Chapter 7
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 Blank______.
dumping
Strategic trade policy suggests a(n) Blank______ justification for government intervention in trade.
economic
The WTO is more successful than GATT because the WTO has Blank______ 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
A tariff is a tax levied on Blank______.
imports or exports
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 Blank______ argument.
infant industry
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
Governments implement Blank______ trade policies that are designed to make it difficult for imports to enter a country.
Administrative
What are two ways a government uses intervention in trade as a foreign policy instrument?
-grant preferential trading terms to countries it wants to build relations with - pressure or punish "rogue states"
The protection of intellectual property has becoming increasingly important to the WTO. The basis for this is that without this protection, the incentive for innovation would Blank______ and economies would suffer.
Decrease
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 free ____________ trade.
Free
The economic success of Blank______ put a strain on the world trading system in the 1980s and promoted protectionism measures.
Japan
What is likely to happen in the absence of a multilateral agreement in the international trading system?
Less innovation in the world economy
A tax on imports that is levied as a fixed charge per unit of an imported good is called a(n) Blank______ tariff.
Specific
___ 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
Taxes placed on imports to protect domestic producers from foreign competition and to produce revenue for the government are Blank______.
Tariffs
Krugman promoted the idea that if each country seeks to follow a strategic trade policy to protect its interests, this may lead to Blank______.
a trade war
What is considered the most common political argument for government intervention in foreign trade?
protecting jobs and industries
Member nations hoped that the WTO would be a facilitator of future trade deals especially in the area of Blank______.
services
Which instrument of trade policy has been in use the longest?
tariffs
By limiting or banning certain products through regulations, governments can protect consumers from products that are
unsafe
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
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
The Blank______ 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
GATT multilateral agreement and objective was to liberalize trade by
Eliminating tariffs, subsidies, import quotas
______ trade is the economic policy of not discriminating against exports to or imports from foreign countries.
Free
The Uruguay Round started in 1986 and eventually provided for, which three provisions?
Reducing agricultural subsidies, reducing tariffs on industrial goods, and reducing tariffs on manufactured goods
What are the 8 main instruments in trade policy
Tariffs, bans, subsidies, import quotas, voluntary export restraints, local content requirements, administrative polices, and antidumping
Which round of GATT negotiations provided enhanced protection for intellectual property and significantly reduced barriers on trade in textiles?
The Uruguay Round
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
A(n) Blank______ 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
Krugman argues that strategic trade policy should not be embraced because many times governments are influenced by politically important Blank______ to intervene in the economy
interest groups
Government intervention may NOT be well executed due to the possibility that policy will be captured by Blank______.
special interest groups
What are two reasons why countries should remain focused on opening markets? (Check all that apply.)
- Because average tariffs on services remains higher than on industrial goods - Because of high tariff rates on imports of selected goods from developing nations into developed nations
What are two drawbacks of government intervention in free trade?
- It protects inefficient industries. - It invites retaliation and trade wars.
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.
Tariff rates on Blank______ products are generally much higher than tariffs on manufactured products or services.
agricultural
What industry tends to benefit the most from subsidies in most countries?
agriculture
