Global Trade War following China’s Economic Invasion of

USA and President Trump’s Economic Sanctions on China

Managerial Ethics | Take-home Exam 2

GROUP MEMBERS
Amit Kr Jash - G19055
Arumugaselvan D - G19059
Joginder - G19068
Niharika Roy - G19076
Aditya Purandar - G19081
 5. This is Executive Exercise AOL4. Read Chapter 15 on Ethics of Corporate Moral Reasoning,
Moral Judgment Calls and Moral Justification. Make a moral judgment call on the market event
you have chosen: Who was right, who was wrong? In general, any moral justification of one's
corporate judgment and decision involves five supporting sets of beliefs and values held by a
particular person in one or more of the following hierarchical series of moral values:

A. A set of normative ethical theories;

B. A set of moral principles derived from set A;
C. A set of moral standards derived from sets A and B,
D. A set of moral rules derived from set C, and
E. A set of moral judgments resulting from applying sets A, B, C or D while
assessing concrete actions.

Next, basing on Exhibits 15A and 15B, do AOL4 in two parts: a) Defend your
moral judgment on the market events chosen using Reverse Moral Justification;
b) Defend your moral judgment using Forward Moral Justification.
Major Contributor: Joginder – G19068 and Aditya Purandar - G19081

Answer:
Making a judgement call while providing a sound moral reasoning in the case of the US-
China trade war is a difficult task. Still, I would like to make an attempt here to use my moral
resaoning to believe that none to the two counties were right on what they did and how they
responded. Now let’s understand why I would like to think so:
A trade war occurs when countries try to impair each other's trade, usually by the imposition
of tariffs or quota restrictions. In the US-China case, it is a narrative of a series of escalating
tariffs on an increasing number of imported good from the other country. This was initiated
by the US government by imposing tariffs and quotas on imported Chinese solar panels and
washing machines in January 2018. The rationale behind this move was the ever increasing
trade deficit between US and China. Moreover many reports said that China has for years
improved its exports by weakening it’s currency and other such schemes so that Chinese
products are cheaper than their competitors. Although the US along with many other nations
has accused China of devaluing it’s currency and other manipulative schemes in order to
lower prices, the Chinese government has maintained that it has done no such unethical acts.
It says that as China is a labour and mineral rich nation, it has cheaper labour and raw
material which when combined with the massive scales of operations of the manufacturing
provides high economies of scale and hence cause lower prices. On March 8, 2018, Trump
urged China to come up with a plan to reduce the $375 billion U.S. trade deficit by $100
billion. China was welcoming to the idea. Part of China's economic reform plan was to lessen
its dependence on exports. But it reminds the US government that there isn't much it can do,
as the deficit is driven by high U.S. demand for cheap Chinese goods. As there was no strong
policy action taken by the Xi government, on March 22, 2018, the Trump government upped
the ante. It announced it would impose tariffs on $60 billion of imports from China as well as
limit U.S. technology transfers to Chinese companies(any foreign companies who wants to
sell products in China needs to form a joint venture with a Chinese company and share their
trade secrets with the Chinese company). China finally responded by announcing tariffs on
$3 billion in U.S. fruit, pork, recycled aluminum, and steel pipes. This led to a series of
escalating tariffs imposed by one country on the imported goods of the other country, which
magnified to such proportions that it has become the biggest trade war in the world history.
So in summary the rationale provided behind both the governments’ actions are:-
US: The main rationale provided by the Trump government was that China had unethically
created a bilateral trade imbalance which had caused a migration of US jobs and capital to

1
China. Also the technology transfer policy used by the Chinese government towards foreign
company was a violation of intellectual property rights of the company.
China: The main rationale provided was that it was a defensive move against the actions of
the Trump government. The Chinese government was apparently willing to reduce the trade
deficit to boost internal growth. But it is wary that it will happen soon as the Chinese
imported goods are cheaper than their American counterparts. So its reasoning is that it
cannot control the deficit as it will hamper the free trade. But it’s stance on technology
transfer was still not clear. Thus China first wanted to take the back seat and not do much,
but after Trump intensified the trade war by incurring more tariffs China started responding
with its own set of tariffs.

Having proclaimed my judgement and given a milieu of the situation I would now provide
my moral reasoning by comparing the two countries on the following hierarchial series of
moral value:
A. A set of normative ethical theories;
B. A set of moral principles derived from set A;
C. A set of moral standards derived from sets A and B,
D. A set of moral rules derived from set C
E. A set of moral judgments resulting from applying sets A, B, C or D while assessing
concrete actions

Rea- Moral Justification of US and Chinese Government Actions in the

soning Justification Trade War
Step based on:

A Normative Both: The actions cannot be justified teleologically as the trade war
Ethical Theory is supposed to reduce the global growth rate by 0.4 to 1 percentage
of: points. It will also lead to higher inflation and unemployment in not
Deontology only China and US but also the rest of the world.
Teleology The actions cannot be justified by the ethics of trust as a trade war
Distributive can never be mutually benefiting trust between the two nations and
Justice the world as a whole.
Corrective Justice The actions cannot be justified by corrective justice as the moves
Ethics of Trust made by both the countries weren’t restorative in nature. Although
both the nations claimed that they were taking such actions as a
response to other nation, it did not reverse the wrongdoing claimed
by the nation on the other nation. Simply put, invoking a tariff as a
response to other person doing the same does not reverse the extra
cost incurred by the exporter.

China: The actions cannot be justified deontologically. As a trade

partner it is China’s duty to maintain transparency in its currency
valuation practices and also after being provoked by the US it is
China’s duty and right to go to the WTO to complain about it and
get justice. But China responded aggressively worsening the
situation.
The actions cannot be justified by distributive justice as the import
tariffs put by China and the violation of intellectual property rights
of foreign companies shows that the government was not ready to

2
 share the cost and benefit equally among the stakeholders(both the
governments, local and foreign companies, and the public)

USA: The actions cannot be justified deontologically. As a

government, it is USA’s duty to maintain competitive advantage in
their industry so that the industry can grow and provide avenues for
more jobs and investment. The US products were unable to
compete on prices and thus there was a massive trade deficit. This
blame should not be shifted to China and China should not
completely take the brunt of reducing trade deficit. Moreover US
should have first appealed to the WTO instead of imposing tariffs.
The actions cannot be justified by distributive justice as the
government was not ready to share the cost and benefit equally as
it wanted to put tariffs and quotas on Chinese imports as Chinese
product were low-cost and US product were inept in this price-
competition.
B Ethical-moral Both: Trade war violates the duty of both the government towards
Principles: their citizens and towards each other as it would only lead to
Deontology – damaged trade and cause higher inflation and unemployment and
Government Duty lower growth.
Teleology – Fair Trade war violates the principle of Fair opportunism as both the
opportunism and governments are providing undeserved advantage towards their
Libertarian theory domestic industries.
of justice Trade war violates the principle of Libertarian theory of justice.
There is no pattern of just distribution other than that of the un-
Distributive patterned free market system based on three principles: acquisition,
Justice – transfer, and rectification. Both the countries are disregarding the
Principle of free three principles and inhibiting the free-market.
trade Trade war violates the principle of free trade as the countries put
Corrective restriction on foreign goods by increasing their prices or putting
Justice- Principle quotas on them.
of righteous trade Trade war violates the principle of righteous trade. The two best
examples would be ban of soybeans(a major US export to China)
causing distress on Chinese pig farmers. The other example is the
high cost incurred by the US automobile industry as the electronic
components imported from China got costly
C Ethical-moral
Standards: Both: Trade war violates moral standards (MS) of:
Deontology Integrity of the two government towards providing a free and
growing market and develop peacefully both internally and
Teleology externally
Transparency towards providing equal opportunity to all the
Distributive stakeholders whether local or foreign and impacts the spirit of free
Justice market.
Entitlement towards the foreign companies and local and foreign
Corrective Justice employees it hires.
Fair procedures towards all foreign companies.
D Moral Rules:
Deontology The foreign companies have the right to sell their products freely
without incurring any extra cost as compared to a local firm. They

3
 also have intellectual property rights which cannot be violated by
Teleology the local government
Every stakeholder must benefit from this action. If not the benefits
must outweigh the cost. The stakeholders are both the
governments, local and foreign companies, and the public. As trade
Distributive war costs all the stakeholders none benefit.
Justice It must treat every stakeholder with fairness and equity and provide
equal opportunity and equal rights. This should be applicable to the
foreign multinational companies which are currently facing the
Corrective Justice fire.
The system that allows free trade and fair actions towards foreign
firms is required.

E Moral Judgments:
Deontology It violated both the country’s duty to do the right thing not just to
the other nation but other companies and publics.
Teleology It will eventually be a major loss to the world economy and the
local government’s economy too.
Distributive It will bring harm to all the stakeholders down the line.
Justice It will rationalize and justify incorrect procedures of protectionism
Corrective Justice which is detrimental to capitalism and free trade.

Reverse Moral Justification

Step Reverse Moral Justification Assessment of Justification

E Moral Judgments:
Deontology: Violation of
Government duty
Teleology: Loss to local and World
economy
Distributive Justice: Harm to all the
stakeholders down the line
Corrective Justice: Rationalize and
justify incorrect procedures of
protectionism
D Moral Rules:
Deontology: Right of foreign firms As the governments were not following their duty
to compete fairly and duty of local towards the foreign firms in providing fair market
Both the government violated their duty towards not
only their citizens but also globally as invoking a
trade war affected industries and job of not just the
other nation but their own nation too. Also the duty of
providing a peaceful environment was challenged as
the countries brought in market turbulence due to
their actions.
The result of a trade war is invariably bad for not just
the countries participating but to the whole world
itself. The trade war inhibits free-trade thereby
artificially inflating prices and causing loss of buyers
and sellers. This slows down the local and world
economy.
As already mentioned trade war is not good for any of
the stakeholder and in the long run it is detrimental to
the free market society.
The protectionist policies of nations affects the
foreign firms competitiveness as they have to bear
extra cost and demand reduction due to tariffs and
quotas and also lose their competitive advantage
through trade secrets by being mandated to transfer
technology and knowhows.

4
 government to respect their rights opportunity the right was unduly inhibited.
Teleology: Benefit to all As trade war leads to trouble for all of the
stakeholders (governments, local stakeholders, the costs are going to outweigh the
and foreign firms, publics) benefits and hence it is undesired.
Distributive Justice:Fairness and Every stakeholder faces the brunt of the trade war and
equity to all in the long run it is just a hindrance to the growth of
the economy
Corrective Justice: Free trade and The protectionist policies incurred during the trade
fair actions towards foreign firms war causes a fall in free trade and also hampers the
competitive advantages of the foreign firm
C Ethical-moral Standards:
Deontology- Integrity of the two The integrity of the two governments is brought to
government question as they try to bring forward their own
agenda while prohibiting the spirit of free trade
Teleology- Transparency towards The actions of both the governments show a lack of
providing equal opportunity to all transparency in providing equal opportunities
the stakeholders especially to the foreign firms
Distributive Justice - Entitlement The standard of the governments being entitled to the
towards the foreign companies and foreign companies and local and foreign employees it
local and foreign employees it hires. hires is not taken care of and hence the impact which
it causes is neglected
Corrective Justice- Fair procedures Protectionism essentially hampers the fair treatment
towards all foreign companies. of foreign firms.

B Ethical-moral Principles:
Deontology – Government Duty
Teleology – Fair opportunism and
Libertarian theory of justice
Distributive Justice – Principle of
free trade
Corrective Justice- Principle of
righteous trade
A Normative Ethical Theory of:
Deontology
Teleology
Distributive Justice
Corrective Justice
Government is not focusing on its duties towards the
foreign firms
Trade war violates the principle of Fair opportunism
as both the governments are providing undeserved
advantage towards their domestic industries.
Trade war violates the principle of Libertarian theory
of justice.
Trade war violates the principle of free trade as the
countries put restriction on foreign goods by
increasing their prices or putting quotas on them.
Trade war violates the principle of righteous trade
Trade war is unacceptable deontologically
Trade war is unacceptable teleologically
Trade war is unacceptable as per distributive justice
Trade war is unacceptable as per corrective justice

Steps What have you learnt in this I understood the basic rules which govern my
E-A iterative moral reasoning and judgement and was able to connect it to the moral and
backward judgment and ethical rules, standards and theory.
justification process?

Forward Moral Justification

Step Forward Moral Justification Assessment of Justification
A Normative Ethical Theory of: The actions cannot be justified teleologically as the
Deontology trade war is supposed to reduce the global growth
Teleology rate by 0.4 to 1 percentage points. It will also lead to

5
 Distributive Justice
Corrective Justice
Ethics of Trust
B Ethical-moral Principles:
Deontology – Government Duty
Teleology – Fair opportunism and
Libertarian theory of justice
higher inflation and unemployment in not only China
and US but also the rest of the world.
The actions cannot be justified by the ethics of trust
as a trade war can never be mutually benefiting trust
between the two nations and the world as a whole.
The actions cannot be justified by corrective justice
as the moves made by both the countries weren’t
restorative in nature. Although both the nations
claimed that they were taking such actions as a
response to other nation, it did not reverse the
wrongdoing claimed by the nation on the other
nation. Simply put, invoking a tariff as a response to
other person doing the same does not reverse the
extra cost incurred by the exporter.
For China, the actions cannot be justified
deontologically. As a trade partner it is China’s duty
to maintain transparency in its currency valuation
practices and also after being provoked by the US it
is China’s duty and right to go to the WTO to
complain about it and get justice. But China
responded aggressively worsening the situation.The
actions cannot be justified by distributive justice as
the import tariffs put by China and the violation of
intellectual property rights of foreign companies
shows that the government was not ready to share the
cost and benefit equally among the stakeholders(both
the governments, local and foreign companies, and
the public)
For USA, the actions cannot be justified
deontologically. As a government, it is USA’s duty
to maintain competitive advantage in their industry
so that the industry can grow and provide avenues for
more jobs and investment. The US products were
unable to compete on prices and thus there was a
massive trade deficit. This blame should not be
shifted to China and China should not completely
take the brunt of reducing trade deficit. Moreover US
should have first appealed to the WTO instead of
imposing tariffs.
The actions cannot be justified by distributive
justice as the government was not ready to share the
cost and benefit equally as it wanted to put tariffs
and quotas on Chinese imports as Chinese product
were low-cost and US product were inept in this
price-competition.
Trade war violates the duty of both the government
towards their citizens and towards each other as it
would only lead to damaged trade and cause higher
inflation and unemployment and lower growth.
Trade war violates the principle of Fair opportunism
as both the governments are providing undeserved
advantage towards their domestic industries.
6
 Distributive Justice – Principle of free Trade war violates the principle of Libertarian theory
trade of justice. There is no pattern of just distribution
other than that of the un-patterned free market system
Corrective Justice- Principle of based on three principles: acquisition, transfer, and
righteous trade rectification. Both the countries are disregarding the
three principles and inhibiting the free-market.
Trade war violates the principle of free trade as the
countries put restriction on foreign goods by
increasing their prices or putting quotas on them.
Trade war violates the principle of righteous trade.
The two best examples would be ban of soybeans(a
major US export to China) causing distress on
Chinese pig farmers. The other example is the high
cost incurred by the US automobile industry as the
electronic components imported from China got
costly
C Ethical-moral Standards:
Deontology- Integrity of the two The integrity of the two governments is brought to
government question as they try to bring forward their own
agenda while prohibiting the spirit of free trade
Teleology- Transparency towards The actions of both the governments show a lack of
providing equal opportunity to all the transparency in providing equal opportunities
stakeholders especially to the foreign firms
Distributive Justice - Entitlement The standard of the governments being entitled to
towards the foreign companies and local the foreign companies and local and foreign
and foreign employees it hires. employees it hires is not taken care of and hence the
impact which it causes is neglected
Corrective Justice- Fair procedures Protectionism essentially hampers the fair treatment
towards all foreign companies. of foreign firms.

D Moral Rules:
Deontology: Right of foreign firms to As the governments were not following their duty
compete fairly and duty of local towards the foreign firms in providing fair market
government to respect their rights opportunity the right was unduly inhibited.
Teleology: Benefit to all stakeholders As trade war leads to trouble for all of the
(governments, local and foreign firms, stakeholders, the costs are going to outweigh the
publics) benefits and hence it is undesired.
Distributive Justice:Fairness and equityEvery stakeholder faces the brunt of the trade war
to all and in the long run it is just a hindrance to the
growth of the economy
Corrective Justice: Free trade and fair The protectionist policies incurred during the trade
actions towards foreign firms war causes a fall in free trade and also hampers the
competitive advantages of the foreign firm
E Given Steps A, B, C and D, and the Subject: Both the nation’s Government and people
moral assessment of SOPE under each, and the firms
what specific moral judgments can you Object: The trade between the nations and the world
arrive at regarding key SOPE in the Properties: Free-Market, tariffs and quotas,
Case, how and why? How can you intellectual property rights
thereby justify this moral judgment and Events: High trade deficit, the tariffs imposed by
the rules, standards, principles, and both the countries
ethical theories it is based on, and
why?
Steps What have you learnt in this iterative A forward moral justification process provides a

7
 A-E moral reasoning and forward moral
judgmental justification process?
bottom up approach with the basic underlying
normative ethical theories to moral principles,
standards and rules. This helps us to understand the
actual driving force which eventually lead to our
judgements

Q6. This is Executive Exercise AOL5. Read Chapter 16 on Ethics of Moral

Justification. Study the same market event, now from the viewpoint of justice. Chapter
16, Table 16.3 provides 9 justice Rules (R01- R09) based on Deontological Justice, 4
Rules (R10, R11a, R11b and R12) based on Teleological Justice, and Table 16.4
provides 16 Rules (R13- R 28) based on Distributive Justice. Using all 29 Rules of
Justice, do AOL 5 as illustrated in Chapter 16, Table 16.5 (ABC).
Major Contributor: Arumugaselvan D - G19059

a) Applying Deontological Justice Rules to US China Trade War

Justice Ethical Theory of Ethical Rule based on the Ethical Theory of Deontological
Rules Deontological
Justice
Did the US China Trade
War treat USA by:
R01 Kantian Formalism: Principles of
Act inasmuch as Universalizability?
your act is motivated
by a law that can NO: As the trade war
apply to all. started by USA is based on
its own protectionist
intentions, it only impacts
USA’s interest but also in
short term and a limited set
of firms.
R02 Kantian Formalism: Principles of Reversibility?
Act inasmuch as
your act is grounded YES: This has to be
on moral reasons accepted that in USA’s
that convince all. perspective, it is a long
running trade deficit it is
trying to address through its
decisions. Though the
actions can be seen as
beneficial to some but it
cannot be convincing to all.
If a dialogue and further
consensus is reached
between the two countries,
which is expected in the
G20 summit, the actions
can be reversed.
Justice:
Did the US China Trade War
treat China by:
Principles of Universalizability?
NO: As the trade war in which
China is involved is retaliatory in
nature and is solely a competitive
maneuver to respond to USA’s
backlash. This is not universally
oriented.
Principles of Reversibility?
PARTIALLY: If we consider the
unit of Analysis as China, as it is
a very export dependent country,
it will take a heavy toll to reverse
the actions that have led to the
US China Trade War. But
definitely to some extent,
restraint can be drawn on the
situation to reverse the
statuesque.

8
R03 Principle of Principle of Deontological
Deontological Justice among the
Justice: Safeguard marginalized?
economic and social
rights and duties of NO: The trade war initiated
the marginalized by USA is not going to
Safeguard economic and
social rights and duties of
the marginalized
R04 Principle of Principle of Deontological
Deontological Justice among the corporate
Justice: Also executives:
safeguard rights and
duties of corporate No, to an extent the trade
executives war’s positive impact can
be only limited to a handful
of producers. But many
more industrial sectors
which are heavily
dependent on steel and
aluminum are adversely
affected by the increased
tariffs of which the major
sectors are automotive,
chemical, nuclear energy
sector, consumer products
sectors etc
R05 Situationism: When Principle of Existential
rights/duties Situationism:
conflict, the actual
situation should NO: If we take a macro
determine the view of the scenario, the
decision and rights of certain
judgment but one manufacturer’s in USA
must own the act were affected but also the
and its duty or the action taken by
consequences. US government has been
affecting many other
businesses even more
detrimentally not only in
US but also across the
world. So, it is definitely a
situation of conflict but
USA is not letting the
Principle of Deontological Justice
among the marginalized?
NO: The trade war is not going to
Safeguard economic and social
rights and duties of the
marginalized. Moreover, China
will be extensively impacted by
the increased tariffs as these
would render the companies
uncompetitive against the US
manufacturers and will lead to a
lot of job loss, which will impact
the marginalized and poor even
more.
Principle of Deontological Justice
among all the corporate
executives:
No, to the extent the trade war
will cost the Chinese companies
and the executive dearly.
Principle of Existential
Situationism:
No : The situation have been
conflicting for China as well but
they have not taken responsibility
for their actions. Though China’s
position in the trade war has been
relatively weak as compared to
USA, neither of the two has taken
responsibility of the actions.
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 situation take control but
rather trying to control the
situation to play it as per its
own terms.
R06 Existentialism: Principle of Existentialism: Principle of Existentialism:
When amidst
uncertainty, risk and YES: Since the actions YES : Since China’s success till
ambiguity, right or taken by USA has been due now has occurred because of the
wrong, truth or to the long run trade deficit
risk and the indomitable passion
falsehood, and good it has with China, it is and robust investment that the
or evil cannot be unclear to distinguish country has made in improving
clearly between the good and bad. its economy through creativity
distinguished, then and innovation, it is very difficult
act in the midst of to distinguish all its actions
doubt. between good and bad. But
partly, the allegations of copy
right infringements, IP violations
which are proven against China,
can be trademarked as wrong.
R07 Legalism: Compliance to legitimately Compliance to legitimately
Legitimacy of promulgated WTO laws and promulgated WTO laws and
government laws ordinances? ordinances?
and industry
ordinances NO, USA’s action are NO, China’s action which had
completely against the Free been root cause to the impending
Economic Capitalist system trade war also amounted to trade
policy propagated by WTO. violations in terms of
infringement of copyrights and IP
Violations. Hence in terms of
compliance of legitimacy
centering the unit of analysis as
WTO, both the parties have
violated laws.
R08 Contractualism: Compliance to freely agreed Compliance to freely agreed on
Binding capacity of on contracts? contracts to help the non-
freely agreed on superrich?
contracts. NO: USA’s actions are
completely not binding to YES: China’s policies are
the contract of free trade compliant to the unsaid
agreement of trade atleast in the
perspective of US China trade
scenario
R09 Parenesis: A Code Is the trade war ruled by Is the trade war ruled by credible
of ethics that credible and valid industry and valid industry and corporate
counsels and exhorts and corporate ethical codes ethical codes of conduct?
action. The of conduct? NO: The trade war is not ruled by
obligation is the corporate ethics of conduct
parenetic or NO: The trade war is not
hortatory. ruled by the corporate
ethics of conduct.

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 b) Applying Teleological Justice Rules to US China Trade War
Justice Ethical Theory of Ethical Rule based on the Ethical Theory of Teleological
Rules Teleological Justice Justice:
Did the US China Trade
War treat USA by:
R10 Hedonism: Principle of Universal
Satisfaction and Hedonism: Did US China
Pleasure of all Trade war promote
(Jeremy Bentham) happiness and satisfaction
of all?
NO: This cannot be
considered to be hedonist as imposed by the USA are going to
many sectors ranging from
automotives, chemicals,
consumer products, nuclear
fuels, machinery sector are
heavily dependent on
Chinese imports and are
few of the worst impacted
R11a Utilitarianism (J. S. Principle of utility-
Mill): Maximize maximization of the
utility of all greatest number fulfilled?
NO: The facts states that the by the impact of trade war and
resultant of the trade war
has higher cons than there
are pros. Also the
advantages are myopic.
R11b Consequentialism Maximize Utility of good
(E. Anscombe 1920- Consequences to all?
2001): Maximally
reduce harmful NO: unless a proper
consequences to all. dialogue and
communication is
established between the two
associated parties, the
extension of war is only
detrimental and cannot
reduce the harmful
consequences though some
advantage can be observed
in case of USA in short
term.
R12 Eudemonism Principle of happiness of
(Aristotle): Principle the maximum fulfilled?
of happiness of the
maximum
Did the US China Trade War
treat China by:
Principle of Universal Hedonism:
Did US China Trade war promote
happiness and satisfaction of all?
NO: From the facts, its in
complete contradiction to the
facts as the increased tariffs
badly impact the export
dependent China.
Principle of utility-maximization
of the greatest number fulfilled?
NO: China will be worst affected
there is no utility maximization
involved in its case.
Maximize Utility of good
Consequences to all?
NO: unless a proper dialogue and
communication is established
between the two associated
parties, the extension of war is
only detrimental and cannot
reduce the harmful consequences.
Though the step taken by China
to take diplomatic actions to
resolve the present situation in
G20 summit is a more matured
way of handling the situation
without further extending the
issue.
Principle of happiness of the
maximum fulfilled?
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 NO: The effects of trade NO: The effects of trade war is
war is detrimental and detrimental and cannot result into
cannot result into prosperity prosperity of both the economies
of both the economies

c)Assessing the US-China Trade War: Based on Distributive Justice Ethical Theories

Distri- Ethical Ethical Rule based on the Ethical Theory of Distributive Justice:
butive Theory of Did the US China Trade War treat Did the US China Trade War
Justice Distributive USA by : treat China by :
Rules Justice (DJ)
R13 Formal Aristotle’s Canon of Equality? Aristotle’s Canon of Equality:?
Justice:
Egalitarianism No. The decisions are mostly No. The decisions are mostly
protectionist and smoothening for retaliatory and Chinese
some particular sectors. Majority economy will presumably be the
are worse off. most affected out of the two.
R14 Socialist The Canon of Need. The Canon of Need.
Justice
No, the decision taken is not No, the decision taken is not
paramount to social justice and is paramount to social justice and
not justified. The USA is also is not justified, especially for
going to face repercussions Chinese Economy as there is
amounting to job losses, higher going to be repercussions in
inflation, ballooning of prices. terms of job losses and several
macro-economic factors are
going to get affected as the
economy is mostly export
dependent
R15 Naturalist No, the naturalist justice suggests No, the naturalist justice
Justice: Only natural laws prevailing the order. suggests natural laws prevailing
natural justice In this case, this is an artificially the order. In this case, this is an
and laws created turbulence which is artificially created turbulence
prevail in adversely affecting both the which is adversely affecting
world economies both the economies
R16 Retributive The Canon of Effort: The Canon of Effort :
Justice : Yes, retributive justice has been Yes, retributive justice has been
Punishment of served. served.
offenders
rather than on
rehabilitation

R17 Capitalist The Canon of Productivity: The Canon of Productivity:

Justice :
Justice No : This cannot be called as No : This cannot be called as
distributed capitalist justice. It is more of a capitalist justice. The justice
according to protectionism based justice which served is more anti-capitalist
market forces is anti-capitalist. and against the norm of market
forces.

12
R18 Libertarian The Canon of Social Utility: The Canon of Social Utility:
Justice
No, if social value is of every No, as the social value is going
stakeholder associated is taken into to get deteriorated in future.
account.
R19 Libertarian The Canon of Supply-demand: The Canon of Supply-demand:
Justice
No, as the actions taken does not No
ensure market driven or supply-
demand based distribution of
justice
R20 Individual Rescher’s Canon of Legitimate Rescher’s Canon of Legitimate
Justice : Claims: The level of legitimate Claims: The level of legitimate
Placing claims of the USA? claims of China?
individual as
the center Yes, to an extent this can be No, in case of China, this cannot
point of considered that individual justice be considered as individual
philosophy is served, if American economy is justice, if the unit of analysis is
concerned. China

R21 Fair Rawls’ Equality Principle: Did Rawls’ Equality Principle: Did
Opportunist impact of US China Trade war impact of US China Trade war
Justice offered equal opportunity to all? offered equal opportunity to all?

No.
R22 Libertarian Rawls’ Difference Principle:
Egalitarian
Justice NO. The actions taken by the
USA is not justified in the
backdrop of US-China Trade war
as per Rawls’ Difference Principle
as it leads to inequality in
distribution but at the cost of
impacting others, even those who
are not in well-off positions
through job losses and inflation
R23 Libertarian Nozick’s Principle of Distributive
Justice Justice: Principle of Justice in
acquisition, in transfer, in
rectification of justice
.Not Applicable to US China
Trade War
R24 Non- Principle of Strict Liability:
malfeasance Imposition of liability on China
Justice without finding a fault
No.
Rawls’ Difference Principle:
NO. This is because the actions
taken in the backdrop of US-
China Trade war is not justified
as per Rawls’ Difference
Principle as it leads to inequality
in distribution but at the cost of
impacting others, even those
who are not in well-off positions
through job losses and inflation
and reduced growth in
economy.
Nozick’s Principle of
Distributive Justice: Principle of
Justice in acquisition, in
transfer, in rectification of
justice
.Not Applicable to US China
Trade War
Principle of Strict Liability:
Imposition of liability on USA
without finding a fault

13
 No, this cannot be said as China
definitely has faults and has been
found to violate WTO laws and
regulations. Hence the imposition
of strict liability is justified in this
case.
R25 Preemptive Principle of Preventive Justice:
Justice Preventing all evil?
No, this cannot be considered as
preventive justice in part of USA.
This is more of a reactive justice
which the US government is trying
to achieve through those
impositions
R26 Protective Principle of Protective Justice:
Justice
Yes. This can be considered as
protective justice given the
uncompetitive market conditions,
which were faced by US
Manufacturers.
R27 Procedural Principle of Procedural Justice and
Justice; Corrective Justice: Has corrective
Corrective justice been served ?
Justice
Yes, considering US government
as the Unit of Analysis, this can be
considered as corrective justice.
But the future repercussions on the
economy due to such protectionist
measures are going to be huge
R28 Beneficent Principle of Beneficent Justice: Is
Justice enabling the US-China trade war
an effort to balance the benefits
and risks/harms ?
No, the risks are more than the
benefits
Yes, this cannot be said as USA
before the incidence of US-
China trade war has not done
any actions violating the
regulations followed by the laws
set on this regards discernably.
Hence keeping the USA as unit
of analysis, we can say that they
strict liability cannot be imposed
on USA for pre-trade war
scenarios.
Principle of Preventive Justice:
Preventing all evil?
No, this cannot be considered as
preventive justice in part of
China. This is because the
actions are mostly retaliatory.
Principle of Protective Justice:
Yes. This can be considered as
protective justice given the tariff
imposed by USA. But more than
aggression, it is type to follow a
balanced approach with some
delay in actions. Archetype 7 of
System Thinking should be
executed by China under such
prevailing conditions.
Principle of Procedural Justice
and Corrective Justice: Has
corrective justice been served ?
No.
Principle of Beneficent Justice:
Is enabling the US-China trade
war an effort to balance the
benefits and risks/harms ?
No, the risks are more than the
benefits
14
Q7. This is Executive Exercise AOL6. Given your approach in questions 1-6, and based
on Chapter 15, frame at least five ethical and moral questions regarding the market
event chosen and respond to them. For illustrations on types of questions, see under
each of the three Cases introduced at the beginning of Chapter 15.
Major Contributor: Amit Jash – G19055
Question 1
While campaigning for the Republican Party's presidential nomination on 2nd May 2016,
Mr. Donald Trump said, "We can't continue to allow China to steal our country, and that's
what they are doing. It's the greatest theft in the history of the world." How far is this
statement correct on ethical and moral grounds?
Answer:
US had earlier accused China of stealing sensitive military secrets, such as technology on
Lockheed Martin's stealth F-35 and F-22 fighter jets. As per the US, China's intellectual theft
has cost the GDP of US something upwards of $600 billion a year. Another instance was
when Motorola had 80 percent of cell towers in the world and networks to run those cell
towers in the year 1997 and was a $17 billion company. Then they did a deal with Huawei,
and Huawei stole their technology and sold it subsidized to the Chinese government. In 2011,
it was sold to Nokia for $900 million. As a result, the US lost 50,000 jobs, and it caused a
massive dent in their GDP. So, there are many instances where China has taken wrongful
advantage of US technologies and intellectual property (IP), which are both ethically and
morally wrong. So, the statement made by Mr. Donald Trump is right, and the US has the
full right to act against China. However imposing tariff is not a correct solution which has
been discussed in the further questions.

Question 2
Is it justified for India to take advantage of the US-China trade war? How right or wrong will
it be based on ethical and moral grounds?
Answer:
According to the State Bank of India Ecowrap report, India's exports to China post the trade
war, have grown much faster than that to the US. "Looking at the products on which China
and USA have imposed tariffs on each other, India has made modest gains in capturing such
market," the report said. It also means that India has benefited from the US-China trade war
by exporting more to China like plastic, cotton, inorganic chemicals, and fish. The primary
aim of the trade war is protectionism in which one country raises tariffs and other barriers for
other countries. This is done to reduce the trade deficit and to shield the domestic businesses
and jobs from foreign competition. It provides advantages to local companies. So, if India is
taking advantage of this Trade War to improve its international market gain, which overall
increases the overall GDP of the country, it is both ethically and morally right. Afterall India
is not breaking any rules of WTO and at the same time improving its business relationships
with both the countries.

Question 3
Reducing the US-China trade deficit through the imposition of tariffs on Chinese exports to
the US had retaliatory tariffs by China. Is Tit for tat strategy a correct solution to this
problem?
Answer:
US-China trade relationship is asymmetrical, in which China's exports exceedingly more
than its imports from the US. It makes no sense for China to try to match the US tariff for

15
tariffs. China mostly imports raw materials, and products like soybeans and slapping tariffs
on these products could only raise import costs, with zero benefits to the Chinese economy.
China needs to import soybeans irrespective of the price, and Americans grower charge less
than that of the Brazilian counterparts. Switching to Brazil will increase the cost of the
soybean. Similarly, imposing tariffs on Boeing planes will lead the Airbus to charge more
prices. China also imports medical devices from GE, and this can’t be substituted no matter
what tariffs are getting imposed. So, Tit for tat strategy is not going to help here for China
and in general, Tit for tat strategy is detrimental for any global trade.

Question 4
Is it morally justified for two such big economies to continue the trade war for such a long
period when it is already showing its drastic effect on the world economy (esp. on European
Markets)?
Answer:
A trade war would cause severe damage to the global economy as protectionist actions
escalate. Countries imposing tariffs and countries facing tariffs would experience losses in
economic welfare, while the countries on the sidelines would suffer collateral damage. There
are no real winners in the US-China trade war. Both the US and China are facing declines in
their exports and GDP growth. Due to this protectionism scenario, the level of global GDP
has reduced to 0.8% in 2019 and is expected to decrease to 1.4% in 2020. In Europe, the
direct effects of US-China trade friction are getting felt in sectors with medium and high
technological content like transport equipment, motor vehicles, pharmaceuticals. So, it is not
morally justified for two such big economies to continue the trade war for such an extended
period especially in a scenario where it is affecting the global economy, and they need to
come up with a solution from bilateral talks.

Question 5
What role can WTO play here to solve this trade war issue on ethical grounds?
Answer:
World Trade Organization should play the role of an umpire to solve this trade dispute issue.
On ethical grounds. As of now, unfortunately, WTO has been dysfunctional on this matter,
but it is trying its best to settle the situation, but it would require political will. President
Trump threatened to pull the US out of the World Trade Organization (WTO). China has
complained against the United States at the World Trade Organization over US import
duties. Under WTO rules, Washington has 60 days to try to settle the latest dispute. Then
China could ask the WTO to adjudicate, a process that would take several years. It could end
with China gaining WTO approval to take trade sanctions if the United States is found to
have broken the rules. The World Trade Organization has said some US tariffs on Chinese
goods do not comply with its regulations. And, China has imposed tariffs on US goods
imported to China without WTO's approval. So, WTO should make sure that both the
economies should follow the rule provided by WTO strictly and should get the necessary
consent before imposing tariffs. Strict action needs to be taken against any country violating
the rules as the trade between two countries should follow the rules provided by an external
source like WTO.

8. This is Executive Exercise AOL7. Apply critical thinking and LEMS to the phenomena (see
Chapter 13): Study its legal (e.g., approval, legitimacy, license, safety, vigilance, security,
liability, quality, …), ethical (is it the right thing, economically justifiable, due-diligence, right
trade-offs, socially desirable, form versus function, nationally benefiting, ecologically sound,
sustainability-wise planetary and cosmic, ethical audit, …?), moral (is it doing the right thing
rightly, in the right time, right place, right people, highest number of stakeholders, with right

16
moral principles, right moral standards, right moral categorical imperatives, moral audit, …?)
and spiritual (Is it doing right thing, rightly and for the right reasons and intentions,
motivations and aspirations, right spirit of dharma, spiritual audit, …?
Major Contributor: Niharika Roy G19076

Answer:
We have addressed the problem of Global Trade War by focussing on ethical, legal, moral and
spiritual issues.

Ethical:
Teleological Analysis- Trade war is a moral action if it produces more benefits than the cost involved
for the most significant number of stakeholders. The impact on businesses judges the severity of trade
war. Major automobile companies in the US have estimated a decline in their profits for this financial
year. If this trade war continues, then according to estimates, it could cause a total job loss of 700000
in China and a total job loss of 400000 in the US. Volvo has announced that there will be a gradual
decline in their hiring this year, owing to weak profits because of increased prices of automobile
components. According to the estimates of Morgan Stanley, if this trade war continues and the US
imposes 25% tariff on all the goods imported, the Global Gross Domestic Product would decline by
0.81 percentage points this year. Bank of England has estimated that if every country imposes a tariff
of 10% on every other country, Global Gross Domestic Product will decline by 2.5 per cent over the
next three years.
Based on Teleological reasoning, which evaluates the cost versus benefit of the actions performed,
the trade war seems unfair. The benefits which Trump proposed was myopic. He propagated to make
America great again. This agenda brought him to power, and if we evaluate the benefits sought
against the price which the whole world has to pay, this looks very myopic.

Deontological Analysis: Trade war is moral if it upholds the rights of the powerless much more than
it supports the rights of the powerful among the most significant number of stakeholders. Deontology,
which means rights and duties, can be used to judge the rightness and wrongness of the decisions
taken by the US and China. According to the principle of Universalizability, the act should be the
norm for all person equally. But in the case of imposition of tariffs by the US, this principle seems to
be violated. The US has exempted countries like Australia with which it has a trade surplus. It may
cite those nations as its allies, but the jeopardy appears when it imposes tariffs against imports from
Canada and Mexico. US has been in the North American Free Trade Agreement (NAFTA) with these
nations, and they were its strategic partners.
The issue should be judged by the perspective of powerless consumers, farmers, small businesses and
powerless third world countries. Developing Asian countries are the primary hub for manufacturing
activities. The imports on aluminium, steel, farm products etc. is going to impact their economies
severely. China can start dumping goods in ASEAN countries and their allies. It has invested a lot in
infrastructure development in countries like Nepal, Sri Lanka, Maldives, and Myanmar. Dumping in
these countries would prove detrimental to the manufacturing sector.

Virtue-Ethics Based Analysis: Virtue ethics is a framework that focuses on the character of the moral
agent rather than on the rightness of an action. The relationship of the US with other nations has
deteriorated after Trump became the president of the US. He pulled out of the Trans-Pacific
Partnership (TPP) and also pressurized Canada and Mexico to renegotiate the terms of the North
American Free Trade Agreement (NAFTA). The emotional sensitiveness towards other nations is
lagging. After Donald Trump became the president of the US, their vision has become myopic, and
the US has started withdrawing from responsibilities on major forums like the Paris Climate Change
Agreement. Being the most powerful nation in the world, it is the responsibility of the US to play the
dominant role.
Similarly, China forges relationships with other nations to advance their growth. Their currency
devaluation shows insensitiveness. Therefore, from the perspective of virtue-ethics based analysis,
both the US and China are the culprit.

17
Trust-Ethics Based Analysis: Among virtues, one of the paramount importance is the executive
virtue of trust and the practice of building trusting relations among critical stakeholders. The US has
lost faith in most of its allies. European Union, Canada, Norway, Switzerland, and Mexico were its
allies and trade partners before this trade war. Since the US started imposing tariffs, they didn't
engage in any dialogue and appealed in the World Trade Organization. Lack of mutual trust and
trusting relations can precipitate tragedy; the converse is also true.

Legal:
The law permits legal matters. The code of law is for citizens, corporation, and countries. In this case,
the companies follow the rules and regulations set by the countries regardless of the ethicality and
morality of their decisions. Governments may also establish rules which may impact the profitability
of some companies and may affect others adversely.
Similarly, countries are under the purview of global bodies. In the field of trade, the World Trade
Organization has set regulations for free and fair trade. However, their rules and regulations have
always been biased towards powerful nations such as the US. Considering the free and fair trade
advocated by the World Trade Organization, the US imposing tariff seems unfair from the legal
perspective.
However, legal issues can only be the starting point for analysis. There are several inherent flaws in
the legal aspect of the study. The authority responsible for judging the legality may be biased and
give unfavourable support to one party. It is evident in the relationship between the US and the World
Trade Organization. Though the US and China have agreed to the laws of WTO, they sparked this
Global Tariff war.
The second flaw in this aspect of the analysis is outdated laws. The global situation is changing fast.
If the rules and regulations are not updated to align with the contemporary situation, the legal aspect
becomes irrelevant. In the current scenario, the cyber world and digitization are gaining prominence.
The trade laws must cover these trends in its ambit.
The third flaw is "one size doesn't fit all". If the problem is new, then deciding based on existing laws
may prove problematic. Most of the decisions in the legal domain are taken by referring to the
historical data.

Moral:
The difference between morality and ethicality lies in their source. Ethics refers to the rules provided
by the external source, whereas morals refer to an individual's principles regarding right and wrong.
In this case, ignoring the complaints of powerless countries smacks of might and ego of the US and
China. Not taking responsibility for the severe impacts due to their actions is a significant omission
on the part of the US and China. Mere growth-expansion strategy for the US and China at the expense
of other nations, consumers, farmers, and corporations is not morality. Both the countries have been
relentlessly taking actions without conducting any good audit.

Spiritual:
In the current scenario, spirituality is gaining a popular place among business leaders and political
leaders. Spiritual Quotient is one of the four pillars of intelligence and is the most fundamental
because it is the source of guidance for the other three bits of intelligence.
The trade war initiated by the powerful nations is not aligned with the spirit of dharma. It is the
"dharma" of the developed nations to support and create an environment for prosperity and growth in
the developing nations. We must remember that developed countries have achieved success at the
expense of many under-developed nations. Slavery and pollution highlight the cost that under-
developed nations have paid for the development of most powerful nations. Therefore, it is the
spiritual duty of those nations to work for the greater common good.
It can be said that developed countries have the right to give priority to their people. Trump aspired to
"Make America great again", but there arise questions. Is he spiritually justified? Is he free of
malaises towards others? Is he concerned about the largest number of stakeholders?

To identify the issues in Global Trade war, we have applied critical thinking to this problem.

18
Critical thinking is a discipline that questions and challenges "our prevailing system of management"
and its assumptions and generalizations. In the process, it is an attempt to transforming the prevailing
system of management. For applying the concept of critical thinking in the given case, we need to
identify the critical subjects, objects, properties, and events first.
Subjects: US, China, trading partners, consumers, corporations, workers and the World Trade
Organization.

Objects: India, Canada, Mexico, European Union, third world countries, automobile companies,
companies in the electronics sector, farmers.

Properties: The regulations set by the World Trade Organization regarding free and fair trade.
Events: This trade war started in January 2018 when the US imposed a tariff of 30% on the solar
panels and washing machines imported from China and South Korea. Later the US imposed a tariff of
10% of aluminium and 25% on imported steel. China retaliated by imposing a tariff on meat products,
pork, grease, asphalt, and soybean imported from the US.
The US not only imposed a tariff on goods imported from China but also from the European Union,
Mexico, Canada, and several other countries. These countries retaliated by imposing tariffs on goods
imported from the US. This escalated the trade war at the global level.

The concept of distributive justice established equal sharing of burdens and benefits among all the
shareholders. Both the deontological and teleological aspects of the actions and consequences of the
nations involved in trade war need to be considered. This is a major concept within political
philosophy. In this answer along with the aspects of equitable distribution for all the stakeholder,
roles
Considering the series of events that took place after Trump announced 30% tariff on imported solar
panels and washing machines from China, we have analyzed the case on the basis of some questions
concerning the distributive justice:

Q1. How would you resolve the problem of Global Trade war from a corrective justice mandate?
Ans. To resolve this problem, we can apply R27, which states that executive action is ethical if it at
least sets up just procedures to treat all people fairly (Procedural Justice). Such an action may not be
necessarily moral. The procedural justice is a subset of corrective justice, and corrective justice is a
subset of distributive justice. The comprehensive measures taken for corrective justice may not be
moral. The outcome should safeguard the principle of non-malfeasance.
In this situation, the corrective justice mandate can be ensured by following the procedures drawn by
World Trade Organization (WTO). Earlier eight nations complained against WTO when Trump had
announced initial tariffs of 10% on aluminium and 25% on steel imports. Among these eight nations
were- Canada, Mexico, Norway, Switzerland, India, Australia, China, and Russia. World Trade
Organization has not been tough against the powerful nations like China and the US, which have
sparked this Global Trade War. In the current situation, there is a need for the World Trade
Organization to step forward and offer to mediate between the US and China. The procedure offered
by the European Union for arriving at a conclusion for this issue is logical. They have proposed to
take the matter to the World Trade Organization and let them decide on this matter.
World Trade Organization should take a tough stance on this issue and look at the broader good
rather than being dominated by few nations.

Q2. How would you resolve the problem of Global Trade war from a distributive justice perspective?
Which distributive justice moral rule applies best, and why?
Ans. Firstly, we are applying R13, which states that "An executive action is ethical if it at least treats
all equal stakeholders equally, and unequal unequally (egalitarian justice)."
The current economic environment is for startups to flourish. But in a situation of Global Trade war,
most of the companies have anticipated a loss. For instance, General Motors has expected its cost to
go up by $ 1 billion in the year 2018. Most of the automobile companies, food processing companies,
companies operating in the domain of poultry have estimated their profits to decline. As the trade war
has increased the cost of capital and cost of other resources it has become difficult for startups and

19
small businesses to flourish in this turbulent market. Big corporations have the financial prowess to
shift their operations to nations where they will incur less cost, but smaller companies will face the
heat. If we take the perspectives of countries, third world countries are going to be worst impacted if
this trade war continues. China derives 30% of its exported goods from third world countries. If
China's exports decline, then it will prove perilous for their economies.
In this case, R19, which states that executive action is ethical if it at least treats all stakeholders
according to each one's market-exchange value can also be applied. This rule is based on the Canon
of Supply Demand that distributes wealth according to the market evaluation of one's socially useful
contributions. The imposition of tariff violates the libertarian free-market rule. It is equivalent to
penalize the capabilities of countries to produce at lower prices.

Q3. The US is a developed economy now and is not expected to be a manufacturing hub at this stage
of its development. Therefore, is it ethically justified to try to become a manufacturing hub by
inflicting losses to the third world nations, which are on the path of development, and hence attracts
the majority of manufacturing industries?
Ans. As the US is a developed economy and dollar is stronger compared to most currencies in the
world, it is difficult for it to attract manufacturing companies. Manufacturing in the US proves costly
for most countries, whereas China has lower standards of living compared to the US and other
developed economies. The labour is cheaply available there, which makes manufacturing cheaper in
China. Therefore, trying to achieve something at the cost of companies, workers, and consumers
doesn't seem ethically correct on the US's part.
If we see this problem from the perspective of the US, then the objective of attracting and retaining
more manufacturing jobs seems. The US also wants to counter the IPR issue and the issue of trade
deficit with China, but the method adopted by the US is questionable.

Q4. Donald Trump promised "America First" during his election campaign. Isn't imposing a tariff to
protect jobs for American morally and ethically justified?
Ans. Donald Trump should take measures to protect jobs for Americans. However, the tariff war
seems to be an instrument to threaten other countries to accept the demands of the US. Trump had
been demanding the release of a pastor Andrew Brunson, who was jailed by the Turkish government
for being involved in a coup in 2016 to overthrow the government. Turkey denied his request and the
US retaliated by doubling the tariff on aluminium and steel imported from Turkey. This caused
depreciation of Turkish Lira and raised the possibility of another Eurozone crisis. This also affected
the economy of Turkey badly.

Q5. China is known to dump goods in other countries. It is also accused of Intellectual Property
Rights. Shouldn't they consider the implications of their actions? Is their myopic vision affecting the
manufacturing sectors in many countries?
Ans. China takes advantage of its lower cost of production. It is the largest manufacturer of raw steel.
The companies in China produce more than the actual annual consumption in China, and therefore,
they dump in other nations. This is a major reason that is inhibiting the growth of several industries in
other developing nations. China is also a master of imitating products manufactured in the US and
Europe. Later they sell these products at lower prices than what is charged by their original
manufacturers. This is unfair to those companies. Therefore, China is equally culpable in causing
distributive injustice. The issue of a trade war should be looked not just from the contemporary
perspective of what sanctions countries have imposed over others, but also look at the practices they
have been following so far. Identification of the relationship between the sequences of actions, the
culprits and the victims is important to get a holistic view of this issue and arrive at the solution
without any biases and presumptions.

20