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A tariff refers to a tax that a particular government imposes on imported goods and services. Such goods and services are those whose import happens from other countries. Tariffs, generally speaking, lead to a rise in the prices of these goods and services. As a result, imports become less attractive or competitive. China, too, has resorted to using tariffs from time to time on different countries. In recent years, the US-China trade war has led to the imposition of high tariffs between the two countries. This has resulted in the reshoring of factory production by US companies. Keep on reading to understand the tariff policy of China and its trade war with the US. This will give you an idea about US companies’ reshoring of factory production.
Tariff Policy of China
- The tariff policy of China has seen a trend of falling tariff rates in the 21st century compared to the 20th century. This has been attributed to several countries following a development path in the 21st century.
- Another reason is that China has become prosperous since the advent of the 21st century, and its average tariff rate has fallen.
- According to the 2018 World Bank data, China’s average weighted tariff rate was 3.4% above the global average. However, this figure was significantly lower than the 1992 figure of 32.2%.
- Most noteworthy, between the years 2001 and 2002, the average tariff rate of China almost halved. This shows the significant change in its tariff policy after joining the WTO.
- The design of China’s tariff regime is such that it lends support to its domestic industries. A recent phenomenon has seen China indulging in a trade war with the US. This has resulted in China levying high tariffs on the US and vice-versa. Due to this, there have been cases of reshoring of factory production by US firms.
US-China Trade War
- The United States and China are undoubtedly the world’s two largest economies. Unfortunately, there has been a trade war between the two countries in recent years.
- Consequently, tariffs worth billions of dollars worth have been imposed by China and the US on one another. This was not always the case, and the pre-trade war level of tariffs between the two countries was quite healthy.
- The dispute has also caused the reshoring of factory production. Due to this, there have been cases of several US businesses shifting back to their home countries.
The trade war was initiated due to the following two causes:
- The accusation by US President Donald Trump that China has been indulging in unfair trading practices.
- The perception in China is that the US is making attempts to stop it from becoming a global economic power.
After Donald Trump’s presidency, experts hoped that things would return to normal between the two countries. However, the pre-trade war level of tariffs between the two countries has not been restored.
What is Reshoring?
- Reshoring refers to the process of returning the goods’ production to the original nation of the company. This process is also known as back shoring, inshoring, and onshoring.
- The opposite of this process is offshoring. Offshoring refers to the process of overseas goods production for reducing labour and production costs.
- U.S. companies have indulged in offshoring in China for many years. This is because China has a lower production cost than the US.
- However, a change happened following the Great Recession of 2008. After this event, US companies began to indulge in reshoring of factory production to reduce costs.
- Another reason for this reshoring is the US-China trade war. As a result, the US businesses shifted back to the US from China.
Conclusion
A tariff refers to a tax that a government imposes on imported goods and services. China has used tariffs from time to time on different countries. There is a trend of falling tariff rates by China in the 21st century. This is because several countries followed a development path in the 21st century. Another reason is the prosperity of China in the 21st century. Recently, there has been a trade war between the US and China. Due to this, tariffs on billions of dollars worth of goods have been imposed by the two countries on one another. This has also led to the reshoring of factory production by US companies. Another reason for this reshoring is the Great Recession of 2008.
Prime Minister Narendra Modi visited Ireland on September 23, 2015. It was the second time an Indian Prime Minister had visited Ireland. The first being Jawaharlal Nehru’s visit in 1956. Ireland is an island nation located in Northwestern Europe and surrounded by the North Atlantic Ocean.
The Prime Minister of Ireland, Enda Kenny, had hosted PM Modi during his visit. The PM was attended by other dignitaries such as the Minister of Foreign Affairs and Trade, Charles Flanagan, and Ireland’s Ambassador to India, Feilim McLaughlin. The main aim of the visit was to create stronger ties and improve trade and cultural relations. Described below is the impact of the PM’s Ireland visit.
Impact on trade and commerce
India and Ireland have strong bilateral trade and business relations. Before the PM’s visit, trades with Ireland were valued at €650 million in business in 2014. This included exports worth €248m and imports worth €402 million.
The indigenous exports increased from €32 million in 2012 to €55 million in 2014. In 2019, the total bilateral trade was around €1.2 billion. The exports and the imports have also increased to €636 million and €480 million respectively. Currently, the total trade between India and Ireland is valued at €4.2 billion. This resulted from improved bilateral ties between the two nations, owing to Prime Minister Modi’s visit to Ireland.
Indian Companies in Ireland
Many Indian companies carry out trade and commerce in Ireland. They provide services to Irish markets and consumers across various industries. Pharmaceutical giants such as Reliance Genemedix and Amneal Pharmaceuticals operate in Ireland. Major IT companies such as Wipro, Infosys, TCS, and HCL also have a strong presence in the country. The trade relations were bolstered after Indian Prime Minister Narendra Modi visited Ireland.
Other companies like Crompton Greaves, Deepak Fasteners, Jain irrigation systems, and Shapoorji Pallonji provide consumer goods and services. Likewise, many Irish companies conduct their business in the Indian market. These companies include pharmaceutical and nutrition players like ICON and Glanbia, IT firms like Globoforce and other companies like Keventer, CRH Taxback Group, and Connolly Red Mills.
Impact on Education
Ireland has been a coveted destination for higher education for Indian students. Over 5000 Indian students have enrolled for higher studies in various institutions in Ireland. The students are admitted to engineering, technology, medicine and management colleges. More than 30 research agreements have been signed between the two nations that allow institutes in both countries to collaborate.
Many reputed institutes like Trinity College, Dublin, and Thapar University, Patiala, have signed MOUs for engineering and science disciplines programmes. Thus, Ireland is an essential collaborator in graduate and doctoral research. This collaboration is also considered an impact of the PM’s Ireland visit.
Indian Community in Ireland
Ireland is diplomatically significant for India also due to the large number of Indian citizens residing there. The Indian origin population is approximately 45,000 people, of whom 18,500 are Non-Resident Indians (NRI), and others are Persons of Indian Origin (PIO). The majority of the residents are working professionals employed in engineering, healthcare and management positions.
It has helped in establishing many policies for the Indian origin population. Two such policies in practice are wearing hijab as a part of the police uniform and the non-requirement of obtaining an additional work permit for the spouse or the partner of Critical Skill Employment Permit holders.
Cultural Impact
As a result of a large population of Indian origin citizens in Ireland and the relationship between the two nations, Ireland promotes Indian culture in various forms. One such example is the celebration of Diwali in Ireland since 2008. The event is organised every year in collaboration with Irish and Indian committees.
Further, an annual contemporary film festival is also a part of the celebration of Indian culture. The promotion of such events indicates the importance of cultural exchange between the two nations. The Irish communities also take a keen interest in conventional practices such as cultivating and consuming Indian herbs and spices. This connects the agricultural practices between the two nations. The cultural ties between the countries were strong, and Prime Minister Modi’s visit to Ireland helped strengthen them further.
Another significant practice is the celebration of International Yoga Day in Ireland. The Irish communities have accepted Yoga as a form of a healthy lifestyle. The practice is similar to the Indian tradition.
Tourism
India attracts around 44,000 Irish tourists every year. Indian tourists too visit Ireland in similar numbers. This was facilitated by the introduction of the common British-Irish visa scheme. This scheme allows the tourists to visit the U.K. and Ireland under one visa, rather than applying for two separate visas. It is valid for short stays. India also extended its Electronic Tourist Visa facility to Ireland to digitally facilitate visa approval and generation. The impact of the PM’s Ireland visit was such that it has also helped establish the tourism sector in both countries.
Conclusion
The diplomatic ties between Ireland and India have been impacted positively after Prime Minister Modi visited Ireland in 2015. It was an essential step toward strengthening the bilateral relationship between these two nations. India and Ireland have been important to each other since the 1900s.
In 2010 and 2017, two honorary consulates were established in Chennai and Kolkata. Later in 2019, a formal and fully functional consulate general in Mumbai. Ireland and India have also shown their allegiance to fighting terrorism after the Pulwama attack. India has also hosted several Irish dignitaries on various occasions. These visits were directed toward engagement in business, education, health and tourism.
Further, many agreements were signed to provide opportunities for employment to people of both countries. Prime Minister Modi’s visit to Ireland helped revive relatively stagnant relations between these two nations. Several cultural and historically similar instances bind these two nations. From Yeats and Tagore to cricket and Diwali, the cultural semblance between these two nations has helped create a strong tie between them.
