Global Free Trade

 
 
 
 

Vocabulary

goods	planet	component
evil	protect	prosperity
steel	duty (2)	polyester
threat	reprisal	steal/stole/stolen
brink	deceive	full-scale
expect	role (2)	punitive (2)
remain	abroad	reluctant
proud	purchase	contradiction
seem	distorted	livelihood
port	pure (2)	swamp (2)
arrive	gateway	container
tariff	complex	subject (4)
agent	variation	countless
ensure	check (2)	custom (2)
pet	declare	charge (2)
knit	isolation	supposed to
leather	loophole	apparently
rate	capacity	behind (2)
free (3)	decision	quality control
coffer	area (3)	pretty much
era	guess (2)	domestic
brand	range (2)	boom (2)
frame	play (3)	assemble
ensure	level (3)	manufacture
content	subsidize	promotion
saddle	destroy	go under (2)
avoid	point (3)	playing field (2)
benefit	compete	sound (2)
fair (3)	scale (2)	argument
aware	apply (2)	around them (2)

 
 
 
 
 
 

Video

 

 
 
 
 

Transcript

Free trade. Millions of tons of goods in motion across the planet. It brings prosperity — or so we’re told.

Protectionism and isolationism are evils from the past — or they were until Donald Trump called for duties on steel imports to the US. Europe and China threatened reprisals.

Are we on the brink of a full-scale trade war?

How are we being deceived when it comes to global trade? And what role do we ourselves play in that deception?

German Official: Germany can’t expect the rest of the world to buy its goods, while remaining reluctant to buying goods from abroad.

The arguments for and against free-trade are full of contradictions. Germans are proud of their country’s top of the list of exporting nations, seemingly unaware that free-trade destroys livelihoods, at home and abroad.

Who are the real winners? And is free-trade really as “free” as it sounds?

 

 

The port of Hamburg. From here, German products are shipped to countries around the world. In return, around nine million containers arrive here every year, most of them from China.

The city in northern Germany is a gateway to Europe for goods from Asia. And then they enter the EU, many goods are subjected to import duties: cars from Asia and the US are taxed at ten percent, clothing at twelve percent.

Smartphones aren’t taxed at all.
Customs duties are complex. There are different types of tariffs in countless variations.

Agents Gaby Jansen and Eva Hoffman from the port’s central custom’s office check imports every day. It’s their job to ensure that goods are declared properly — there are a vast number of loopholes.

Eva Hoffman, Customs Agent: It says it’s a micro-fiber coat . . . for a pet.

Gaby Jansen: Customs Agent: That’s right, made of knitted polyester.

Eva Hoffman, Customs Agent: Exactly. From the size, I’d say it’s supposed to be for a dog. Made in China, and their different sizes. This is apparently for a medium-sized dog.

Do the dog-coats have leather parts as well? In that case it would be charged at a lower rate.

Eva Hoffman, Customs Agent: A hundred percent polyester, so at the moment, a twelve percent import tax. If these were saddles these would only be 2.7%.

They have no idea what’s behind that difference. It’s a decision taken at the EU level. All they do is check the contents of containers.

Eva Hoffman, Customs Agent: I’ve been working here for a long time. And working here, Germany doesn’t feel like the top exporter; but that most of the stuff is coming from China. The Chinese make pretty much everything.

The question is: do tariffs bring benefits outside of government coffers?

Eva Hoffman, Customs Agent: I guess they protect the country’s economy.

Is that true?

What role does protecting domestic industries play in an era of global free-trade?

 

 

We visit a bicycle company that offers a range of bicycle models. And business is booming. So where do the bikes come from?

Reporter: This bike is made in Germany?
Bicycle Company Owner: No, it’s not made in Germany.
Reporter: But it’s a German brand?
Bicycle Company Owner: Yeah, it’s a German brand. Like so many things, the frame comes from China. It’s painted and assembled in Taiwan. Quality control happens here.

A bike designed in Germany, assembled in Taiwan, from components manufactured in China.

Made in this way, a bike like this pays a 15% import duty when it arrives in the EU.

But if it was shipped directly to Germany from a factory in China, the importer would have to pay almost fifty percent (50%) in punitive tariffs.

Why?

Because a Chinese company can make bikes much more cheaply than German firm ever could.

In this promotional video, Chinese bicycle manufacturer Fuji-ta claims it has the largest bicycle factory in the world.

Companies like these are subsidized by the Chinese government. But that’s just one reason why Chinese products are so cheap.

There’s also scale. With a creation capacity of a hundred million bicycles a year, China could quickly swamp the world with its products.

Companies like Wolfgang Renters’ would go under. So he sees tariffs as protecting Europe’s bicycle manufacturing industry.

Wolfgang Renter, German Bicycle Company owner: Sometimes you have to have protectionism. It’s unavoidable. The point is that in business, you need a fair playing field.

You can see it in other areas too, where government subsidies keep other manufacturers from competing because the market is distorted.

It’s about jobs and fairness.

The import duties ensures that Chinese bikes are more expensive when purchased in Europe.

Punitive tariffs, a form of pure protectionism. But there are ways around them, for instance having bikes frames produced in China, finished in Taiwan. Then punitive tariffs don’t apply.

The final assembly of bicycles with Chinese frames then takes place in Europe.

 

 

Questions

1. Are EU customs duties straightforward or very complex? Do the Hamburg customs agents know exactly why they are that way?

2. Explain how bicycles are imported, made and sold in Germany. Why does it function this way?

3. Are there any American bicycle manufacturers? Why did this happen?

4. Does Germany manufacture most of its household appliances and clothes?

5. All Americans simply buy the cheapest products in stores. Is this right or wrong? Are Sarah Parker and Susan Schweikert American nationalists?

6. Are protectionism and tariffs a new phenomenon? What caused it? What were the consequences?

7. Tiles in Germany are mostly domestically produced thanks entirely to their superior quality. Is this correct or incorrect? Describe the situation.

8. Are Germany and the EU hypocritical?

 

A. Describe your nation’s trade policy.

B. Has it changed over the years? What have been the consequences?

C. Is there a lot of debate and argument over free-trade versus protectionism?

D. What might happen in the future?

E. What would be the “ideal” trade policy for your country? For the world?