Global Business Chapter 7

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

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

What were the first two service industries targeted by the WTO as part of its effort to include regulations governing foreign direct investment?

- Financial services - Global telecommunications

What are three trade barriers that can constrain a firm's ability to disperse productive activities?

- Local content regulations - Quotas - Tariffs

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

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

What are two issues were addressed by the Uruguay Round?

- Reducing agricultural subsidies - Reducing tariffs on manufactured goods

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

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

What are two characteristics of countervailing duties?

- They are a special tariff - They can be substantial and stay in place for five years

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.

Seven instruments of trade policy

1. tariff 2. subsidy 3. import quota 4. voluntary export restraints 5. local content requirements 6. administrative policies 7. antidumping duties

The WTO reports that approximately _____ of all antidumping actions reported involve the basic metals, chemicals, plastics, and electrical equipment industries.

70 percent

Why do exporting countries agree to impose voluntary export restraints?

Because the exporting countries would prefer to impose their own restrictions than risk sustaining worse terms from tariffs or quotas.

The _____ Round started in 2001 and still continues to this day: dealing with issues of agriculture protectionism, intellectual property protection, and other priorities of the WTO.

Doha

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

Enforcement mechanisms

Which function did the creators of the WTO hope it would perform?

Facilitate future trade deals

dynamic economy

For example, China's national income increase by 2% in the first year; 3% in the second year and 5% in the third year.

static economy example

For example, India's national income increase by 5% in 1977 - 78. The increase in 1978 - 79 and 1979 - 80 was also 5%.

In the mid-1800s, _____ was the first nation to officially follow free trade.

Great Britain

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

How to price products that are dumped

The WTO's TRIPS agreement attempts to protect _____ around the world.

Intellectual property rights

Which economist was a key figure

Ricardo

One consequence of free trade is higher domestic consumption and a more efficient use of resources. These would be considered _____ economic gains.

Static

What is considered the simplest instrument of trade policy?

Tariffs

What group worked to extend GATT rules to provide enhanced protection for intellectual property and significantly reduce barriers on trade in textiles?

The Uruguay Round

dynamic economy

The concept of dynamic refers to a situation where there is a movement. But this movement does not change at a constant rate. The rate of change is different at different times.

static economy

The concept of static refers to a situation where there is a movement. But this movement is continuous, certain, regular and constant.

What is a bound tar

The highest tariff rate that can be charged.

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

To ensure sufficient supply of a good within the country.

Tariff rate quotas are common in agriculture, where the goal is to limit imports over quota.

True

After analyzing current practices, it can be said that subsidies are not that successful at increasing the international competitiveness of domestic producers.

True Reason: This is true because studies how that government subsidies tend to protect the inefficient and promote excess production.

Trade sanction

a trade penalty imposed by one nation onto one or more other nations

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 nation 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

One purpose of the Smoo

avoid rising unemployment

One benefit of free trade is that is stimulates economic growth and wealth creation. In other words, it provides _____ economic gains.

dynamic

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 percent

A government would impose administrative trade policies in order to

make it difficult for imports to enter a country

Today, many nations are _

opposed to

Countries base the decision

protecting national security

By threatening _____ trade

punitive

If we accept that

should

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