Traditionally the main causes of trade wars is the desire to achieve economic or political objectives through different kinds of import restrictions, or (rarely) exported. To limit imports or promote exports of their initiator enters the necessary customs duties, or other methods to restrict trade. For example, in the summer of 2013 in the Ukrainian cheeses and other dairy products to Russia were found “numerous violations”, resulting in the export of this product from Ukraine were stopped. Often there are news flashes of various kinds of diseases in animals, which is also the reason for the restrictions. Thus the methods of conducting trade wars can be economic and administrative, and the reasons economic and political.
Classic trade wars were fought for economic goals. Thanks to this war between the mother country and the colonies entered into history event known as the Boston tea party, and later gained its independence, the United States, currently has the largest economy in the world and a potential initiator of a new trade wars. In order to limit the trade of war and to establish unified rules of the game in world trade in 1995 on the basis of the General agreement on tariffs and trade established the world trade organization (WTO). Currently, its members are 164 States, including all the largest economies of the world. Ukraine became the 152 WTO member in 2008.
In a modern liberal system of global trade, not all States abide by its rules (including the budget) and adhere to the policy of floating exchange rates. Formed a group of countries that are major participants in world trade and the world trade organization (WTO), however, have slightly different rules, unlike those used in developed countries.
Describe the possible “violation” of the norms of modern international trade that are not classic causes of trade wars.
- Ignoring environmental problems. Cleaner production, does not have a significant impact on the environment, is quite expensive. Therefore, production costs and profitability are highly dependent on the norms of environmental legislation. Of course, from the “dirty production” is affected primarily residents of the territories, but the consequences can affect the overall environmental situation in the world and in the business environment.
- The policy of a fixed exchange rate. Floating exchange rates to smooth imbalances of trade and provide a mechanism to automatically adjust prices of exports and imports under the General conditions of international trade. So, in the case of a constant within a few years the excess of exports over imports the exchange rate over time increases, which gradually stimulates the curb exports and increase imports, and Vice versa. In the case of fixed exchange rates exports could exceed imports for a long period. Artificial restraint of the growth rate of the national currency is akin to tariff barriers, which often cause traditional trade wars.
- The difference in the level of taxation (including subsidies to exporters). As in the first case, a significant difference in the rates of tax and availability of systems to support exporters affects the cost of production and profitability of the business.
We have the following options for conducting trade wars in the modern world:
- States are parties to the WTO: tools of the tariff wars of lent, otherwise it may be investigated by the WTO. However, it can be penalized as a result of investigations to the WTO;
- States are not parties to the WTO: a classic trade war in the absence of international arbitrators and of the fear of penalties or even expulsion from the organization;
- the imposition of sanctions (often mutual) for any breach of international norms.
The effect of a trade war depends on the sizes of the economies, which are usually simplistically divided into “small” and “large”. Large economy can cause more serious blows to the economies of “small”, especially if you are their main trading partners. For example, as of the end of 2013 part of the Russian Federation in Ukrainian exports was 40% and of Ukraine in Russian exports of 5%. Thus, the introduction of mutual sanctions can have a different impact on the economy “warring” countries. In this example, the strength of the negative effect in the case of total trade war between Russia and Ukraine in 2013 would be eight times higher for our state.
Large economies can abuse its right to impose sanctions in relation to “small”, pursuing including political reasons.
A special variant of the make up of a trade war between the “large” economies, such as, for example, China and the United States. In this case, the effect of war affects other countries. The results of this influence can be both positive and negative.
Positive lies in the expansion of exports in the case of application of quotas and direct restrictions on the same products the “fighting” competitor. However, the effect can be short-term and retroactive effect in case of the termination of the war.
The negative effects are the slowdown of world trade and global GDP. As a consequence of the reduction of total global exports and lower prices for resources. In States in which resource export greater than 10% of GDP and 30% of the gross export negative consequences of the decline in global trade and lower prices for resources can be substantial.
If as a result of trade wars between the US and the EU, the US and China, the US and Turkey may reduce the prices of resources, but it depends on the scale of “trade wars”. To date, the formal cause trade wars to subsidize producers and tax breaks, the artificial maintenance of a low rate of the yuan at a constant steady current account surplus and balance of payments.
Trade wars were and still are an important element of political and geopolitical struggle. In many countries there is a certain group of people who believe (not always correctly) the main cause of their plight “treacherous foreigners” taking their jobs or bankrupt business.
If we consider the current situation, while no significant impact of the trade wars described the dynamics of prices for goods exported by Ukraine. However, in the case of aggravation of trade wars between the US and China, the global economy may reduce economic growth, and the price of resources can be reduced. It is a similar scenario took place in late 2008 – early 2009, when Ukraine was faced with huge economic problems caused by the global financial crisis.