IB Chapter 7: Government Policy and International Trade

The TRIPS agreement is based on the notion that inadequate protection of intellectual property _____ the incentive for innovation.

decreases

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

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

economic

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

false

During the 1980s and early 1990s, protectionism around the world

increased

GATT negotiations continue to deal with additional issues such as

intellectual property, services, agriculture 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

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

local content requirement

A government would impose administrative trade policies in order to

make it difficult for imports to enter a country.

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

multilateral trade agreements

Today, many nations are _____ new trade policies associated with the WTO.

opposed to

In _____ Britain withdrew from the European Union following _____.

2016, Brexit

What are four main instruments of trade policy?

Antidumping duties Local content requirements Import quotas tariffs

What are two reasons countries should remain focused on opening markets?

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

What are the four issues currently at the forefront of the WTO agenda?

-Antidumping policies -High tariffs on nonagricultural goods and services -Protectionism in agriculture -Lack of intellectual property protection

______ is the acronym for the multilateral agreement established in 1947 aimed at the abolition of quotas, tariffs, and subsidies in order to liberalize trade.

GATT

Which economist was a key figure in the early free trade movement in Great Britain?

Ricardo

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

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

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

To ensure sufficient supply of a good within the country

By threatening ______ trade sanctions, one country can convince another country to open its markets. Multiple choice question.

punitive

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

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

tariffs

Unilateral lowering of trade barriers has not occurred mostly due to a lack of _____ among governments.

trust

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

unworkable

In order to preserve protectionism, many countries are looking to which of these loopholes associated with antidumping?

vague definition of dumping

The WTO does allow ______ to be imposed on foreign goods sold below their cost of production when domestic producers are being hurt.

anti dumping duties

The WTO is more successful than GATT because the WTO has ______ that make it more effective.

enforcement mechanisms

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

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

What is considered the simplest instrument of trade policy?

tariff

_____ 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

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.

_____ argued that the invisible hand of the market mechanism, rather than government policy, should determine what a country imports and what it exports.

adam smith

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

As noted in the text, the U.S. 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 U.S. companies millions of dollars in lost revenue.

chinese