DQ # 3: Based on the following case study Case Summary This feature explores the
ID: 391963 • Letter: D
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DQ # 3: Based on the following case study Case Summary This feature explores the subsidies paid by Chinas government to Chinese producers of autos and auto parts. U.S. lawmakers have raised concerns that the subsidies are unfair and have filed a complaint with the World Trade Organization (WTO) arguing that the subsidies have effectively hurt U.S. auto and auto parts producers. While some in the U.S. auto industry support the complaint, others are concerned that it could jeopardize their investments in the Chinese market. Discussion of the feature can begin with the following questions: 3-a) In your opinion, could U.S. complaints about China's policies toward its auto exports actually harm U.S. producers more than they help? Should the U.S. dismiss its complaint with the WTO? 3-b). As a U.S. consumer, do you support China's subsidies on autos and auto parts? Does your response change if you work for a U.S. automaker? Why or why not?Explanation / Answer
Answer to the question 3-a:
China is slowly but gradually moving towards open economy. Due to vast market prospectives in China, most automobile manufacturers around the world, including that of US, are attracted towards China. China provides subsidies to its domestic autos and auto parts manufacturers, to help them compete against the low cost foreign imports and to gain export markets. This subsidies usually make the manufacturing cost lower and the final product is available at cheaper rate in the market. The US registered its complaint with WTO against the subsidies extended by China to auto manufacturers as it thinks that it is harming the domestic automobile industry, due to availability of low cost imported autos and auto parts from China. However, most of the US auto manufacturers are concerned by this move of US as they think that it could jeopardize the vast opportunity to gain from the Chinese market, in case, China retaliates with counter measures. The US manufacturers are heavily benefitting from the imported low costs part of China and ultimately, they are supporting the subsidies. Hence, it could be inferred that the US complaint will do more harm to the US producers than benefitting them. On the above grounds, US should dismiss its complaint made with WTO.
Answer to the question 3-b:
Being a US consumer, I will definitely support the Chinese subsidies as cheaper products will be available in the market and due to this, a healthy competition in the US market will be initiated for maintaining the prices. As a worker in a US automaker, my response is not going to change. Initially, the competition in the industry could threaten the jobs but gradually, new jobs will be created due to availability of cheaper Chinese products in the market.
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