Comparison of China and USA Harvard Case Solution & Analysis

Nonetheless USA has made certain trade agreements with Mexico, Canada, and South American Nation so on. This will benefit countries which are involved in trade agreements to increase immigration of the people. Their policies are designed in such a way that both are interlinking with each other.

USA imposed several tariffs on exports which made local producers to produce more due to the tax imposed; this caused prices to rise which will ultimately lead the cost purchaser to be charged a higher price for their product (Lens, 2004). As a result demand for these goods will decrease. In some cases, import tariff helps the US economy. US producer blame the Canadian producer for dumping lumber at lower price, which caused local producer to suffer losses because US’s lump charged higher price than Canadian lump. Although the trade agreement between USA and Canada creates mutual benefits for each other, but in this case the trade agreement caused losses to USA.

USA also imposed import quota in order to protect itself from dumping. Import quota is similar to import tariff. In the case of import quota, higher tax will be charged on the import of higher quantity of goods and services  (Lens, 2004). Import quota is also beneficial for USA because it preserves the local producer of USA and enables them to analyze the quality and material used in the imported goods and services. This will help to produce it locally; which will help to decrease the cost of import and charge lower prices to local customers.

In the case of USA, tariff will be charged on its exports and as a result its goods and services will become costly to the importer due to which they will find it difficult to cope in the international market. However, China is able to provide goods and services at lower cost than USA; hence USA’s exports will suffer due to their higher prices, as countries around the world will prefer China’s goods and services over USA’s goods and services on the basis of its lower cost. In this scenario, USA economy will suffer and the balance of payment will become negative.

Export policy will also give benefit to USA when it will able to export goods in a third world country. This is because it will be able to charge higher amount of price and third world country like Pakistan will have to pay it in order to obtain goods and services.

Furthermore, trade agreements between Mexico and USA have misbalanced the environment over utilization of land, increase in waste material, depletion of resources, etc. This will increase health issues and will damage natural environment of the countries.

Trade agreement between Mexico and USA has created social benefits for Mexico and created more jobs in the Mexican markets. People in Mexico are moving towards the urban society in order to create wealth and social balance. Mexico was able to save some portion of their incomes in order to utilize it to avail other opportunities to increase its income; this situation has created a positive balance in the economy of the Mexico. This has attracted US investors who are moving towards and investing in the Mexican markets. As US investors are disinvesting from their current US investment; hence this has created a misbalance in the balance of payment of USA. Moreover, labor in US is expensive as compared to Mexico therefore; investors prefer Mexican labor over US labor. Consequently, the unemployment rate of US labor is increasing.

This situation can be controlled if the US government gives some kind of benefits to its investors in order to increase their investment in USA as this will eventually create more jobs. USA government may give tax benefits or decrease tariffs on its exports; this will persuade the local producer to produce more, which will have a positive impact on its balance of payment.

USA is also monitoring imports through the registration of brokers. Registered brokers are required to clear goods from the dock and send it to the warehouse of the clients. If the broker is unable to clear goods within 60 days then the custom officer has the right to auction goods and services and the amount of money which is received from auction will be used to pay-off import and custom duty. USA is following a strict procedure for the registration of broker.......................................

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