Tariffs are generally imposed to regulate foreign trade in order to protect internal markets from international competition. The imposition of taxes restricts imported goods by adding the prices of commodities and services bought from another nations, making them less appealing to domestic buyers. Domestic manufacturers continue trading their products at comparable prices since they are not forced by the government to reduce rates due to high competition. Consequently, domestic buyers end up paying higher costs (Baqaee & Farhi, 2019). Trade restrictions will generally evoke retaliation by trade partners and negatively affect the gains from trade. When trade barriers and legal restraints are lifted, the producer surplus and the number of export commodities and services heighten, in turn, prices are reduced, and internal industries suffer. They also lead to increased rates of labor-intensive manufactured commodities and raw products. This results in fewer economy resources being utilized in the manufacture of commercial products. There is a high probability that without the WTO intervention, retaliation would have sparked between China and the USA. If this had triggered a retaliatory situation, gains from trade would have regressed.
The nature of the claim is that China imposed trade tariffs on particular chicken products that were imported from the USA, asserting that they were being sold for low costs. As a result of the tariffs, the U.S chicken product sales experienced an estimated 80% decline (Swanson, 2013). The action by the defendant does not necessarily impede free trade; thus, it does not deserve scrutiny. If the issue was that the prices were low, then this would have been addressed, and probable measures would have been implemented. Perhaps, the matter would have deserved scrutiny if the defendant’s products were harmful to its buyers.
Baqaee, D., & Farhi, E. (2019). Networks, barriers, and trade (No. w26108). National Bureau of Economic Research.
Swanson, A. (2013). WTO Sides With U.S. In Poultry Dispute With China. Retrieved from https://www.npr.org/2013/08/05/209097983/wto-sides-with-u-s-in-poultry-dispute-with-china