Answer ONE of the following questions (no more than 2000 words each)
- According to the British charity Action Aid, cheap fashion comes at a human price (BBC news 20thJuly 2010). Critically discuss the validity of this statement with reference to trade in industrial goods.
- China manufactured every one of the 24 kinds of toys recalled for safety reasons in the United States so far this year, including the enormously popular Thomas & Friends wooden train sets, a record that is causing alarm among consumer advocates, parents and regulators (New York Times June 8th,2007. Evaluate this statement and discuss the challenges that developing countries face in trade in a globalised world.
The quality of products ‘made in China’ has been suspected for a long time in the attitude of the government of the United States. In recent years, from the socks in 2004 (Crenshaw John, 2005) and textile in 2007 (Michael F. Martin, 2007), to children toys in 2007 (ERIC S. LIPTON, 2007) and steel in 2009 (China Daily, 2009), the exporting has been an hindered factor in the Chinese industry. The New York Times reported in Washington D.C. on June 18 that ‘China manufactured every one of the 24 kinds of toys recalled for safety reasons in the United States.’ The products also include made by famous toy company, Thomas & Friends. It can lead a varieties of negative outcomes if children play with these toys for a while such as damaging brain cells as high portion of lead paint, choking hazard and kerosene filled. (ERIC S. LIPTON, 2007) As the increasing globalization, the United States has imported a large amount of products from different countries all over the world. It can bring a lot of advantage but setbacks as well. However, in the aspects of China, after its entering into WTO, the facing challenge is how can be a standard supplier and exporter during the world trade. The following words will introduce the pros and cons of the United States and China encountering this case as well as talking about the pros and cons of globalization. In addition, the challenges facing by the developing countries during world trade especially the industrial trade aspect will be discussed. Finally, WTO and other governance issues will be stated and analyzed.
Pros and Cons
Pros for China
As reported by ERIC, there is a doubled number of being recalled products made in China to 467 in 2006, hitting a annual record. (ERIC S. LIPTON, 2007) It offers an opportunity that let Chinese manufacturers think over the standard and quality of products and analyze the importing countries’ testing processes. In addition, it can be an alarm to the Chinese government that it has to improve the quality inspection. The workers in the product lines are unaware of what are they doing. The company has to hire more qualified employees that have the knowledge of the products, materials and the making process as they can control the quality when products are manufacturing.
Pros for the United States
The increasing number of recall products is indicated the rising standards and quality requirements the United States. As the toy trains and railroad recalled as the lead painting producing in China and selling in U.S. by RC2 Corporation, the company may well to enforce the control of the safety and quality of products which are made in Chinese plants. The case said that ‘in the last two years, the staff of the consumer product commission has been cut by more than 10 percent, leaving fewer regulators to monitor’ (ERIC S. LIPTON, 2007) and the senior counsel Janell Mayo Duncan at Consumers Unions reported that more money are demanded to do more checks. Therefore, the U.S. government can realize the safety and quality of importing products especially for children’s toys and grant more money to conduct control and checks.
China failed in some extends in trading with the United States. It would cause a loss of revenue in exporting and a large expenditure such as a waste of time, a waste of energy, but no income. In addition, the reputation of made in China will declined such as the entrust on Chinese made pet food and pharmaceuticals’ as well as toothpaste. This may bring a world trade hazard for Chinese exporting industry. Ms Vallese, the spokeswoman for the product safety commission said that the United States worried about the products coming in from China and expected a rising standard. Certain authorities and obligations would enforce to control it. (ERIC S. LIPTON, 2007) On the other hand, America also suffered a higher checking expenditure. In addition, as known to all, the cost of products made in China is little. The American companies may earn a lot if labeled U.S. brands. A large amount of products are made in Chinese plants, if the testing control enforce the Chinese supplier step back, the country may bear large pollutions if made in domestic countries.
Globalization is integrated national economies into international economy through foreign direct investment, migration, trade, technology spread and military presence. (Bhagwati Jagdish, 2004). However, it can be also understood by combination of economic, social, biological, political and technological factors. (Sheila L. Croucher, 2004) There are a large amount of opportunities for developing countries such as importing new technology and increasing capital flows, rising revenue because of trading aboard, obtaining subsides and granting from domestic countries. On the other hand, there are also a great volume of challenges for developing countries to world trade like the constraints in external and internal environment.
In the external constraints for industrial trade, it includes market access, tariff escalation and technical barriers. In the market access, the foreign country may have many local companies in the market which have high brand renditions and image. Consumers may reluctant to try new products from other counties. In the aspect of tariff escalation, it may lead developing counties producing primary commodities, sell them to the developed countries to assembling and then sell back as finished products such as Apple Company. There are lots of small parts are made in China but under a low producing price for Apple and then sell back up to RMB 5200 for each Iphone. In addition, the technical barriers are another challenge for developing countries. The high regulations and standards in developed countries cause a large amount of canceled products or recall products back to China. It may be too costly for developing countries to follow as the lower technical development. The case of Chinese toy in 2007 is supported this argument. As the lower technical regulations, standards and controls in local China, the products exporting to the United States cannot pass the checks.
The small size of populations may lead to small size of consuming power. As the large population in developing countries, such as China and India, the demand for goods is higher than other developed countries. In addition, the shipment of products is a large expenditure for companies in developing countries. It is a large challenge to deal with the high transaction costs. Furthermore, the foreign government may limit the importing products as protecting local company’s market size.
The environment pollutions is an serious issue for developing countries. As being a primary products supplier, the developing countries usually ignore the environment issues. As a matter of fact, these countries may restrict by the technical and capital factors that they have not enough capability to cope with this issue. In addition, after the developing countries joined WTO, there are also foreign companies entered into developing countries’ market such as large market in China. However, the product qualities from the developed countries are higher than local suppliers. They have to encounter large pressure and intense competition from foreign firms who have a better brand reputation, awareness, capital flows, technical support and human resources. Therefore, it is another challenge for developing countries to face in industrial trade. The developing countries have to focus on the education industry to increase the quality of labor which is one of the root solutions for developing countries to compete with developed ones.
WTO and Governance Issue
Global governance is the political interaction of transnational actors aimed at solving problems that affect more than one state or region when there is no power of enforcing compliance. (James Rosenau, 1999) It makes and implements the rules and regulations in a global scale. There are some main institutions involved in global governance including United Nations, The IMF, World Bank and WTO. WTO has several agreements for the countries who are members of including General Agreement on Tariffs and Trade (GATT), General Agreement on Trade in Services (GATS), Agreement on Technical Barriers to Trade (TBT), Agreement on Government procurement (AGP), Agreement on the Application of Sanitary and Phytosanitary Measures (SPS), Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), Agreement on Trade-Related Investment Measures (TRIMS) and Agreement on Agriculture (AOA) (Peter Costantin, Nov. 2001) Under the Bretton Woods System, there are tree institutions including International Monetary Fund (IMF) and The world Bank.
However, in practice, many international institutions are strongly impacted by the United States and the European Union. For example, the head of the World Bank is always and American and the head of the IMF is always a European. Therefore, the global governance is always dominated by these large countries and institutions. As a result, the developing countries may face challenge during the world trade as the rules and regulations of Global Governance may lean to these development countries. In the GATT, the global governance regulate that members liberalize trade by eliminating barriers. However, China is restricted to exporting textile products to the United States. That is because the government of United States concern it is anti-dumping. The country has already regular the quota of Chinese textile exporting products and then judge the Chinese textile as dumping. Therefore, the Chinese textile manufacturers decided to transfer the products to Indonesia and then sold them to the United States. It has to spend $ 500 to $800 per container. However, this kind of trade has been also restricted by its government. (Trust and Trade, March 2007) Therefore, the developing countries cannot liberalize the trade by eliminating barriers from developed countries. These developed countries have the method to protect its domestic industry. As a result, the Global Governance is not a full umbrella to protect all the members in the institution as the large influences from the United States and the European Union.
In conclusion, from the case of Chinese manufactured toys recalled for safety reasons in the United States, it can be seen there are a large amount of challenge during world trade especially for developing countries such as China and India. It may contain the pros and cons for both China and the United States. The developing countries should have to improve the quality inspection system and control in order to reach the standards of the foreign countries’ requirements. In addition, the United States need to concern about granting more money for the quality checks especially for children used. These recalled case occurred may also bring the a economic losses for Chinese manufacturers and may protect American local firms in the same industry.
There are a lot of challenge facing by developing countries when involved in world trade such as the market access, tariffs and technology issues. Developing countries have to prepare more to engage in the global trade as the large competition pressure from overseas great firms. In addition, the lower demand of products as smaller population is another issue developing countries have to encounter. The transaction cost is an considerable expenditure that the developing countries’ firms have to afford. Furthermore, the environment problems and huge competition from outside the developing countries entered into the inside are two major issues that government can be intervened.
In addition, the Global Governance although is in a global scale, it lean its position to the developed countries as the head of these institutions are from there. Therefore, the developing countries may bear the unfair treatment or encountered tough situations which Global Governance cannot show the help. Therefore, the strategies of dealing these issues are a challenge for developing countries.
Crenshaw John., June 15, 2005. U.S. government socks it to China’s socks, imposes embargo. Bicycle Retailer and Industry News.
Michael F. Martin. July 10, 2007. U.S. Clothing and Textile Trade with China and the World: Trends Since the End of Quota. Congressional Research Service
China Daily, Oct 28, 2009. U.S. sets prliminary duties on China steel products
Bhagwati Jagdish. 2004 In Defense of Globalization. Oxford. Published by Oxford University Press.
Sheila L. Croucher. 2004. Globalization and Belonging: The Politics of Identity in a Changing World. Rowman & Littlefield.
Peter Costantin, Nov. 2001. WTO Treaties. World Trade Organization.
James Rosenau, 1999. “Toward an Ontology for Global Governance,” in Martin Hewson and Timothy J. Sinclair (eds.), Approaches to Global Governance Theory