Problem context
The Chinese economy has emerged as a major international power and one of the world’s leading exporters. The United States has embraced Chinese imports and benefitted from a higher standard of living due to the cheaper prices that accompany these items. With the recent recession and the growing trade imbalance between the two countries, many Americans have begun to question the fairness of this arrangement. Given the decline in American manufacturing and the high unemployment rate, many people are pointing to China’s currency policies as the driving source of this inequality and are seeking an answer to level the playing field.
Behavior over time
The trade imbalance with China has been growing since the mid-1980’s. Many people feel that Chinese currency policies during this time have left American manufacturers with a serious disadvantage when it comes to competition with Chinese goods in terms of price.
Policies now in place or under consideration
The Chinese government has pursued a policy of pegging the value of the Yuan to the dollar and actively participating in the currency markets to maintain the pegged value. Some members of Congress have suggested that China be labeled a currency manipulator and that tariffs be applied to Chinese goods.
Issues and concerns with the current situation or policies
Has China undervalued the Yuan to boost their export-dependent economy?
Has the rise in Chinese imports lead to a decline in American manufacturing?
Is China’s economy at serious risk if the value of the Yuan appreciates?
What effect would the imposition of tariffs have on both economies?
Study purpose and questions to be addressed
The purpose of this study is to determine whether imposing tariffs on imported Chinese goods will help reduce the trade imbalance between the United States and China.
You did a good job of drawing the lines around each of the 5 problem articulation sections. They progress into each other very cleanly. You are tackling an interesting and very relevant topic.
ReplyDeleteOne thing of note, the issue of Chinese imports causing a decline of American manufacturing I find runs in the opposite direction too and I think it should be considered both ways, Chinese imports eroding American manufacturing or a decline in American manufacturing making way for more Chinese products.
Ken has definitely picked a timely issue. One the biggest drivers of our economy for at least the last decade has been the availability of cheap Chinese imports. Now the U.S. is beginning to question whether this issue has been created artificially by China.
ReplyDeleteKen has laid out the problem and Behavior Over Time well. It is clear and seems to be accurate. The Policies in Place section does list the Chinese policies and the recent response from our government. However, there is no mention of why we have allowed this problem to persist. It seems that there should be some mention of the fact that our economic growth was more important than worrying about the Chinese currency manipulations until now, which is certainly our Behavior over Time.
The Issues and Concerns section does lead to questioning the actual problem and why it should be a concern. The Study Purpose lists only one item to study in this very complex problem. Based upon the description of the problem, several other areas could be included like what effect the tariffs might have on China. Perhaps it will be more manageable with the focus on just balancing the trade but the issues/concerns Ken lays out will have to be in the model.
Nice problem, Ken. Good comments by Ivan and Brooks. Ivan makes a very interesting point: Which was first...the US decline in mfg (thereby opening opportunities for China) or Chinese growth in mfg (and putting the US out of business?). I'm not sure which is more accurate. Actually, both could be true if this involves a feedback mechanism, right?
ReplyDeleteI believe it's good to focus on the issue of tariffs. My suggestion is to broaden the study purpose a bit, more in line with Brooks' suggestion. Seldom is a SD study done in order to answer a "YES/NO" question like the one you have in your study purpose. Instead, such a study is done to give insight so that we can understand the totality of impacts from the tariffs. Brooks suggests including the impact on China. This might be a good idea...but be careful not to get to bogged down in trying to model the Chinese and US economies with any real detail! It might be that your goal is to study the overall effects of tariffs on the trade balance (US/China) and also on the health of the Chinese and US economies.
In your ISSUES/CONCERNS section, you list questions to be answered. That's not the purpose of that section. Instead, you should describe what issues there are with the proposed policy of tariffs. For example, the US and Chinese economies are increasingly interconnected. If the trade balance is sustained too long, then the US economy will suffer, thereby hurting China (since we are a primary consumer of Chinese goods). If we are too draconian with China, we could stall their growth, plunging them into a serious recession and affecting our economy (not sure about that, really). These are the kinds of issues you need to highlight in this section. The ideas is this: We are looking at this policy. There are reasons for considering it, but there are also concerns about using this policy. You need to explain those concerns. That sets up the study purpose, which is to see what impact the policy could really have.
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