Determining Causes and Effects Essay Example | Topics and Well Written Essays - 1250 words

Determining Causes and Effects - Essay ExampleEvery since 2000, incidentally when mainland China joined the WTO, the U.S. has been hit by manipulative Chinese policies which agency that Chinese exports of auto parts bring forth increased 900 percent and the U.S. is a major importer of these parts (See figure 1). The reason the Statesn railcar industries trust so heavily on the Chinese auto parts market is because the Chinese ones atomic number 18 a good deal cheaper, plain and simple, a feat achieved by the Chinese central and local governments heavily subsidizing its industries for the past decade. These subsidies are direct and indirect much(prenominal) as low- comprise or free land and infrastructure, below-cost industrial inputs such as steel and glass, and electricity provided at less than the cost of generation. Despite the fact that these subsidies have been declare illegal by the WTO (Anderson, 2012), Chinas auto parts industry and consequently its balance of payment s live to thrive at the expense of the honest practice of their the Statesn counterparts. Another important factor in Chinese products appearing cheaper than Ameri keep ones is that China is notorious for employing the most staunch currency manipulation policies so that its exports remain competitively prices as compared to American and European counterparts. This means that China artificially gives its currency a lower face value so that when converted they appear to be lower in toll of American dollars (or any other currency for that matter) and so their goods seem more appealing to the public. In fact, the difference achieved by the artificially valued Renminbi is believed to be as much as 25 30%. That means Chinese exports appear 25 - 30% cheaper than they would have been otherwise in the global markets if these currency manipulations were not in place. Thus, many American businesses and industries rely on China (instead of their own local) auto parts industries. control 1 O ne other aspect involved in this tilting of the balance towards China is the fact that in China the industries receive great support from many estates of the country. That is to say, in the auto industry, rare earth elements and provided to Chinese exporters and low cost and similarly, capital cost is also kept artificially low as investors and exporters are allowed to borrow from government-owned banks on sub-market rates, sometimes even given a waiver on their loans. Thus, their production cost is greatly reduced making them competitive in the foreign market. But China is not the single party to blame in this auto parts fiasco, a great part of the burden also goes on the American industries that instead of condemning, actively encourage and endorse the Chinese disregard of fair swop practices by purchasing Chinese imports. America and China are not the only countries with giant automobile industries Germany, Japan, and South Korea also operate in this manufacturing niche. Seein g as Chinese manipulation and policies affect America so, it can be assumed that the other three countries and their balance of payments should be affected similarly, but that is not the case. In fact, Germany, Japan, and South Korea have trade surpluses with China as opposed to the heavy deficit that America has. This is because their governments have imposed laws and not operated on a completely blind free-trade practice with China, something America can take