficit.

Specifically, Mulally insisted that the U.S. tariffs be rolled back over time, rather than immediately, to make sure Korea held up its end of the bargain. He also pushed for non-tariff barriers be lifted and that a tough enforcement mechanism be implemented. Ford had complained, for instance, that Korea limited the hours that foreign brands could advertise, audited the tax returns of import car owners and manipulated its currency to protect Korean carmakers.

That's not cricket.

Why keep your solar photovoltaics company in the United States...

BEIJING — Aided by at least $43 million in assistance from the government of Massachusetts and an innovative solar energy technology, Evergreen Solar emerged in the last three years as the third-largest maker of solar panels in the United States.

...when you can partner with a Chinese company eligible for big government subsidies?

But now the company is closing its main American factory, laying off the 800 workers by the end of March and shifting production to a joint venture with a Chinese company in central China. Evergreen cited the much higher government support available in China.

What worries me: The giant sucking sound of US intellectual property going abroad. US policy is still shaped around a previous era's conditions. US innovation no longer leads to US factories or, in many cases, even a large trail of supporting engineers to productize an innovation. Former Intel CEO Andy Grove understands what mainstream economists, policy makers, and their glee club hasn't cottoned onto yet.

The United States has a big trade deficit problem that is about to get bigger.

Joseph Gagnon is worried. Mr. Gagnon, a former Federal Reserve economist now at the Peterson Institute, contends in a new paper that the world’s financial imbalances — such as China’s trade surplus and the United States’ trade deficit — will probably return to record levels in coming years.

The rising price of oil is going to make the trade deficit worse as well. I foresee a vicious cycle where the trade deficit drives down the value of the dollar and therefore drives up the price of oil more in dollars than in other currencies. As you make decisions on where to live and work and what to drive prepare for higher gasoline prices.

Share |      By Randall Parker at 2011 January 16 06:48 PM  Economics Trade


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