Bartu Geyik<\/p>\n\n\n\n
Op-Ed: Moral Principles in International Trade<\/p>\n\n\n\n
There is no denying that nations tend to prioritize their own development and prosperity, aiming to maximize social welfare. However, this does not mean that situations where certain economic policies are followed by a country that are harmful to others should be accepted, as the low exchange rate policies of countries like China, South Korea and Vietnam not only affect the trade balance of other countries, but also leads to unemployment in the export industries of such countries. In currency wars, countries gain an unfair comparative advantage by keeping exchange rates lower than expected through government manipulations, leading to ethical questions. In terms of moral principles, the standard utility model articulates moral dispositions through utility analysis. However, Rabin argues that moral dispositions are not necessarily preferences, as it happens to be the case in utility analysis, but are rather internal constraints. In the former, a person would normally seek for more information to articulate moral dispositions, yet in the latter, self-serving biases come to the picture and people avoid the information which prevent them from pursuing their self-interest. As such, along with the currency war, some governments ignore the rules, subsidize export industries, making them more competitive than countries that used to have a comparative advantage in the industries. This way, they produce goods at a lower opportunity cost compared to a country that would normally have a comparative advantage of the production. Currency wars and protectionism through subsidies are economic methods to eliminate competitors, distorting current comparative advantages just to increase the share of the pie both politically and economically. Viewing morality as a constraint on behavior, some export-oriented countries ignore the information of rules and regulations of world trade to increase their social welfare, giving the state the power to manipulate economic activities through actions such as keeping the exchange rate low, subsidizing export industries and exploiting its workers. <\/p>\n\n\n\n
If moral principles prevent the decision maker\u2019s aim of fulfilling their self-interest, they are likely to avoid moral constraints in order to fulfill their self-interest, ignoring all evidence that would normally direct them otherwise. Rabin highlights the importance of internal constraints for moral dispositions and in his paper, the subjects are individuals with utility functions (Rabin, 1995, 1). In this context, using Rabin\u2019s argument as a framework, this paper will focus on this topic at a country level with the consideration of social welfare functions and aggregating preferences instead of individual utility functions. A social welfare function takes into consideration the utility of individuals in a community in order to understand the collective welfare of the group as a whole. In this regard, it can be seen that a country can prioritize its self-interest, ignoring world trade norms despite being a member of the World Trade Organization (WTO) where all countries are expected to abide by international trade rules and regulations. For the sake of fair global trade, other WTO nations can chime in, as there are altruistic punishers who apply sanctions to those who behave unfairly according to prevalent norms of corporations. This is reinforced by many nations imposing tariffs with strong reciprocity (Matthes, 2024). Similar to Rabin\u2019s salience injection, third parties such as global actors and the WTO make sure that the information is not only readily apparent for those countries, but also impossible to circumvent (Rabin 1995, 18). If a country is guided by moral constraints, imposing information on them might yield positive results, bringing them in line with the expected moral rules (Rabin 1995, 19). As long as nations are guided by rules and are punished for ignoring them, there is no reason to worry about instability in international trade.<\/p>\n\n\n\n
Some governments like China, South Korea, and Vietnam keep their domestic consumption habits and expenditures low, diverting most of their resources to the exporting industries. They choose to endure their export-oriented economy through the domestic demand of other countries, following capitalist trade rules outside of the country (Matthes, 2024), while sacrificing domestically. Using low-wage laborers, they flood the world market with their low-cost exports, and some examples of the use of forced labor to produce cheaper export goods is also seen (EPP, 2021). Many nations are worrying about these ethical values, along with their trade deficit with such countries. For instance, according to the IMF\u2019s recent data, 150 out of 181 countries are pursuing a trade deficit with China (Matthes, 2024). This worrisome environment and ambition of some countries to maximize their social welfare function at any cost makes the global trade arena tense, highlighted by the strong reciprocity they receive in the form of tariffs from other nations. It is unfortunate how any country like this has gained an unfair comparative advantage over many other countries by lowering their exchange rates through currency wars, subsidizing export industries and exploiting workers with low wages and long hours. Electric vehicles, computers, batteries and accumulators of high-tech industries are some examples where comparative advantage is distorted (Matthes, 2024). Although these countries such as China are connected with the capitalist world really well economically, they continue to have authoritarian governing, making questionable ethical decisions. <\/p>\n\n\n\n
It is important to note that similar to keeping the currency undervalued, tariffs being used as a strong reciprocity also harm the global economy, motivating further protectionism. Initially, the country that applies the tariff first because of the gain from tariff taxes and the delay of retaliation might be better off compared to its counterpart. However, in the long run, mutual tariffs will elevate the exchange rate for both nations, yielding to a decrease in their exports (Esmel, 2015, 417). As in line with economic theory, the increase in the price of imported goods due to tariffs will decrease the quantity of imported goods, leading to the domestic demand for foreign currency to decrease. As the value of the domestic currency relative to foreign currency may rise, exports will decrease because domestic goods will be more expensive for foreigners. In addition to this effect, the foreign country will retaliate by applying tariffs after the tariff initiation of the domestic country. This reality enforces the argument that tariffs will decrease exports in each country in the long term. To this end, for the sake of prosperous global trade, cooperation and coordination among the countries should be a priority before applying tariffs.<\/p>\n\n\n\n
Despite the presence of rules to regulate world trade, export-oriented nations can easily circumvent these rules with the belief that the ends justify the means. They will continue becoming a leading exporter, with the goal of maximizing their social welfare function. The point being made by this paper is that using Rabin\u2019s argument, these countries can easily be classified as viewing morality as a constraint on behavior, pursuing information in a self-serving manner (Rabin, 1995, 1). In this respect, the harm created by those countries is mainly in the form of worker exploitation and unfair trade. Unfortunately, as Rabin suggested with his theory, from the lens of country dynamics, no one has successfully made these countries acknowledge the information about the rules and regulations of fair trade. As it seems to be the case in the reality of world trade, these countries will continue to have an unfair comparative advantage in many industries just by ignoring the rules, leading to ethical backlash. Yet, having the view of morality as a constraint on behavior still can demonstrate the possibility of attaining smooth global trade with other nations as long as they start following the WTO rules. Considering these ethically questionable methods with the goal of increasing their social welfare, other countries following ethical terms in the global trade arena have an obligation to remind the ambitious countries of the rules to reach a fair trade dynamic where ethical problems are addressed and prevented. <\/p>\n\n\n\n
References<\/p>\n\n\n\n
Esmel, A. (2015). Currency Wars: The Need for International Solutions, <\/em>43 Denv. J. Int\u2019l L. &\u00a0 Pol\u2019y 403. https:\/\/digitalcommons.du.edu\/cgi\/viewcontent.cgi?article=1073&context=djilp<\/a><\/p>\n\n\n\n European Parliament Group (EPP). (October, 2021). EU-China Relations – Towards a Fair\u00a0Reciprocal Partnership. <\/em>Newsroom. https:\/\/www.eppgroup.eu\/newsroom\/eu-china-relations-towards-a-fair-and-reciprocal-partnership<\/a><\/p>\n\n\n\n Matthes, J. (2024). China\u2019s Trade Surplus – Implications for the World<\/em> and for\u00a0Europe<\/em>.Intereconomics, Volume 59, pp. 104-111. https:\/\/www.intereconomics.eu\/contents\/year\/2024\/number\/2\/article\/china-s-trade-surplus-implications-for-the-world-and-for-europe.html<\/a><\/p>\n\n\n\n Nelson, Rebecca M. (2025, January 10). Exchange Rates and Currency Manipulation.(CRS\u00a0Report No: IF149). https:\/\/www.everycrsreport.com\/files\/2025-01-10_IF10049_48231f202ba472691b061d8b96cc13d1d66016be.pdf<\/a><\/p>\n\n\n\n Office of the United States Trade Representative (USTR). (September, 2024). Fact Sheet: WTO\u00a0Case Challenging Chinese Subsidies. <\/em>Press Office. https:\/\/ustr.gov\/about-us\/policy-offices\/press-office\/fact-sheets\/2012\/september\/wto-case-<\/a><\/p>\n\n\n\n Rabin, M. (1995). Moral Preferences, Moral Constraints, and Self- Serving Biases<\/em>. Department\u00a0of Economics, University of California, Berkeley. 1-44.<\/p>\n","protected":false},"excerpt":{"rendered":" Bartu Geyik Op-Ed: Moral Principles in International Trade There is no denying that nations tend to prioritize their own development and prosperity, aiming to maximize social welfare. However, this does not mean that situations where certain economic policies are followed by a country that are harmful to others should be accepted, as the low exchange… Continue reading Op-Ed: Moral Principles in International Trade<\/span><\/a><\/p>\n","protected":false},"author":4906,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_uag_custom_page_level_css":"","_jetpack_memberships_contains_paid_content":false,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[5],"tags":[],"class_list":["post-3932","post","type-post","status-publish","format-standard","hentry","category-international-economics","entry"],"jetpack_featured_media_url":"","uagb_featured_image_src":{"full":false,"thumbnail":false,"medium":false,"medium_large":false,"large":false,"1536x1536":false,"2048x2048":false,"post-thumbnail":false},"uagb_author_info":{"display_name":"meitingx","author_link":"https:\/\/sites.lsa.umich.edu\/mje\/author\/meitingx\/"},"uagb_comment_info":0,"uagb_excerpt":"Bartu Geyik Op-Ed: Moral Principles in International Trade There is no denying that nations tend to prioritize their own development and prosperity, aiming to maximize social welfare. However, this does not mean that situations where certain economic policies are followed by a country that are harmful to others should be accepted, as the low exchange……","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/sites.lsa.umich.edu\/mje\/wp-json\/wp\/v2\/posts\/3932","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sites.lsa.umich.edu\/mje\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sites.lsa.umich.edu\/mje\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sites.lsa.umich.edu\/mje\/wp-json\/wp\/v2\/users\/4906"}],"replies":[{"embeddable":true,"href":"https:\/\/sites.lsa.umich.edu\/mje\/wp-json\/wp\/v2\/comments?post=3932"}],"version-history":[{"count":1,"href":"https:\/\/sites.lsa.umich.edu\/mje\/wp-json\/wp\/v2\/posts\/3932\/revisions"}],"predecessor-version":[{"id":3933,"href":"https:\/\/sites.lsa.umich.edu\/mje\/wp-json\/wp\/v2\/posts\/3932\/revisions\/3933"}],"wp:attachment":[{"href":"https:\/\/sites.lsa.umich.edu\/mje\/wp-json\/wp\/v2\/media?parent=3932"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sites.lsa.umich.edu\/mje\/wp-json\/wp\/v2\/categories?post=3932"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sites.lsa.umich.edu\/mje\/wp-json\/wp\/v2\/tags?post=3932"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}