International Business Chapter 7
Which three industries are frequently targeted by antidumping actions? (Check all that apply.)
Chemicals Plastics Basic metal
As noted in the text, the US government used the threat of trade sanctions to try to convince the _____ government to enforce its intellectual property laws since massive copyright infringements in that country have cost US companies millions of dollars in lost revenue.
Chinese
Company ABC in Scotland exports a pound of cheese to the US for $100. The US places a 9% tax on the cheese as a proportion of its value. What type of tariff is this?
Ad valorem
The infant industry argument has what potential negative consequence?
causing infant industries to lack efficiency.
Countries can use ______ duties on an offending import to offset dumping.
countervailing
At one time, strict trade sanctions were in place between the US and Cuba as a way to _____.
create economic hardship and replace the form of government in Cuba
When the Smoot-Hawley Act was put into place it _______ as a way to protect domestic industries.
created a wall of tariff barriers.
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, it is called ______.
dumping
One benefit of free trade is that is stimulates economic growth and wealth creation. In other words, it provides _____ economic gains.
dynamic
Strategic trade policy suggests a(n) ______ justification for government intervention in trade.
economic
In 1975, Congress restricted the export of US crude oil in response to the actions taken by OPEC. This restriction is an example of which trade policy?
export ban
When a country restricts the export of a product, it is implementing a(n) _____.
export ban
If a country places a 20% 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
Member nations hoped that the WTO would do which two of the following?
facilitate future trade deals be effective at policing global trade
Global telecommunications and _____ have been targeted by the WTO as industries that need expanded trade agreements.
financial services
GATT was put into place by the US government as a way to
foster free trade.
According to ______ trade theory, in reality, strategic trade policy is unworkable.
free
A consequence of subsidies paid to companies during difficult economic times -- for example, the Japanese farm subsidies -- is
giving recipients an unfair competitive advantage.
What are the four issues currently at the forefront of the WTO agenda?
high tariffs on nonagricultural goods and services protectionism in agriculture lack of intellectual property protection antidumping policies
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
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%.
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 where developing nations must protect their domestic industries until they are ready to compete globally is the ______ argument.
infant industry
GATT negotiations continue to deal with additional issues such as (Check the three that apply.)
intellectual property. services. agricultural subsidies.
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
When governments intervene in foreign trade, they often claim they are protecting ______ from unfair foreign competition.
jobs
Country A wants to lower trade barriers with its neighbor, Country B. While both countries support free trade, they are both reluctant to lower their barriers because they are not sure the other country will reciprocate. What obstacle is preventing the advancement of free trade between these countries?
lack of trust
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% of the component parts of their vehicles in Mexico. This is an example of a
local content requirement.
Developing countries use ______ to move their manufacturing base from simply assembling component parts to the manufacturing of those parts by requiring that a specific fraction of a good be produced domestically.
local content requirements
What are four main instruments of trade policy?
local content requirements antidumping duties import quotas tariffs
A government would impose administrative trade policies in order to
make it difficult for imports to enter a country.
Governments occasionally protect certain industries, like defense-related industries, for ______ reasons.
national security
A foreign nation is concerned that all jobs in the computer manufacturing industry will be lost to another country. The government decides to step in and prevent this from happening and implements tariffs on certain imports. The leader is praised for this action and reminds voters of this during the next election. In this situation, government intervention is based on a _____ argument.
political
In what two ways can a government use intervention in trade as a foreign policy instrument? (Check all that apply.)
pressure or punish "rogue states" To grant preferential trading terms to countries it wants to build relations with
When analyzing the economic effects of import tariffs, it has been concluded that tariffs are considered anti-consumer and pro-_____.
producer
The main objective of antidumping policies is to
protect domestic producers from unfair foreign competition.
Developed countries use local content requirements to
protect local jobs from foreign competition.
Countries base the decision for intervention on ______ when protecting aerospace and semiconductor industries.
protecting national security
By threatening ______ trade sanctions, one country can convince another country to open its markets.
punitive
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
The economic benefit gained when the supply is artificially restricted by an import quota is called quota ______.
rent
GATT rules initially only dealt with trade in manufactured goods and commodities. With the increase in trade in the ______ sector, the Uruguay Round sought to establish agreements to cover this area.
service
If we accept that the tenets of strategic trade policy are correct, then the government _____ intervene in international trade.
should
A tax on imports that is specified as a fixed monetary amount per unit of import is called a(n) ______ tariff.
specific
If a country assesses a fixed charge of $5 per unit of rice that's imported, it is using a(n) ______ tariff.
specific
One consequence of free trade is higher domestic consumption and a more efficient use of resources. These would be considered _____ economic gains.
static
According to strategic trade policy, governments should use ______ to support development work aimed at commercializing target technologies.
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.
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
A tax on goods coming into or leaving a country is called a(n) ______.
tariff
What is considered the simplest instrument of trade policy?
tariffs
Taxes placed on imports to protect domestic producers from foreign competition and to produce revenue for the government are called
tariffs.
One of the greatest benefits of local content regulations for a producer is that _____,
they limit foreign competition
What's the main reason a country would use export tariffs?
to ensure sufficient supply of a good within the country
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
Krugman argues that if each country seeks to follow a strategic trade policy to protect its interests, this may lead to a ______.
trade war
Country A subsidizes oil development and Country B is losing any competitive advantage because of it. Krugman would agree that Country B hopes to minimize subsidies to prevent a
trade war.
True or False: The United States has imposed trade sanctions on other countries in order to protect and promote human rights.
true
Unilateral lowering of trade barriers has not occurred mostly due to a lack of _____ among governments.
trust
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.
Japan imposed a limit on auto exports to the US as a result of pressure by the US government. What instrument of trade policy does this represent?
voluntary export restraint
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.
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
True or false: GATT has NOT recognized the infant industry argument as a legitimate reason for protectionism.
False
True or false: Quota rent refers to the tax agricultural producers must pay when excess supply is produced and must be stored by the government.
False
Which two groups are negatively impacted when an import tariff is enacted? (Check all that apply.)
Foreign producers Consumers
______ trade is the economic policy of not discriminating against exports to or imports from foreign countries.
Free
______ is the acronym for the multilateral agreement established in 1947 aimed at the abolition of quotas and the reduction of tariff duties among the contracting nations.
GATT
What were the first two industries targeted by the WTO as part of its effort to include regulations governing foreign direct investment? (Check all that apply.)
Global telecommunications Financial services
Which two groups are positively impacted when an import tariff is enacted? (Check all that apply.)
Government Domestic producers
What are the two components of strategic trade policy? (Check all that apply.)
Governments should subsidize promising domestic firms in emerging industries. Governments should intervene to assist firms in overcoming barriers to entry created by foreign firms due to first-mover advantages.
In the mid 1800s, ______ was the first nation to officially follow free trade.
Great Britain
Which two activities are in place in the US to protect domestic farmers from foreign competition? (Check all that apply.)
High tariff rates Government subsidies
What two outcomes typically occur with the implementation of local content regulations? (Check all that apply.)
Local content regulations provide protection for a domestic producer. The restrictions on imports raise the prices of imported components which lead to higher prices for the consumer.
The Uruguay Round started in 1986 and addressed which three issues?
Reducing tariffs on industrial goods Reducing tariffs on manufactured goods Reducing agricultural subsidies
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
______ permit a specific quantity of imported goods to enter the country under a reduced rate of duty during the quota period.
Tariff rate quotas
According to the text, what are three economic effects of import tariffs? (Check all that apply.)
Tariffs reduce the overall efficiency of the world economy. Tariffs are generally pro-producer. Tariffs are anti-consumer.
What extended GATT rules to provide enhanced protection for intellectual property and significantly reduced barriers on trade in textiles?
The Uruguay Round
What are three reasons that the global trading system erected under GATT was strained during the 1980s and early 1990s? (Check all that apply.)
The economic success of Japan The persistent trade deficit in the United States Countries finding ways to get around GATT regulations
What occurs when a company practices dumping?
The firm is unloading excess production in a foreign market.
In order to preserve protectionism, many countries are looking to which of these loopholes associated with antidumping?
The vague definition of dumping
What are two characteristics of countervailing duties?
They can be substantial and stay in place for 5 years. They are a special tariff.
Why do exporting countries agree to impose voluntary export restraints?
To avoid damaging tariffs and import quotas on their products
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: Export tariffs are sometimes levied to raise revenue for the government.
True
True or false: To limit imports over the set quota, tariff rate quotas are common in agriculture.
True
What organization now arbitrates trade disputes and monitors trade policies of member countries?
WTO
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.
ad valorem
Bureaucratic rules implemented by governments that benefit producers and hurt consumers are called ______ trade policies.
administrative
The Japanese government is used in the text as an example of how governments have effectively used ______ to limit imports of vehicle parts through bureaucratic rules.
administrative trade policies
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
Sometimes governments pay subsidies to help companies survive challenging economic climates. In effect, these companies have
an unfair competitive advantage.
Governments develop ______ policies to punish foreign companies that sell their products at below fair market value.
antidumping
The WTO does allow ______ to be imposed on foreign goods sold below their cost of production when domestic producers are being hurt.
antidumping duties
One purpose of the Smoot-Hawley Act, passed by the US Congress in 1930, was to
avoid rising unemployment.
