Perspective on International Trade and Finance Assignment

Perspective on International Trade and Finance - Assignment Example This paper focuses on the trade disputes involving China, the impact and the determinants of foreign exchange rates, the valuation of the Chinese currency before and after the reforms. This paper also discusses the options that are available to China for reform of its exchange rate system. Introduction The level of exports by China had amplified radically from $250 billion in the year 2000 to a proposed $1,500 billion in the year 2009. This massive increase of Chinese exports severely hampered rival businesses in the developed countries, predominantly the Europe and the United States. In 2001, China entered the World Trade Organization (WTO), which ascertained China the right to export to countries like US and the Europe. Nevertheless, the entry to the WTO necessitated China to stick on to certain regulations that were required to endorse fair trade and generate a level playing ground for all. Various issues such as the safeguard of intellectual property, labour and environmental ben chmarks, health and safety apprehensions about Chinese products, China's management and manoeuvring of their currency, and expenses and prices established by the government instead of the free markets gave rise to a number of trade disputes. This paper investigates the different types of trade disputes and the endeavours made by China to solve them. A lot of disputes were rooted in the Chinese cultural practices as well as in ideological outlook and hence take time to resolve. Deficiencies in the legal and court arrangement in China also effected the enforcement of various rules. Additionally, many of the disputes originated due to the government's wish to guard the welfare of Chinese organizations and their workforce, and consequently China might modify its practices only if faced with convincing penalizing threats. The central government of China also encountered the "principal-agent" crisis where its decisions or requests could be overlooked by the local governments and organizat ions. In the meantime, modifications in business structure within the developed countries were changing the negotiation positions of the governments of those countries (Conklin & Cadieux, 2009). Analysis of the Case Issues Arguments of the different parties After the entry into the WTO, China started taking part in international trades. However, China did not impose criminal procedures and punishments on the infringement of intellectual property rights; neither did it build identical health and safety standards that were implemented in the western countries. The extensive health and safety, along with the labour and environmental regulations in the developed countries, added the expenses involved for the manufacturers located there. Since China did not enforce such strict standards, the Chinese manufacturers had unfair advantage over the western ones. Moreover, China did not honour the property ownership of western manufacturers because the Chinese manufacturers were creating employ ment and promoting domestic prosperity via counterfeiting. But this activity of Chinese manufacturers hurt the volumes of sales and the profit margins of the western