Political Economy Of Chinese Auto-protection

Auto-industry is the fifth biggest industry in our country, devoting much more to the whole economy than any other industry. In 2003, China was the fourth biggest auto-producing country. Although we made a lot of achievements, we are still backward in some fields: Chaotic and small, low efficiency, low research ability, few own brands.Because of the important status of the auto industry; press after we enter WTO, someone think we should strengthen protecting our auto-industry, we should learn from political protection experience of USA and Japanese government. The others think we are now over-protecting our auto-industry, which is not good to the development of our auto-industry. High tariff and quota can only keep our auto-industry dropped behind; restricting foreign investment would widen the gap between advanced countries and China; and what' s more, high tariff lead to smuggle.So, realizing the problems and challenges, understanding the function and importance of government in auto-protection is very important and meaningful.Now, the classic international trade theories consider the free trade is the most efficient way; on the contrary, all the prevailing policies are all protecting their industries. It' s the dilemma of the classic theories.That' s because all the classic theories think that the political factors are exogenous, but the parade, political donation are the most important factors in policies decision. So only using the classic theories can not explain the prevailing policies smoothly.This thesis, using political economy, based on Grossman and Helpman's 'Trade Wars' and 'Trade Talks' model, brings the political factors into the model and analyze the process of trade policy decision to resolve the issue of auto protection and offer the government policy suggestions.