Chapter 7
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
Member nations hoped that the WTO would do which two of the following?
facilitate future trade deals be effective at policing global trade
The ______ argument for trade intervention states that developing countries need to support new industries until they are strong enough to compete globally
infant industry
______ 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 occurs when a company practices dumping?
The firm is unloading excess production in a foreign market.
What are three reasons that the global trading system erected under GATT was strained during the 1980s and early 1990s? (Check all that apply.)
The persistent trade deficit in the United States Countries finding ways to get around GATT regulations The economic success of Japan
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
Reciprocal trade agreements between two or more partners are called _____ trade agreements.
multilateral
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
What are four main instruments of trade policy?
antidumping duties local content requirements import quotas tariffs
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
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
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
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
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
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
During the 1980s and early 1990s, protectionism around the world
increased
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
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
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.
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?
multilateral
The stalled Doha Round has caused many nations to use _____ to foster trade.
multilateral trade agreements
Today, many nations are _____ new trade policies associated with the WTO
opposed to
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
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
What is considered the simplest instrument of trade policy?
tariffs
Taxes placed on imports to protect domestic producers from foreign competition and to produce revenue for the government are called
tariffs.
What's the main reason a country would use export tariffs?
to ensure sufficient supply of a good within the country
Unilateral lowering of trade barriers has not occurred mostly due to a lack of _____ among governments
trust
True or false: Krugman advocates that it is logical to expect the US government to ignore special-interest politics when forming policy.
False
____ trade is the economic policy of not discriminating against exports to or imports from foreign countries.
Free
The Uruguay Round started in 1986 and addressed which three issues?
Reducing tariffs on manufactured goods Reducing agricultural subsidies Reducing tariffs on industrial goods
What extended GATT rules to provide enhanced protection for intellectual property and significantly reduced barriers on trade in textiles?
The Uruguay Round
What are the four issues currently at the forefront of the WTO agenda?
protectionism in agriculture high tariffs on nonagricultural goods and services antidumping policies lack of intellectual property protection
