MKT 310 Ch. 7 LS
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
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 remains higher than on industrial goods
Which three industries are frequently targeted by antidumping actions?
Chemicals Basic metal plastics
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
When the government does not use quotas, taxes or other means to restrict what its citizens can buy from or sell to another country, it is called ____ trade.
Free
In the mid 1800s, ______ was the first nation to officially follow free trade.
Great Britain
What are two drawbacks of government intervention in free trade?
It invites retaliation and trade wars. It protects inefficient industries.
Which economist was a key figure in the early free trade movement in Great Britain?
Ricardo
The trade policy argument suggests that governments should subsidize promising domestic firms in emerging industries and should also assist firms in overcoming barriers to entry created by foreign firms due to first-mover advantages.
Strategic
What occurs when a company practices dumping?
The firm is unloading excess production in a foreign market.
What two outcomes typically occur with the implementation 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.
In order to preserve protectionism, many countries are looking to which of these loopholes associated with antidumping?
The vague definition of dumping
What's the main reason a country would use export tariffs?
To ensure sufficient supply of a good within the country
Member nations hoped that the WTO would do which two of the following?
be effective at policing global trade facilitate future trade deals
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
Export tariffs are (more or less?) common than import tariffs.
less
Higher tariff rates on agricultural products come from a desire to domestic agriculture and traditional farming areas. (Choose protect or outsource.)
protect
One of the greatest benefits of local content regulations for a producer is that _____,
they limit foreign competition
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.
According to the text, what are three economic effects of import tariffs?
-Tariffs are anti-consumer. -Tariffs reduce the overall efficiency of the world economy. -Tariffs are generally pro-producer.
While there were a total of 196 cases handled by GATT, records show that between 1995 and 2017, the WTO successfully handled about _____ trade disputes.
500
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.
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 of duty during the quota period.
Tariff rate quotas
______ is the organization that encompasses GATT, GATS and TRIPS.
WTO
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
Strategic trade policy suggests a(n) ______ justification for government intervention in trade.
economic
The WTO is more successful than GATT because the WTO has ______ mechanisms that make it more effective.
enforcement
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
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
Global telecommunications and _____ have been targeted by the WTO as industries that need expanded trade agreements.
financial services
Which two groups are negatively impacted when an import tariff is enacted?
foreign producers consumers
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
______ trade is the economic policy of not discriminating against exports to or imports from foreign countries.
free
The WTO will work hard to reduce tariffs toward zero because this will lead to substantial ______ in trade.
gains
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 lack of intellectual property protection antidumping policies protectionism in agriculture
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
What are four main instruments of trade policy?
import quotas antidumping duties tariffs local content requirements
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%.
During the 1980s and early 1990s, protectionism around the world . (Choose increased or decreased.)
increased
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
Many developing nations use the ______ to justify high tariff rates on nonagricultural goods but the WTO believes the nations would benefit from increased international trade by lowering tariffs.
infant industry argument
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
Tariffs, quotas, and subsidies are forms of government _____.
intervention
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
What are three ongoing priorities for the WTO and agenda items at Doha?
limiting antidumping laws phasing out agriculture subsidies cutting tariff rates on services
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
The basic metals, chemicals, plastics, and machinery and electrical equipment industries account for the ______ of antidumping actions.
majority
A government would impose administrative trade policies in order to
make it difficult for imports to enter a country.
As the text notes, Donald Trump appears to embrace which view on trade?
mercantilist
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
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
Today, many nations are _____ new trade policies associated with the WTO.
opposed to
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
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 TRIPS agreement is based on the notion that inadequate protection of intellectual property the incentive for innovation. (Choose reduces or increases.)
reduces
The economic benefit gained when the supply is artificially restricted by an import quota is called quota ______.
rent
Protecting intellectual property through patents, trademarks, and copyrights, fosters innovation and can lead to what two results?
rising living standards economic growth
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
Government intervention may NOT be well executed due to the possibility that policy will be captured by ______.
special interest groups
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
According to strategic trade policy, governments should use ______ to support development work aimed at commercializing target technologies.
subsidies
Which three trade barriers constrain a firm's ability to disperse its productive activities?
subsidies quotas tariff barriers
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
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's the main reason a country would use export tariffs?
to ensure sufficient supply of a good within the country
True or false: To limit imports over the set quota, tariff rate quotas are common in agriculture.
trUE
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
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: Government-imposed import quotas may limit a firm's ability to serve a country from a foreign location.
true
True or false: The fact that countries are using the WTO represents an important vote of confidence in the WTO's dispute resolution procedures.
true
True or false: To limit imports over the set quota, tariff rate quotas are common in agriculture
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
According to the text, what two world events imply that free trade is not a global consensus?
withdrawal of Britain from EU election of donald t****
What are the two reasons that export tariffs are levied?
To raise revenue for the government To reduce exports from an industry sector, often for political reasons
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
Which two groups are positively impacted when an import tariff is enacted?
Domestic producers Government
True or false: Krugman advocates that it is logical to expect the US government to ignore special-interest politics when forming policy.
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
______ 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?
Global telecommunications Financial services
Which two activities are in place in the US to protect domestic farmers from foreign competition?
Government subsidies High tariff rates
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.
With regard to strategic trade policy, which two actions can governments take in response to pressure from business firms?
Increased protectionism Push for more open markets and freer trade
In what two ways can a government use intervention in trade as a foreign policy instrument? (Check all that apply.)
To pressure or punish "rogue states" To grant preferential trading terms to countries it wants to build relations with
What are three reasons that the global trading system erected under GATT was strained during the 1980s and early 1990s?
The economic success of Japan Countries finding ways to get around GATT regulations The persistent trade deficit in the United States
What is a bound tariff rate?
The highest tariff rate that can be charged.
What are two characteristics of countervailing duties?
They can be substantial and stay in place for 5 years. They are a special tariff.
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
Tariff rates on ______ products are generally much higher than tariffs on manufactured products or services.
agricultural
GATT negotiations continue to deal with additional issues such as
agricultural subsidies. intellectual property. services.
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
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