Chapter 6
What are two reasons countries should remain focused on opening markets? (Check all that apply.)
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
Which three industries are frequently targeted by antidumping actions? (Check all that apply.)
Chemicals Plastics Basic metal
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
Which two groups are negatively impacted when an import tariff is enacted? (Check all that apply.)
Consumers Foreign producers
In _____ Britain withdrew from the European Union following _____.
2016, Brexit
While there were a total of 196 cases handled by GATT, records show that between 1995 and 2019, the WTO successfully handled more than _____ trade disputes.
500
The WTO reports that approximately _____ of all antidumping actions reported involve the basic metals, chemicals, plastics, and electrical equipment industries.
70 percent
Company ABC in Scotland exports a pound of cheese to the United States for $100. The United States places a 9 percent tax on the cheese as a proportion of its value. What type of tariff is this?
Ad valorem
What are the four issues currently at the forefront of the WTO agenda?
Antidumping policies Protectionism in agriculture Lack of intellectual property protection High tariffs on nonagricultural goods and services
Countries can use ______ duties on an offending import to offset dumping.
countervailing
According to the strategic trade policy argument, a government can help raise national income if it can somehow ensure that the firms that gain a first-mover advantage in an industry are_____.
domestic firms
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
When a country restricts the export of a product, it is implementing a(n) _____.
export ban
If a country places a 20 percent 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: Government policies related to international trade have little effect on the success of a business.
false
True or false: Krugman advocates that it is logical to expect the U.S. 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
GATT was put into place under the leadership of the U.S. government as a way to
foster free trade.
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
______ 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.
American car makers promote the idea that Japan makes it difficult for others to compete in the industry because the country has
implemented vehicle parts standards that no other country uses.
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
Government intervention is said to be self-defeating because it tends to protect _____.
inefficient firms
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 in which developing nations must protect their domestic industries until they are ready to compete globally is the ______ argument.
infant industry
The WTO's TRIPS agreement attempts to protect _____ around the world.
intellectual property rights
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
Export tariffs are (more or less?) common than import tariffs.
less
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 percent of the component parts of their vehicles in Mexico. This is an example of a(n)
local content requirement.
A government would impose administrative trade policies in order to
make it difficult for imports to enter a country.
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
Today, many nations are _____ new trade policies associated with the WTO.
opposed to
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
Countries base the decision for intervention on ______ when safeguarding 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
Sometimes governments pay subsidies to help companies survive challenging economic climates. In effect, these companies have
received an unfair competitive advantage.
The TRIPS agreement is based on the notion that inadequate protection of intellectual property ____ the incentive for innovation. (Choose reduces or increases.)
reduce
The economic benefit gained when the supply is artificially restricted by an import quota is called quota ______.
rent
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
A tax on imports that is designated 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
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
During the 1980s and 1990s, the world trading system was strained by the persistent trade deficit in the world's largest economy, which was:
the United States.
One of the greatest benefits of local content regulations for a producer is that _____.
they limit foreign competition
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
Krugman argues that if each country seeks to follow a strategic trade policy to protect its interests, this may lead to a ______.
trade war
Following Brexit, Great Britain withdrew from the European Union in 2016.
true
True or False: It is the goal of the WTO to bring tariff rates down to zero.
true
True or false: Government-imposed import quotas can limit a company'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.
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.
Which two groups are positively impacted when an import tariff is enacted? (Check all that apply.)
Domestic producers Government
In 1975, Congress restricted the export of U.S. crude oil in response to the actions taken by OPEC. This restriction is an example of which trade policy?
Export ban
______ 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
What are the two components of strategic trade policy? (Check all that apply.)
Governments should subsidize promising domestic firms in emerging industries. Governments should intervene to assist firms in overcoming barriers to entry created by foreign firms due to first-mover advantages.
In the mid-1800s, ______ was the first nation to officially follow free trade.
Great Britain
What are four main instruments of trade policy?
Import quotas Antidumping duties Tariffs Local content requirements
What are two drawbacks of government intervention in the process of free trade?
It's unlikely to be well-executed. It invites retaliation and trade wars.
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 trade barriers that can constrain a firm's ability to disperse productive activities?
Local content regulations Tariffs Quotas
Which two outcomes typically occur with the implementation of local content regulations? (Check all that apply.)
Local content regulations provide protection for a domestic producer. The restrictions on imports raise the prices of imported components, which lead to higher prices for consumers.
What are two ways trade barriers hamper a firm's productive activities? (Check all that apply.)
Quotas limit the ability to serve a country from outside locales. They raise the cost of exporting products.
Which economist was a key figure in the early free trade movement in Great Britain?
Ricardo
Protecting intellectual property, through patents, trademarks, and copyrights, fosters innovation and can lead to what two results? (Check all that apply.)
Rising living standards Economic growth
Which two actions can governments use to intervene in business with the intent of helping firms establish a competitive advantage?
Subsidies Antidumping actions
______ 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
According to the text, what are three economic effects of import tariffs? (Check all that apply.)
Tariffs are anti-consumer. Tariffs reduce the overall efficiency of the world economy. Tariffs are generally pro-producer.
What occurs when a company practices dumping?
The firm is unloading excess production in a foreign market.
What is a bound tariff rate?
The highest tariff rate that can be charged.
What are three reasons that caused the global trading system erected under GATT to be strained during the 1980s and early 1990s? (Check all that apply.)
The persistent trade deficit in the United States The economic success of Japan Countries found ways to get around GATT regulations
In order to preserve protectionism, many countries are looking to which of these loopholes associated with antidumping?
The vague definition of dumping
What are two characteristics of countervailing duties?
They are a special tariff. They can be substantial and stay in place for five years.
What's the main reason a country would use export tariffs?
To ensure sufficient supply of a good within the country
In what two ways can a government use intervention in trade as a foreign policy instrument? (Check all that apply.)
To grant preferential trading terms to countries it wants to build relations with To pressure or punish "rogue states"
What are the two reasons that export tariffs are levied? (Check all that apply.)
To reduce exports from an industry sector, often for political reasons To raise revenue for the government
Japan imposed a limit on auto exports to the United States as a result of pressure by the U.S. government. What instrument of trade policy does this represent?
Voluntary export restraint
The ______ is the organization that encompasses GATT, GATS, and TRIPS.
WTO
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
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
GATT negotiations continue to deal with additional issues such as (Check the three that apply.)
agricultural subsidies. intellectual property. services.
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