Dixon
1. Why do you think that the Chinese apparently have a cost advantage in the production of pencils?
Answer: Chinese apparently have a cost advantage due to the amount that they can sell pencils at. It may be due to the domestic competition, a rebate the Chinese offers for exports of pencils, and the lowering of duties that where imposed by the U.S. Department of Commerce. Also, the Chinese continued to find ways of lowering cost, increasing technology, and their know-how in making pencils.
2. Do you think that lobbying the U.S. government to impose antidumping duties on imports of pencils from China is a good way to protect American jobs? Who benefits most from such duties, who loses? What alternative policy stance might the government take?
Answer: The U.S. pencil industry began lobbying the U.S. government to impose antidumping duties on Chinese pencil imports in the early 1990s. At the time, the industry was watching its market share being eroded by Chinese producers that were exporting low-priced pencils. Most students will probably agree that the imposition of duties by the U.S. government was nothing more than a stop-gap measure. In order to compete, U.S. producers needed to become more efficient and innovative. While the duties protected U.S. producers and workers in the short-term, they also harmed consumers who had to pay higher prices for pencils. Some students may suggest that rather than imposing duties, the government might have provided incentives for U.S. producers to find better ways to compete.
3. Now that Dixon has a production operation in China, why does it not simply import finished pencils from China to the United States, instead of making those pencils in Mexico?
Answer: It is advantageous for Dixon to continue to manufacture and assemble pencils in Mexico because of the North American Free Trade Agreement (NAFTA). Dixon’s