The General Motors, popularly known as GM, is a giant company that manufactures cars and trucks (automobiles) and is based in the United States of America. According to Erjavec (2005), the other big automobile makers in the US are the Ford Motor Company and Chrysler Corporation. However, there are other automobile companies from Korea, Germany, Japan and Sweden which are competing with the General Motors today; with Japanese companies offering the stiffest competition for both domestic and foreign sales.
It is important for a country to have trade policies which are in line with their interests. In fact, since the US government has over 60 per cent shares in GM, they are in a position to make any policy. However, such policies have to be economically informed. According to Kerr and Gaisford (2008), the domestic market is always affected by international trade policies. If we take US as an international force, then other countries will be affected by their (US) decisions on automotive exports to US. This shall in return affect the US in several ways (Kerr and Gaisford, 2008).
The current situation is that the dollar is rapidly losing value due to the huge US foreign debt. Banning auto imports would further reduce the dollar value. As a result, those countries keeping foreign reserves in dollars would probably shift to Euros. Another effect would be a natural need to import cheaper fuel, among other goods, as opposed to preference of US-based fuel. This is because in view of Kerr and Gaisford (2008), US-made autos consume more fuel. A further effect of such a policy would be loss of jobs for many workers which in return would reduce the amount of income tax collected. In addition, the service industry would suffer since the net insurance on cars would reduce. In the view of Perdikis and Read (2005), the World Trade Organization may also recommend to other countries not to export some other products to the US since the country would have failed to follow the rule of multilateralism.
It is also important to compare this case with a similar case in the past. Kerr and Gaisford (2008), expressively illustrated how car imports (especially Hondas) from Japan boosted the US economy in the early 1980’s. Due to high oil prices, Americans preferred cars from Japan as they were more fuel-efficient. Further, Japan sold unassembled cars to auto-makers in Taiwan and Korea who exported them to US. They also established assembly plants in US thereby enriching the tax pool of the country.
In retrospect, banning of imports would have a negative effect on the value of the dollar. Although the General Motors would make huge profit, the other sectors of trade would not perform well.
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