IB Chapter 7

While there were a total of 196 cases handled by GATT, records show that between 1995 and 2019, the WTO successfully handled more than _____ trade disputes.

500

What are two reasons countries should remain focused on opening markets? (Check all that apply.)

Because average tariffs on services remain higher than on industrial goods Because of high tariff rates on imports of selected goods from developing nations into developed nations

The infant industry argument has what potential negative consequence?

Causing infant industries to lack efficiency

What are three reasons that caused the global trading system erected under GATT to be strained during the 1980s and early 1990s?

Countries found ways to get around GATT regulations The persistent trade deficit in the United States The economic success of Japan

What were the first two service industries targeted by the WTO as part of its effort to include regulations governing foreign direct investment?

Financial services Global telecommunications

Which two groups are negatively impacted when an import tariff is enacted? (Check all that apply.)

Foreign producers Consumers

What are the two components of strategic trade policy? (Check all that apply.)

Governments should intervene to assist firms in overcoming barriers to entry created by foreign firms due to first-mover advantages. Governments should subsidize promising domestic firms in emerging industries.

What are two drawbacks of government intervention in the process of free trade?

It's unlikely to be well-executed. It invites retaliation and trade wars.

______ constrain a firm's ability to export its products by raising the price of the exported product, which could put the firm at a competitive disadvantage with domestic firms in that country.

Tariff barriers

What are four main instruments of trade policy?

Tariffs Antidumping duties Local content requirements Import quotas

What are two characteristics of countervailing duties?

They are a special tariff. They can be substantial and stay in place for five years.

Why do exporting countries agree to impose voluntary export restraints?

To avoid damaging tariffs and import quotas on their products

What's the main reason a country would use export tariffs?

To ensure sufficient supply of a good within the country

In what two ways can a government use intervention in trade as a foreign policy instrument? (Check all that apply.) Multiple select question.

To pressure or punish "rogue states" To grant preferential trading terms to countries it wants to build relations with

Japan imposed a limit on auto exports to the United States as a result of pressure by the U.S. government. What instrument of trade policy does this represent?

Voluntary export restraint

A country might create safety standards for certain products that other nations can't comply with. As a result, these nations can't be involved with exporting parts for those goods and trade does not exist. These safety standards are a form of _____.

administrative trade policy

Governments develop ______ policies to punish foreign companies that sell their products at below fair market value.

antidumping

Countries can use ______ duties on an offending import to offset dumping.

countervailing

The argument for strategic trade policy suggests a(n) ______ justification for government intervention in trade.

economic

If a country places a 20 percent tax on dairy products exported to other nations in order to limit exports and have sufficient supplies of dairy products for the home country, it is using a(n) ______.

export tariff

True or false: Critics say that protectionism afforded by the infant industry argument has helped eliminate inefficient industries.

false

true or false: Krugman advocates that it is logical to expect the U.S. government to ignore special-interest politics when forming policy. True false question.

false

______ trade is the economic policy of not discriminating against exports to or imports from foreign countries.

free

American car makers promote the idea that Japan makes it difficult for others to compete in the industry because the country has

implemented vehicle parts standards that no other country uses.

The United States has placed a limit on the amount of tuna in airtight containers that can be imported into this country. This is an example of a(n) _____.

import quota

The ______ argument for trade intervention states that developing countries need to support new industries until they are strong enough to compete globally.

infant industry

The oldest argument for government intervention in trade in which developing nations must protect their domestic industries until they are ready to compete globally is the ______ argument. Multiple choice question.

infant industry

The European Union's support for the Common Agricultural Policy illustrates why strategic trade policy is problematic. In this instance, the government was influenced by ______ to the detriment of consumers.

interest groups

the European Union's support for the Common Agricultural Policy illustrates why strategic trade policy is problematic. In this instance, the government was influenced by ______ to the detriment of consumers.

interest groups

Export tariffs are common than import tariffs.

less

A(n) ______ states that some percentage of a good must be produced domestically.

local content requirement

in order to win a contract in Mexico, QVB Auto Manufacturing must make 65 percent of the component parts of their vehicles in Mexico. This is an example of a(n)

local content requirement.

government would impose administrative trade policies in order to Multiple choice question.

make it difficult for imports to enter a country.

Reciprocal trade agreements between two or more partners are called _____ trade agreements.

multilateral

The stalled Doha Round has caused many nations to use _____ to foster trade.

multilateral trade agreements

Developed countries use local content requirements to

protect local jobs from foreign competition.

Countries base the decision for intervention on ______ when safeguarding aerospace and semiconductor industries.

protecting national security

An import _____ is a type of trade restriction that sets a physical limit on the quantity of a product that can be imported into the country in a set period of time.

quota

Sometimes governments pay subsidies to help companies survive challenging economic climates. In effect, these companies have

received an unfair competitive advantage.

What two issues were addressed by the Uruguay Round?

reducing tariffs on manufactured goods Reducing agricultural subsidies

If we accept that the tenets of strategic trade policy are correct, then the government _____ intervene in international trade.

should

If a country assesses a fixed charge of $5 per unit of rice that's imported, it is using a(n) ______ tariff. Multiple choice question.

specific

According to strategic trade policy, governments should use ______ to support development work aimed at commercializing target technologies. Multiple choice question.

subsidies

A(n) ______ is a payment by the government to a domestic producer to help lower production costs so they are better able to compete with foreign imports. Multiple choice question.

subsidy

The nationwide company, Nightingale Health Systems, received a tax break from the government when it was faltering and ready to declare bankruptcy. This subsidy helped the company with production costs and allowed it to have a stronger presence in the competitive health industry. This tax break is a type of _____.

subsidy

Taxes placed on imports to protect domestic producers from foreign competition and to produce revenue for the government are called

tariffs

What is considered the simplest instrument of trade policy?

tariffs

What is a bound tariff rate?

the highest tariff rate that can be charged

True or False: The United States has imposed trade sanctions on other countries as a way to protect and promote human rights in those nations.

true

Paul Krugman would agree that while strategic trade policy seems appealing in theory, in reality, strategic trade policy is _____.

unworkable

The trade sanctions on Iraq that were imposed in 1991 after the Gulf War are an example of

using trade policy to punish rogue states.

A self-imposed trade restriction on the quantity of a good that the exporting country is allowed to export to another country is called a(n) Multiple choice question.

voluntary export restraint.

In 2012, Brazil was concerned about a surge of vehicles coming in from Mexico and considering protectionist measures. Mexico decided to be proactive and imposed _____ to limit the shipments of vehicles to Brazil.

voluntary export restraints

What group worked to extend GATT rules to provide enhanced protection for intellectual property and significantly reduce barriers on trade in textiles?

the Uruguay Round

Which two groups are positively impacted when an import tariff is enacted? (Check all that apply.)

Government Domestic producers

What are three trade barriers that can constrain a firm's ability to disperse productive activities?

Tariffs Quotas Local content regulations

A(n)______ tariff is a tax that is levied on a good on the basis of its value, not on the basis of its weight or quantity. Multiple choice question.

ad valorem