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9/27/2011

An Example of Chinese Foreign Trade Policy: Protectionist or just plain smart on their part

According to a recent media release, GM is set to partner with Chinese counterparts in China to build large numbers of electric cars.  The deal is a plan to transfer electric car technology to joint ventures in China.  This of course entails the creation of manufacturing facilities in China, job creation in China and the transfer of advanced knowledge to Chinese counterparts.  This tends to differ from the older, more traditional trade policies that would entail the US manufacturing electric cars in the US (with US manufacturing, labor and know how) and exporting them abroad.  Some of the reasons of the change from the older model have alluded to the fact that if foreign manufacturers did not create joint ventures with Chinese firms in China, then their products would be subject to stiff tariffs, which would potentially price them out of the market.

What do you know…it appears that China is seeking to enhance its economy that entails the extraction of technological knowhow from foreign producers, the creation of domestic manufacturing facilities and job creation by using tariffs against the producers of products who do not adhere to their model.  In effect, they are using policies that seek to preserve the growth and enhancement of their economy.  Now some would scream PROTECTIONISM on their part…a term that has been used as a negative label in the US as short sited and anti-expansionary.  Reality however is, that from time to time, domestic markets require some protectionist policies, in order to preserve the well being of that economic activity. 

Unfortunately, adopting policies that seek to enhance/preserve the well-being of many facets of the US economy have nearly vanished, where the result has been job destruction and the destruction of portions of entire industries.  Everyone seems to be looking for the cause of high US unemployment…here’s some advice….just read up on contemporary business activities and it’ll jump right out at you.  You may want to check out GE’s latest plans for expansion… in China of course.