US-China Trade Wars: Impact on Pet Food Industry - Essay Sample

Introduction

Trade between countries has been a common practice in the world today. Foreign trade has played a substantial role in connecting different countries in the world. Thus, this has led to the establishment of economic relations. For the last few years, the United States and China have been in trade wars with each other. Understanding these wars could help to predict future trade outcomes. One thing worth noting is that the government of China has increased the import tariffs for the pet food sellers in America, which is one of the pieces of evidence showing the trade wars between the two nations. According to Thiebaut (2018), the formation of the World Trade Organization (WTO) aided in the regulation of international commerce of goods and services. In a bid to understand the trade wars between the United States and China, this paper will also analyze the role of the WTO. Thus, this paper discusses the current trade wars between the United States and China by fostering an understanding of the causative factors and the role of the World Trade Organization in solving such disputes.

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History of Trade Wars

Trade wars have been frequent throughout history. As Thiebaut (2018) argued, the United States has launched five investigations commonly termed as "section 301 investigations" with three of them against China. The surveys are aimed at probing into areas that include property rights, unfair trade barriers, and clean energy. In the investigations, the two sides threatened to impose tariffs as a means of revenge. Such conflicts, in the past, were solved through diplomatic channels. Some of the techniques applied include the signing of trade agreements after the processes of negotiations. Others involved reaching a concession under the procedure for solving the dispute of the World Trade Organization (WTO).

In the year 2010, the administration of President Obama initiated a 'section 301 investigation' on China (Thiebaut, 2018). The investigation focused on subvention policies and venture in green technologies. In addition to that, the scrutiny focused on the subsidies that were allocated to the Chinese firms. The subsidies were mainly enjoyed in the wind and solar energy, high-performance batteries, and alternative fuel vehicles. The companies were accused of having violated the policies stipulated under the WTO. Chong and Li (2019) asserted that the United States applied for discussions within the WTO dispute settlement framework in the year 2010. China, on the other hand, was responsive and agreed to revise its subsidy policies. However, this formed the foundation for the wars between the United States and China.

Importantly, the United States has engaged in trade wars with countries such as Japan and the European Union. The wars stemmed from an array of domains that include vehicles, colored televisions, textiles, currencies, and steel. According to Chong and Li (2019), the United States initiated 24 'section 301 investigations' against Japan in the 1980s. A majority of these trade disputes, however, were resolved peacefully through the processes and techniques of bilateral negotiations. It is worth noting that no country wins in a trade war. A case example is the trade war on the US and Japan on automobiles. During the war, the US achieved a strategic conquest by forcing Japan to contain its automobile exports and open up its local markets to the firms in the United States. However, the care producers in Japan and the consumers in America suffered significantly from the conflicts. The producers experienced a significant decline in revenues, and the consumers had to deal with the rising increase in car prices. Over 60,000people lost their jobs, leading to increased rates of unemployment during the trade disputes that existed during President Reagan's term.

From the example of the trade war between the US and Japan provided, one can see that the disputes lead to economic challenges. The exporting country suffers a reduction in the overall sales that, in turn, pressurize the total output and employment. More so, some industries from the importing counties benefit due to the protection for trade wars while others bear the costs of increased prices. The aggregate effect of trade wars is often negative. In addition to that, most of the trade wars that happened in the past were resolved through negotiations and peace talks. Primarily, this suggests that the tariff threats acted as tools for bargaining to force parties to negotiations. Therefore, in evaluating the trade wars between China and the United States, it would be critical to understanding the motivations of the war and the main reasons behind it as well.

The Economic Relationship Between the US and China

Since the accession of China to the WTO in the year 2001, the trade between the US and China increased from $125 billion to $700 billion (Meltzer & Shenai, 2019). Within the same period, the economy of China expanded four times. With this in mind, China grew from being the fourth largest economy to the second-largest economy in the world. Importantly, China accounts for about 16% of the world's global activity. The four largest banks in the world are in China. Asides from that, China has the largest e-commerce market. Within this period after China's accession to WTO, the US supported the global integration of China with the hope that the benefit that China accrued from the international economic system would make the nation a responsible stakeholder. The United States believed that China would work with the United States in a bid to sustain the global order that has contributed to the success of the country.

China did not live up to the United States' expectations since it became less of a partner and more of a competitor. The US, in turn, has shifted its policies towards China, particularly on the trade and investment front. In the year 2017, for instance, the National Security Strategy of the United States stipulated that China and Russia wanted to challenge the America power, influence, and interest with the primary intention of eroding the prosperity and security in the country (Meltzer & Shenai, 2019). The states were determined to make economies less unrestricted and fair, grown their militaries, and control data and information by repressing the American society and in turn, expanding their influence. The security strategy also warranted the United States to rethink its policies for the last two decades. The procedures included the ones based on the assumption that engaging rivals and including them in the international institution would turn them to partners, as it as the case with China. The premise turned out to be false.

Consequently, Meltzer and Shenai (2019) stated that international trade often leads to an improved economy and fosters efficiency in the industries. In the case of trade between the United States and China, jobs have been created in some areas of the US economy, particularly agricultural sectors, while in others, jobs have been lost. Between the years 1995 and 2001, for example, the exports of the US were presumed to have created 6.6 million jobs with recent data suggesting that US export to China support about 1.8 million jobs (Meltzer & Shenai, 2019). Consumers in the United States have also benefitted from trade with China. From the year 2000 to 2007, for example, the lower-priced imports from China led to an economic gain of about $200 million for the United States (Meltzer & Shenai, 2019). Similarly, trade with China led to job losses in the manufacturing sector of the United States. From this, one can see that trade between China and the United States has had significant benefits and challenges.

China has a socialism economy. On that note, the country sets economic objectives and goals while also allots funds to achieve them through industrial strategy and offering platforms for state-owned enterprises. The influence of China's economy differs from that of countries with the same economic model. The fact that China is the second-largest economy in the world, the growth of China has some effects on the planet, particularly in ways that other countries have not.

Notably, the economic model of China has some implications for the United States and the world at large. First, the country has focused on self-abundance in emerging technologies, which depicts a trading system that is focused on comparative advantage. Consequently, the use of state-owned enterprises, access to subsidies, and the limited rule of law in the country support state companies within china and the world. Thirdly, the use of industrial policy to select winners in China is expected to lead to excess production, which would eventually cause trade abandonment with overseas countries. Excessive production has already been witnessed in commodities such as steel and solar PV, which has created adverse consequences for the United States in matters concerning output and innovation. The problem is likely to persist and expand to industries such as robotics, high-speed rail manufacture, new energy automobiles, and batteries.

Accordingly, the reliance on industrial policy and planning to achieve goals recognized by China has turned the focus on the industrial systems to the pursuit of an economy driven by innovation (Meltzer & Shenai, 2019). Mainly, this constitutes policies such as the National Medium and Long-Term Science and Technology Development Plan Outline, which requires the country to focus on innovation by the year 2020 and become a leading nation in science and technology by the year 2050 (Meltzer & Shenai, 2019). The program will be made effective by innovation within the country's premises. From this, it is articulate that Chin wants to be self-sufficient in technology products such as advance information technology, aircraft, robotics, new energy automobiles, and biotechnology. Such commodities will make the country to avoid over-reliance on goods imported from countries such as the United States.

The prospect of trade wars has increased debates with people wondering whether China's disputes with the United States on trade issues could derail the rapid growth of the country. With a focus on exports, China has enjoyed rapid and impressive economic growth for the last few years. The figure 1 below shows the growth of exports and the GDP of China for the past decade. From the chart, it is worth noting that the heights of the bars are a representative of the new exports to total outputs, as shown on the left axis. The line, on the other hand, shows the GDP growth rate of the country and is shown on the right axis. From the figure, the exports in China have been declining as China transitions from a consumption-based economy. However, net exports are still a significant growth factor. In addition to that, the ratio of net exports to the GDP of China recovered in the year 2014, when the country experienced a slow down in its growth (Chong & Li, 2019). In the year 2017, the exports of the country contributed to about 3.47% of the country's gross domestic product. Therefore, the figure below shows the growth of exports and GDP of China (Chong & Li, 2019).

Figure 1. China's Export and GDP Growth (Chong & Li, 2019).

Causes of Trade War Between US and China

The primary causes of the trade war between China and the United States result from an array of factors. Presumably, trade disputes are caused by the large gap between China and the United States. According to Chong and Li (2019), the trade deficit between the two states has been increasing both absolutely and relatively. The figure below shows the trade balance between the United States and China.

Figure 2. Trade Balance between United States and China (...