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IB Economics IA Commentary. Title of Extract: EU imposes dumping tariffs on Chinese tile-makers

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Introduction

International Baccalaureate Internal Assessment: Economics Commentary 3 Candidate Name: Candidate Number: Date of Commentary: April 6, 2011 Word Count: 746 Pertaining Section of IB Economics Syllabus: 4 (International Economies) Title of Extract: "EU imposes dumping tariffs on Chinese tile-makers" Source: Internet - European Voice Online http://www.europeanvoice.com/article/2011/march/eu-imposes-dumping-tariffs-on-chinese-tile-makers/70590.aspx Date of Extract Publication: March 13, 2011 EU imposes dumping tariffs on Chinese tile-makers By Ian Wishart 17.03.2011 / 15:52 CET Provisional duties of up to 73% to protect EU market. The European Commission has imposed provisional anti-dumping duties on imports of ceramic tiles from China. The move comes following an investigation initiated after a complaint lodged by the European Ceramic Tile Manufacturers' Federation (CET) on behalf of 69 tile producers in the EU, the Commission said. The duties range between 26.2% and 73% depending on the company and last for six months. They could be prolonged for five years and are intended to punish tile manufacturers from China who sell tiles below cost-price in the EU. Alfonso Panzani, the president of the CET, said that the duties were not intended to exclude Chinese products from the EU market but "to bring Chinese prices to a fair level, making it possible for ceramic tile production to continue in Europe, and creating the conditions for healthy competition to develop". ...read more.

Middle

cost of imports and stimulate profit for domestic producers (Competition - "the presence in a market of independent buyers and sellers competing with one another."1; Imports - "spending be individuals, firms, and governments for goods and services produced in foreign nations."1; Profit - the amount of money a business earns after paying all expenses.) The conflicting economic values of free trade and protectionism are disputed in this situation as to which forces are allowed to control a nation's economy - the government and domestic producers or the global market and consumer welfare (Free trade - "the absence of artificial barriers to trade among individuals and firms in different nations."1; Consumer welfare - individual consumer satisfaction depending on prices and income.) Since domestic ceramic suppliers are threatened with economic ruin from such cheap products, the Commission turned to protectionism to force a more equal domestic competition and punish dumping companies through a tariff despite the consequences of higher prices (Protectionism - " policies that aim at restricting the flow of imports into a country."2). The anatomy and economic effects of a tariff can be demonstrated in Figure 13 where the perfectly elastic world supply (Sworld) ...read more.

Conclusion

The major disadvantage of a tariff comes from the reduction in consumer surplus where it had originally occupied Areas 1,2,3,4, & 5 and was reduced to only Area 5 because consumers must now buy ceramics at a higher price (P2). Although Areas 1 through 4 represent the total consumer surplus reduction, since Areas 1 and 3 are beneficial to a society, so Areas 2 and 4 represent the net loss to society through higher prices. Therefore, in order to protect the European ceramic producers from being completely swept from the market due to the dumping efforts of Chinese ceramic exporters, the Commission is justified in the imposition of an anti-dumping tariff because the societal loss of an entire industry is greater than that of forcing higher domestic prices to the consumer. 1 - Defined by: Economics: Principles, Problems, and Policies, 15th edition textbook by Campbell R. McConnell and Stanley L. Brue, publisher: McGraw-Hill Irwin. 2 - Definition derived from: 2 - Definition from: Ziogas, Constantine. Economics for the IB Diploma: Standard and Higher Level, 2008. 3 - Graph adapted from original at: "Effects of Tariffs." Linux User's Group at WSU. Chart. 04 May 2007. Web. <http://en.wikipedia.org/wiki/File:EffectOfTariff.svg>. ?? ?? ?? ?? ...read more.

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