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Thursday, December 15, 2011 2:09 AM


China to Impose Anti-Dumping Duties on GM; "Fair Trade" Idea is Self-Serving Scam; Proposal to Stop "Free Sunlight" Gains Support From Mitt Romney


In response to inane tariffs on tires imposed by the US (and upheld by the WTO) China to Impose Anti-Dumping Duties on GM, U.S. Cars

China announced plans to impose anti-dumping duties on some vehicles imported from the U.S. after failing to block a U.S. tariff on Chinese tires.

Punitive duties will be as high as 12.9 percent for autos from General Motors Co. (GM) and 8.8 percent for Chrysler Group LLC, China’s commerce ministry said today on its website. The U.S. units of Bayerische Motoren Werke AG (BMW) and Daimler AG (DAI) will face duties of 2 percent and 2.7 percent respectively, it said.

“The move shows that China is always capable of intervening politically in its markets,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler. “The automobile industry is very dependent on China for growth, and there’s doubts about the pace of future expansion.”

The move to increase import levies comes three months after the World Trade Organization rejected China’s appeal of a ruling backing U.S. duties on tire imports.

The WTO in September rejected China’s appeal of a ruling by WTO judges last December that found tariffs on $1.8 billion of car and light-truck tires from China were legal. President Barack Obama imposed the duties of as much as 35 percent in September 2009 under a so-called safeguard provision designed to protect U.S. producers from a surge in imports.
Trade is Between Individuals, Not Nations

If someone wanted to give you tires for free would you take it? If you needed new tires, surely you would. Would there be anything wrong with it?

The answer is of course not. Chinese manufacturers should be able to sell tires at whatever price they want, including giving them away. If China "underprices" tires, it is to the advantage of US consumers who have more money to spend on other things, including cars, boats, and houses, perhaps made in the US, perhaps not, but definitely shipped within the us providing countless jobs along the way.

Trade is not between nations, trade is between individuals. Both parties have to agree the transaction is mutually beneficial or there is no trade.

Candlemakers' Petition

Tariffs on tires (or anything else) makes as much sense as placing a tariff on free sunlight because it impedes the rightful growth of candle-making jobs. However there was a proposal to do just that.

Please consider the Candlemakers' Petition
The Candlemakers' petition is a well-known satire of protectionism written and published in 1845 by the French economist Frédéric Bastiat as part of his Economic Sophisms. In the Candlemakers' petition, the candlemakers and industrialists from other parts of the lighting industry petition the Chamber of Deputies of the French July Monarchy (1830–1848) to protect their trade from the unfair competition of a foreign power: the Sun.

In their petition, the candlemakers cite several economic 'advantages' that might be had from blocking out the Sun, by increasing consumption of products: tallow, leading to the increased production of meat, wool, hides, etc.; vegetable oil, leading to the increased production of poppies, olives, and rapeseed; resinous trees, leading to more bees, hence crop pollination; whale oil, leading to a larger merchant navy that would boost France's prestige and standing.
Fair Trade is Self-Serving Protectionist Scam

Here is the Bastiat's Open letter to the French Parliament, originally published in 1845 on his candlemaking proposal.

If his satirical proposal sounds ludicrous, it is because it is ludicrous.

However, it is no more ludicrous than the World Trade organization deciding minimum prices for toilet paper, steel, or tires.

It is also no more ludicrous than the UK facing £20m garlic tax bill

The UK Government has received a European Commission ultimatum to hand over £20 million within two months or face legal action. The wrangle is over the fact that import tariffs on frozen garlic from outside the EU are lower than the rates for fresh garlic. And, according to the Commission, UK authorities carelessly levied the lower rate applicable to frozen garlic on imports of the fresh product from China, in breach of EU customs rules.

A Commission statement explained: "Between 2005 and 2006, the UK customs authorities allowed imports of fresh garlic from the People's Republic of China under wrong authorising documents. They have erroneously stated that the goods imported were frozen garlic for which significantly lower import duties apply.
Why put up with this? What on God's green earth does the UK get for these endless regulations other than higher prices and direct subsidies to French farmers?

Mitt Romney Hopes to Stop Free Sunlight

Meanwhile, back in the US,  Mitt Romney has stated he will declare China a currency manipulator and jack up tariffs (costing US consumers plenty). In essence Romney hopes to stop "free sunlight".

The result will be a collapse in trade and the global economy will suffer.

Proponents of "fair trade" want anything and everything but "fair trade". The very essence of "fair trade" is to block sunlight to protect the jobs of a favored group.

Once one comes to the proper conclusion that trade is between individuals, not nations, and that everyone should have the right to make trades they deem to be in their own best interest, the notion of "fair trade" can easily be seen as a self-serving protectionist scam.

Proper analysis shows that "free sunlight" and "cheap tires" are both good things.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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