ch. 7 government policy and international trade
ongoing priorities for the WTO
-high level of protectionism in agriculture -high tariff rates on services -antidumping policies
Smoot-Hawley Act
Enacted in 1930 by the U.S. Congress, this act erected a wall of tariff barriers against imports into the United States.
-agricultural subsidies -intellectual property -services
GATT negotiations cont to deal with additional issues such as ___
strategic trade policy
Government policy aimed at improving the competitive position of a domestic industry and/or domestic firm in the world market
-be effective at policing global trade -facilitate future trade deals
WTO members hoped that the WTO would:
antidumping
___ policies are intended to protect domestic producers from foreign competitors that sell their products below fair mkt value
import quota
a direct restriction on the quantity of a good that can be imported into a coountry
export ban
a policy that partially or entirely restricts the export of a good
ad valorem tariff
a tariff levied as a proportion of the value of an imported good
true
a tariff rate quota is a hybrid of a quota and tariff where a lower tariff rate is applied to imports within a quota (t/f)
tariff
a tax levied on imports
war
according to Krugman, a trade ____ could ensue if each country develops and implements a strategic trade policy
increased
during the 1980s and early 1990s, protectionism around the world ___
quota rent
extra profit producers make when supply is artificially limited by an import quota
subsidy
government financial assistance to a domestic producer
special interest
government intervention may not be well executed due to the possibility that policy will be captured by ___ groups
protect
higher tariffs on ag products show a desire to ___ domestic ag and traditional farming areas
-to grant preferential trading terms to countries it wants to build relations with -to pressure or punish "rogue states"
how can a gov use intervention in trade as a foreign policy instrument?
chemicals, basic metal, machinery and electrical equipment, plastics
industries frequently targeted by antidumping actions
tariff rate quota
lower tariff rates applied to imports within the quota than those over the quota
GATT
multilateral agreement established in 1947 that liberalized trade by eliminating tariffs, subsidies, and quotas
Multilateral or Bilateral Trade Agreements
reciprocal trade agreements between two or more partners
dumping
selling goods in a foreign market for less than their cost of production or below their "fair" market value; firms unload excess production in foreign markets
administrative
sometimes gov use ____ trade policies, which are bureaucratic rules, to restrict imports and boost exports
an unfair competitive advantage
sometimes governments pay subsidies to help companies survive challenging economic climates. one of the consequences of this assistance is to provide these companies with ____
economic
strategic trade policy suggests an ___ justification for government intervention in trade, and challenges the classic trade theories of Smith and Ricardo
specific tariff
tariff levied as fixed charge for each unit of good imported
agricultural
tariff rates on ____ products are generally much higher than tariffs on manufactured products/services
ricardo
was a key figure in the early free trade movement in great britain
antidumping policies
designed to punish foreign firms that engage in dumping and thus protect domestic producers from unfair foreign competition
TRIPS Agreement
established standards for the international protection of intellectual property rights
cuba
in an attempt to bring down the Communist gov in place in ____, the US has maintained long-running trade sanctions against this country
consumers
japans ban on american beef in 2003 is an example of using trade policy to protect ___
Uruguay
the ___ round started in 1986 and dealt with reducing tariffs on manufactured goods by more than 40% reducing agricultural subsidies, as well as other issues
strategic
the ___ trade policy has two components 1. gov should subsidize promising domestic firms in emerging industries and 2. gov should intervene to assist firms in overcoming barriers to entry created by foreign firms due to first-move advantages
free trade
the absence of barriers to the free flow of goods and services btw countries
dynamic
the consequences of free trade include ____ economic gains bc free trade stimulated economic growth and wealth creation
-it protects inefficient industries -it invited retaliation and trade wars
what are the drawbacks of gov intervention in free trade?
great britian
what country in the mid 1800s was the first to officially follow free trade?
financial services and global telecommunications
what were the first two industries targeted by the WTO as part of its effort to include regulations governing foreign direct investment?
to reduce tensions with other trading partners
why did china put a tariff on textile exports to moderate the growth in the export of textiles in 2004?
-bc average tariffs on services remains higher than on industrial goods -bc of high tariff rates on imports of selected goods from developing nations into developed nations
why must countries remain focused on opening markets?
-to raise revenue for the gov -to reduce exports from an industry sector, often for political reasons
2 reasons why export tariffs are levied
voluntary export restraint (VER)
A quota on trade imposed from the exporting country's side, instead of the importer's; usually imposed at the request of the importing country's government.
Local Content Requirement (LCR)
A requirement that some specific fraction of a good produced domestically.
administrative trade policies
administrative policies, typically adopted by government bureaucracies, that can be used to restrict imports or boost exports
true
after analyzing current practices, it can be said that subsidies are not that successful at increasing the international competitiveness of domestic producers
export
an ___ tariff is levied on goods produced in a country and sent out of that country
countervailing duties
antidumping duties; special tariff
reduces
the TRIPS agreement is based on the notion that inadequate protection of intellectual property ____ the incentive for innovation
counterveiling
the WTO allows ___ duties to be imposed on foreign goods sold below their cost of production when domestic producers can show theyre being harmed
enforcement
the WTO is more successful than GATT bc the WTO has ___ mechanisms that make it more effective at policing global trade
open markets
the WTO will cont to work to ___ bc this will lead to an increase in world income, including an increase in income to developing countries
smoot-hawley
the ___ act was passed by US congress to protect domestic industries during the great depression and divert consumer demand away from foreign products
WTO (World Trade Organization)
the ___ is the organizaiton that acts as an umbrella org that encompasses GATT as well as two other organizations
protectionism
the theory or practice of shielding a country's domestic industries from foreign competition by taxing imports.
myanmar
the us imposed trade sanctions on ____ until the country implemented democratic reforms in 2012
service
GATT rules initially only dealt with trade in manufactured goods and commodities. with the increase in trade the ___ sector, the Uruguay round sought to establish agreements to cover this area
general agreement on tariffs and trade (GATT)
International treaty that committed signatories to lowering barriers to the free flow of goods across national borders and led to the WTO
infant industry argument
New industries in developing countries must be temporarily protected from international competition to help them reach a position where they can compete on world markets with the firms of developed nations.
increase by 50%
according to a study cited in the text, if advanced ocuntries stopped providing subsidies to farmers, global trade in ag products would ___
embargo
ban on trade--quota of 0
