IBUS Ch 7 SB
The infant industry argument has potential negative consequences, including ______.
causing infant industries to lack efficiency
The infant industry argument for trade intervention states that developing countries need to support new industries until they are strong enough to ______.
compete globally
In 2003, Japan decided to ban imports of beef from America because of the threat of mad cow disease. This ban was implemented to directly protect ______.
consumers
Countries can use ______ duties on an offending import to offset dumping.
countervailing
For national security reasons, the ______ industry is often protected by the national government.
defense
The purpose of the Smoot-Hawley Act, passed by the US Congress in 1930, was to ______.
deter rising unemployment
At the end of the fiscal year, Jack's company sells their bicycles in Thailand at below what it costs to produce the bikes in order to unload excess inventory. This is an example of ______.
dumping
When manufacturers export a product to another country at a price either below the price charged in its home market or below its cost of production, as a way to get rid of excess product, it is called ______.
dumping
Based on the theories of Ricardo and Smith, the consequences of free trade include Blank______ economic gains in terms of economic growth and wealth creation.
dynamic
Strategic trade policy suggests a(n) ______ justification for government intervention in trade.
economic
One way the GATT hoped to achieve its objective was by ______.
eliminating tariffs
The WTO is more successful than GATT because the WTO has ______ mechanisms that make it more effective.
enforcement
What can a country use to counteract a country that uses subsidies to support an industry?
establish anti-dumping regulations
Goods that are taxed as they ship out of a country have a(n) ______ tariff.
export
In the past, China enacted a(n) ______ on grain to make sure there was a sufficient supply within the nation.
export tariff
Quota rent provides producers with ______.
extra profit
The strategic trade policy argument may look good in theory, but in practice it may be unworkable. As a result, the case for ______ trade may come to the forefront.
free
A consequence of subsidies paid to companies during difficult economic times is ______.
giving recipients an unfair competitive advantage
During the 1980s, the trend was for ______ protectionism around the world.
greater
Political opposition to the WTO has been ______ in many nations.
growing
Tariff rates on agricultural products tend to be ______ tariff rates on a manufactured good.
higher than
A(n) ______ 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.
import quota
A tariff is a tax levied on ______.
imports or exports
According to a study cited in the text, if advanced countries stopped providing subsidies to farmers, global trade in agricultural products would ______.
increase by 50%
When governments intervene in foreign trade, they often claim they are protecting ______ from unfair foreign competition.
industries
The oldest argument for government intervention in trade where developing nations must protect their domestic industries until they are ready to compete globally is the ______ argument.
infant industry
If a country does not have protections in place for ______ property, it is likely that businesses will be less inclined to pursue innovation.
intellectual
As noted in the text, in the past, the US government has tried to convince the Chinese government to enforce its ______ laws by threatening punitive trade sanctions.
intellectual property
Under the umbrella of GATT, the two sister bodies of GATS and TRIPS focus on which two issues?
intellectual property services
Krugman argues that strategic trade policy should not be embraced because many times governments are influenced by politically important ______ to intervene in the economy.
interest groups
Evan works in a country in which the government has stated that 45% of all goods must be produced domestically. What type of requirement does this country have in place?
local content requirement
In order to win a contract from Mexico, QVB Autos Manufacturing must make 65% of the component parts for their automobiles in Mexico. This is an example of a ______.
local content requirement
As a result of the Doha Round, ______ countries are entering into multilateral and bilateral trade agreements.
more
In response to the apparent failure of the current Doha Round, many nations have implemented ______.
multilateral trade agreements
Governments occasionally protect certain industries, like defense-related industries, for ______ reasons.
national security
The WTO will continue to work to ______ markets because this will lead to an increase in world income, including an increase in income to developing nations.
open
Developed countries have imposed local content requirements in order to ______.
protect local jobs from foreign competition
What is considered the most common political argument for government intervention in foreign trade?
protecting jobs and industries
Rising pressures for ______ lead to ongoing GATT negotiations via the Uruguay Round.
protectionism
Import quotas are based on the ______ of a good.
quantity
When supply of a product is artificially limited by an import quota, a producer receives extra profit that is known as ______.
quota rent
What is NOT included in the Doha agenda?
raising tariffs on industrial services
Member nations hoped that the WTO would be a facilitator of future trade deals especially in the area of ______.
services
The Uruguay Round extended trading policy to cover ______.
services
A tax on imports that is levied as a fixed charge per unit of an imported good is called a(n) ______ tariff.
specific
According to strategic trade policy, governments should use ______ to support development work aimed at commercializing target technologies.
subsidies
An advocate of the strategic trade policy argument would agree that a government should use ______ to help promising businesses that are active in emerging industries.
subsidies
What are three main instruments of trade policy?
subsidies import quotas voluntary export restraints
When the US government "bailed out" the automobile industry starting in 2009 by loaning money to keep General Motors and other automakers in business, it was an example of a(n) ______.
subsidy
According to the text, reducing many of the tariffs that are still in existence will lead to ______.
substantial gains in global trade
Taxes placed on imports to protect domestic producers from foreign competition and to produce revenue for the government are ______.
tariffs
Which instrument of trade policy has been in use the longest?
tariffs
Protectionism measures in the agriculture industry encourage the overproduction of products which are then typically purchased by ______.
the government
Subsidies are a form of payment that is provided by ______.
the government
A loophole that many countries are exploiting to pursue protectionism dealing with antidumping is ______.
the vague definition of dumping
The main objective of GATT was to liberalize ______ restrictions.
trade
In 2003, Libya announced it would terminate a program to build nuclear weapons. This is thought to be a result of ______ placed against Libya by the United States.
trade sanctions
As the text notes, unrestricted free trade is impossible if there is a lack of ______ between nations.
trust
When considering the benefit of free trade in neighboring countries, one government might favor lowering trade barriers but won't do it because of a lack of ______ in the other nation.
trust
By limiting or banning certain products through regulations, governments can protect consumers from products that are ______.
unsafe
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) ______.
voluntary export restraint
Brazil was concerned about a surge of vehicles coming in from Mexico and considered protectionist measures. When Mexico responded by limiting the shipments of vehicles to Brazil it was using a(n) ______.
voluntary export restraint
Japan imposed a quota on auto exports into the US as a result of pressure from the American government. This action is an example of a(n) ______.
voluntary export restraint
What measure did many countries use to get around GATT regulations in the 1980s?
voluntary export restraints
Which three industries are more likely to be targeted by antidumping actions?
-Plastics -Chemicals -Basic metal
Which country was the first to officially follow a policy of free trade in the mid 1800s?
Great Britain
How do import tariffs affect the overall efficiency of the world economy?
They reduce the efficiency.
True or false: Since countries are using the WTO to resolve disputes, it is an indication that the organization is successful in this responsibility.
True
The net effect of high tariff barriers and subsidies on agricultural products is to ______ prices to consumers.
raise
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
Ad valorem tariffs are based on the ______ of a product.
value
The ultimate goal of the WTO is to reduce tariff rates to ______.
zero
What are two reasons why countries should remain focused on opening markets? (Check all that apply.)
-Because of high tariff rates on imports of selected goods from developing nations into developed nations -Because average tariffs on services remains higher than on industrial goods
What are the two components of strategic trade policy?
-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 free trade?
-It protects inefficient industries. -It invites retaliation and trade wars.
With regard to strategic trade policy, what are two actions governments take in response to pressure from business firms?
-Push for more open markets and freer trade -Increased protectionism
What are two ways trade barriers hamper a firm's productive activities?
-Quotas limit the ability to serve a country from outside locales. -They raise the cost of exporting products.
What two outcomes typically occur as the result of of local content regulations?
-The restrictions on imports raise the prices of imported components which lead to higher prices for the consumer. -Local content regulations provide protection for a domestic producer.
Why would a country enact an export tariff?
-To discriminate against exports in order to guarantee a sufficient supply of a good within the country -To reduce exports from an industry sector, often for political reasons
What are the four issues considered a priority on the WTO agenda?
-antidumping policies -high tariff rates on goods and services -high level of protectionism in agriculture -lack of strong protection of intellectual property
In its first two decades, the WTO has been successful based on what two reasons?
-member countries have faith in the WTO's dispute resolution procedures. -countries involved in formal procedures for trade disputes have adopted WTO recommendations.
What are two ways a government uses intervention in trade as a foreign policy instrument?
-pressure or punish "rogue states" -grant preferential trading terms to countries it wants to build relations with
In ______ Britain withdrew from the European Union following a national referendum known as ______.
2016, Brexit
Company ABC in Scotland exports a pound of cheese to the US for $100. Based on the value of the cheese, the US places a 20% tax on it. What type of tariff is this?
Ad valorem
Which policy is intended to protect domestic producers from foreign competitors who sell goods in foreign markets below their costs of production?
Antidumping policy
How did the Chinese government respond when the U.S. government threatened to impose 100% tariffs on a range of Chinese imports unless it imposed tighter regulations on intellectual property?
China agreed to tighter intellectual property regulations.
Which two groups are negatively impacted when an import tariff is enacted? (Check all that apply.)
Consumers Foreign producers
In an attempt to bring down the Communist government in ______, the US initially maintained long-running trade sanctions against the country.
Cuba
The ______ Round started in 2001 and continues today to deal with the issues of agriculture protectionism, protection of intellectual property, and other priorities of the WTO.
Doha
What two events were cited in the text as posing a threat to the world trading system? (Check all that apply.)
Election of Donald Trump Britain's withdrawal from the European Union
True or false: Countervailing duties are placed on foreign firms to encourage them to sell products below their "fair" market value.
False
True or false: GATT has NOT recognized the infant industry argument as a legitimate reason for protectionism.
False
True or false: Strategic trade policy does not advocate for government intervention in international trade.
False
______ trade is the economic policy of not discriminating against exports to or imports from foreign countries.
Free
What were the first two industries targeted by the WTO as part of its effort to include regulations governing foreign direct investment?
Global telecommunications Financial services
Which two groups are positively impacted when an import tariff is enacted? (Check all that apply.)
Government Domestic producers
Which country is pointed to as the master of administrative trade policies?
Japan
What is likely to happen in the absence of a multilateral agreement in the international trading system?
Less innovation in the world economy
Which economist was a key figure in the early free trade movement in Great Britain?
Ricardo
Many Western countries imposed trade sanctions against ______ during the 1980s and 1990s to encourage the country to improve human rights policies.
South Africa
______ 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
______ permit a specific quantity of imported goods to enter the country under a reduced rate while those exceeding the quantity are charged at a higher rate.
Tariff rate quotas
Why do exporting countries agree to impose voluntary export restraints?
To avoid future tariffs and import quotas on their products
True or False: The United States has imposed trade sanctions on other countries in order to protect and promote human rights.
True
True or false: After analyzing current practices, it can be said that subsidies are not that successful at increasing the international competitiveness of domestic producers.
True
True or false: Governments do not always act in the national interest when intervening in the economy.
True
True or false: If Italy places a fixed charge of $5 for every unit of rice imported, that $5 is an example of a specific tariff.
True
True or false: To limit imports over quota, tariff rate quotas would be used for agricultural products to limit the amount entering a country.
True
What were two results of the Smoot-Hawley Act?
US exports declined every industry encountered tariff barriers
What organization now arbitrates trade disputes and monitors trade policies of member countries?
WTO
Krugman promoted the idea that if each country seeks to follow a strategic trade policy to protect its interests, this may lead to ______.
a trade war
Governments implement ______ trade policies that are designed to make it difficult for imports to enter a country.
administrative
Tariff rates on ______ products are generally much higher than tariffs on manufactured products or services.
agricultural
Sometimes governments pay subsidies to help companies survive challenging economic climates. In effect, these companies receive ______.
an unfair competitive advantage
Based on the economic analysis of tariffs, it can be said that they are (select two)
anti-consumer pro-producer
Sergei believes that a Japanese-based company is selling digital cameras well-below market costs in the United States and thereby gaining all of the business. He plans to report this to the Commerce Department who can examine the case based on US ______ policies.
antidumping
During the 1970s, Congress did not allow US industries to export crude oil production. This action is an example of an export ______.
ban
