Trade Wars
History Of War Trade
- Trade war battles have been going on for years given the fact that nations have constantly traded amongst themselves. A trade war takes place when a country raises import tariffs or restrictions on other countries’ imports during the trade. However, the trade war of 2022 is characterized by sanctions imposed on Russia as a result of the war between her and its sister country Ukraine. Most trade wars apart from the one experience now in 2022, could be a result of a misunderstanding of the extensive profit of free trade. Over the years, there have been 5 notable trade wars thus far: the Great Britain depression, the Anglo-Irish trade war, the banana wars, and the me’line war;
- The Smoot-Hawley tariff of Britain’s Great depression was in 1930.
- Anglo-Irish Trade War between England and Ireland, Ireland advocated for steep protectionist trade (1652-1784).
- The banana war (1898-1934) was not so common as a war waged by U.S multinational companies via Latin American banana-growing countries and Europe.
- Me’line Tariff symbolized the end of free trade between England and France which started in France in the 80s with the Cobden-chevalier treaty.
- China and the United States trade war is still ongoing. It started in 2018.
Trade Wars Between Countries
- Besides the sanction on Russia by the US and a refusal to buy its oil over the years this trade war/dispute is prevalent among countries, while some are ongoing, others have been fought a long time ago and compromised arrived at. So eminent is the current trade war which is between China and America this trade would have escalated in the past under President Donald Trump’s regime and several threats and tariffs have been flying around from both countries.
- Milk war (2009) was the war between Russia and Belarus.
- Chicken war: This was in response to tariffs placed by France and Germany on the Importation of US Chicken in 1984.
- Beef Hormone dispute This was the most obstinate agricultural controversy since World Trade Organization was established. From 1989-2018.
- Rare Earth trade dispute between China and other countries and also China’s (2012-2015).
- Opium war This was between Qing China and the United Kingdom (1839-1860).
How Is Trade Wars Won?
- President Trump 2018 tweeted that “trade wars are good and easy to win” IS that really true? To answer this, a trade war can be won through an increase in tariffs on imports thereby wearing them to their breaking point where they snap. The Sanction placed on Russia today by President Biden is expected to make president Putin turn a new leaf. Adam Smith believed in exceptions to a free trade policy and also retaliatory tariffs could have a definite purpose. With the ongoing trade war between US and China, Trump 2018, imposed amounted to $360b on China’s imports. In 2020, when China was able to control the coronavirus pandemic, there was high demand for medical supplies irrespective of the levies.
United Nations And Other International Organizations Like WTO, IMF, GATT, Etc.
1. United Nations:
- This is a diplomatic organization aiming to maintain international peace and security, stability, and friendliness among nations. It has its headquarters in New York and other key offices in Nairobi, Vienna, and Geneva. UN has 6 principle organs which are the General assembly, the International Court of Justice, UN Secretariat, Economic and Social Council (ECOSOC), Security Council, and Trustee Council. In terms of financing for the organization, the UN is being financed by evaluated and charitable contributions from its member states.
- UN was established in October 1945 after World War II.
- The secretary-general of the UN’s chief administrative officer is Anto’nioGu’terres.
- The official languages of the UN are Arabic, Spanish, English, French, Russian, and Chinese.
International Economic organizations are responsible for maintaining peace and security among world nations. The lists of these organizations are General Agreement on Tariffs and Trade (GATT), World Trade Organizations (WTO), United Nations Conference on Trade and Development (UNCTAD), European Economic Community (EEC), South Asian Association for Regional Corporation ((SAARC).
GATT came to be a product of the post-cold war. GATT signed its trade agreement at Geneva by 23 nations, including India in 1947. The aim of its establishment is to ensure the establishment of a multilateral trading system and liberalization of international trade by removing discrimination and reducing barriers.
WTO came into operation in January 1999 when the final act was signed by 125 countries plus India.
WTO administers understanding of rules and measures concerning dispute settlement, administering trade policy review instruments, and ensuring world resources are efficiently utilized.
The highest body of WTO which is the ministerial conference has members that meet once in two years. The general council is made up of; the Council for Trade in Good, the Council for Trade in services, Council for Trade-Related Aspects of Intellectual Property Rights.
UNCTAD was established in 1964 as a permanent agency of the United Nations. UNCTAD was the first-ever effort for developing countries to come together and discuss global problems and file for restructuring.
- In 2004, 10 nations joined the union.
- South Asian Association for Regional Cooperation (SAARC) was established in 1985. Close to 1/6% and about 50% of the world’s poor live in Asian regions like India, Maldives, Sri Lanka, Bangladesh, Bhut–an Pakistan, Nepal.
- SAARC has covered areas like agriculture, health, education, culture, women, and lots more.
- In 1993 SAARC years of Disabled persons was celebrated.
- This body has done so much to improve the economic state of underdeveloped, underdeveloped countries, but its usage of it for efficient development in these nations and the ability to develop them goes a long way. It comprises 190 member countries. It was established in 1945.
- IMF is responsible for promoting exchange stability and ensuring the correction of the balance of payment problems.
- It comprises 190 members.
Different Guidelines Made By International Organizations To Solve The Trade Wars
The UN is responsible for maintaining peace among conflicting nations. The dispute settlement instrument was created in 1994 Arbitration or conciliation is a widely recognized method for adjudicative dispute settlement and these methods have been used by SAARC since the 19th century and the European Union has handled about 97 cases
When there is a trade dispute, WTO staff tries to settle disputes over discussions at first. Most disputes are settled outside court and others are still unresolved. Preferably nations apply to WTO to help settle disputes as an alternative to imposing tariffs.
- In 2016a dispute was filed against China because China was levying tax on the export of high-demand raw materials
- UNCTAD use an arbitration agreement to settle present and future dispute; by entering an arbitration, certain matters will be submitted to the arbitrator for settlement rather than the court of law.
Impact Of Trade War On The Economy
With the ongoing Present US:-
China war, since China is the World’s largest exporter, the imposition of tariffs and the enduring trade war will affect China, alongside neighboring regions, China’s yuan is currently low and most investors are scrambling for better alternatives, imports in the US fell by 4.5% in 2020 and the heavy tariff was levied by China on US products. With this ongoing trade, neighboring countries like South Korea, Taiwan, and Singapore that have links with China might be vulnerable to this war trade as well.
The US and China’s trade war could be heading for a collapse is tariffs are extended and a GDP fall could be looming.
A trade war between two countries can become damaging to other consumers and businesses among the nations fighting and can also be contagious to other nation’s economies.
Present war between Russia and Ukraine will bring about global trade inflation, skyrocketing the price of gas and oil.
Advantages And Disadvantages Of Trade War
- Time after time, trade war has been gaining diverse attention; this is due to the fact that global financial markets are edgy. Nonetheless, it has great impact in home countries when the restrictions by nations make her citizens diversify.
- It helps local or domestic industries to grow and become players in the domestic market thereby increasing the people’s consumption of locally made goods
- It boosts the competitive market so that there is continuous improvement and diversification.
- It could lead to scarcity of food or global trade inflation in gas, wheat, barley, gas, corn, etc., which Russia and Ukraine and larger exporters.
=> Disadvantages
- The imposition of restrictions and tariffs leads to artificial scarcity which translates to an increase in the price of goods and later inflation
- It leads to an increase in a domestic monopoly since there is no competition from an international brand. However, customers suffer deeply due to the increase in prices by these domestic companies.
- Trade War creates undue tension among this country, which over the long run, has a negative effect on both nations.
Beneficiaries Of Trade War
- Given the two years war between world economic powers, few nations like Vietnam, Taiwan, and Mexico are the beneficiaries of this war. These nations enjoy the flow of export to US Mexico and Canada have benefited supplementary from China import substitution while Asia’s global value chain benefited from US import substitution.
- India did not benefit much from the trade war due to trade diversion and there have not develop a strong supply chain and regional integration.
- Vietnam is a big beneficiary of the trade war receiving a huge percentage of US imports
- Taiwan’s export to the US amounted to $4.2b in the first ½ of2019
- China imports a large portion of food grains from Australia
- With the present war between China, Germany competes with China in terms of car production and with the heavy tariff levied by China, the US will shift to Germany thereby making her a beneficiary.
- Iran and Russia are likely to benefit from these sanctions since they have oil in large supply and China is likely to trade with them irrespective of the consequences.
- India’s economy rose by 3.5% as a result of export as of 2019.
Looser Of Trade Wars
- The loggerhead between these two nations since 2018 has affected a whole lot of sectors both in the US and China, bringing about massive losses among sectors not beneficiaries of this war. The automotive sector especially companies producing cars like Ford needs steel and aluminum, high tariff restriction has cost the company a great deal.
- In the US, beverage companies and food companies are on a roller coaster, the need for metal in order to package their products is outrageously high due to tariffs and the continuity could lead to the loss of Jobs
- China’s tariff with put aerospace giants at a major disadvantage to other giant competitors and also lock up sales
- The growth rate of the US as a result of a 25% levy on $200 b in Chinese export was expected to be 3.7% in the year 2019.
- China is the most affected because it lost its position and the second-largest stock market to Japan as a result of a lingering fear of a trade war and an envision of a deterrent economy.
Top 13 Interesting Facts About Trade War
Minor trade disagreements are referred to as a dispute.
The first Opium war was due to the blockage of Sea Port by Qing’s Administration and the seizure of illegal imports.
On 30th December free trade agreement was signed between European Union, the United Kingdom, and the European community.
The history of a trade war is traced o the 17th century when the colonial powers went against one another to control the foreign auctions of goods.
China joined World Trade Organization in 2001.
In 2019, US and China celebrated 40 years of diplomatic relations.
Vietnam has been the winner in trade wars over the years.
India is likely to benefit from this trade war in her 3 distinctive sectors which are; pharmaceutical, engineering, and chemicals.
In February 2021, Okonjo-Iweala became the first woman and first African to be the director-general of WTO.
General Agreement on Tariffs and Trade was established in 1948 a year before NATO was established.
European Union has established the first major carbon market.
The holocaust claimed about 6 million lives of Jews.
The German invasion of Poland was the cause of World War II Hitler.
