chapter 8

20) What environmental problem gets worse as income rises?

carbon dioxide emissions

Labeling that states that a product was produced under environmentally sustainable conditions may not be an effective way to reduce pollution if

consumers do not believe the information on the label

Some proponents of trade sanctions argue for changes in policy because they fear low standards will be used to capture markets and foreign investment. While theoretically possible, there is little or no support for the view that countries use low labor standards this way, because

countries with low labor standards generally have trouble attracting foreign investment

What does empirical research suggest about the existence of pollution havens

countries with low standards are actually less successful at attracting foreign investment

Countries that compete by offering foreign firms a reduced set of environmental compliance requirements are known as

pollution havens

Under the Sullivan Principles, a multinational producing in different countries

should comply with the same environmental standards that exist in the home country

16) Which region has the highest proportion of its children working?

sub-saharan africa

Transborder environmental impacts can take place when one country's pollution spills over into a second country in all of the following situations EXCEPT

the production of exported products degrades the local environment

13) Child labor is a common family survival strategy, especially for farmers in rural areas where it is hard to enforce rules or to reach the poor with any supporting infrastructure or social services.

true

14) One reason why the plants of multinational corporations abroad may have better standards than domestic contractors in low-income countries is because multinational corporations tend to reduce costs by using one standard in terms of capital equipment and technology for all markets.

true

18) Lower income countries may have more difficulties in enforcing standards.

true

19) Harmonization of standards can institutionalize a set of inferior standards.

true

6) Domestic policies can have unintended effects on international trade.

true

8) Many conflicts over standards result from the differences in income between countries.

true

Coffee is an example of a product that has been successfully labeled and marketed based on its production method or environmental protection

true

Over time, most countries have increased environmental standards

true

The WTO allows trade protection to protect endangered species

true

The WTO explicitly stated that in making its sea turtle decision, it was NOT saying that sovereign nations could not adopt effective measures to protect endangered species. Clearly, it said, sovereign nations can and should develop effective measures, including trade measures, to protect endangered species.

true

9) What are two main obstacles to increased international integration?

Laws and regulations adopted strictly for domestic reasons that unintentionally limit international commerce when economies become more integrated, and conflicts over standards

11) Race to the bottom refers to which of the following?

A) Firms have an incentive to relocate to countries with lower standards.

9) Which of the following is true?

A) Generally, the lower the country's average income, the less administrative, scientific, and technical capacity it has to design and enforce standards.

2) Monopoly powers given to domestic utility companies to create economies of scale might unintentionally

A) be an obstacle to increased international trade.

15) Harmonization of standards

A) can make it less costly for exporting firms to produce.

6) All of the following are reasons countries may be unable to use discriminatory trade practices to enforce labor standards EXCEPT

A) countries can never impose trade barriers on other sovereign nations.

1) The race-to-the-bottom concept described in the text refers to

A) the situation in which countries with high standards are forced to lower their standards or face the loss of jobs and industry.

10) Which of the following is FALSE?

B) All labor and environmental conditions improve with income growth.

3) Which of the following is NOT an obstacle to increased international economic integration?

B) High tariff rates imposed by industrialized nations

12) Harmonization of standards

B) can reduce firm costs.

1) Harmonization of standards refers to

B) common product safety, environment, labor, and fair competition standards agreed upon by trading partners.

14) As national income rises,

B) infant mortality falls.

4) Discriminatory trade practices are allowed among sister WTO member countries, especially when it comes to

B) national security and special benefits given to other members of a free trade area.

7) Domestic firms operating abroad may find it economically beneficial to adopt environment-friendly standards because

B) the least-cost strategy usually involves the adoption of one set of environment-friendly technology rather than multiple standards.

3) Developing countries are usually unwilling to negotiate over labor standards because

B) they fear that industrialized nations are trying to undermine their comparative advantage—production of agriculture and textiles/apparel—and close the markets of high-income countries in these areas.

7) When countries try to ban child labor,

C) child labor often moves to the informal economy.

4) Greater specialization within a country

C) creates winners and losers and raises issues about fairness.

5) When the evolution of new technologies is unknown, or it is unclear which country has the "best" rules for standards, the adoption of ________ is the superior option.

C) mutual recognition standards

2) Mutual recognition of standards refers to

C) the acceptance of a trading partner's standards as valid and sufficient by another trading partner.

8) Using trade barriers to address labor standards does all of the following EXCEPT it

C) works more effectively for countries that are small relative to the total market.

10) Why does a country's increased specialization due to trade raise issues of fairness?

Comparative advantage based trade causes a nation to shift its production mix in order to produce relatively more of the export good. As discussed in previous chapters, this raise the return to the factor of production that is used intensively and lowers the return to the other factor(s). This in turn increases national income but also redistributes it. This means that there are both winners and losers, and thus there are issues as to fairness

Which of the following is NOT a problem with finding a solution to global climate change

Countries have not recognized that there is a problem with climate change

5) Which of the following is a true statement about obstacles to increased economic integration?

D) Adopting common standards gives an advantage to firms that already meet those standards.

6) Which of the following is true?

D) Agriculture is the main industry that uses child labor.

4) Most regional trade and WTO agreements practice

D) a combination of harmonization, mutual recognition, and separate standards.

8) Requiring a firm with international operations to follow the standards of its home country instead of those of the foreign country has all of the following advantages EXCEPT

D) it is a comprehensive measure, since it addresses the problem of production in foreign firms as well as firms from high-standards countries that relocate abroad.

5) Low labor standards are usually associated with

D) low foreign investment.

13) Imposing the same standards on high- and low-income countries can be a problem because

D) low-income countries may have less ability to enforce standards.

2) The use of trade barriers to enforce standards abroad raises all of the following concerns EXCEPT

D) only small countries may be able to use trade barriers effectively.

3) Separate standards refers to

D) standards held by different trading partners which other partners refuse to recognize.

1) All of the following are responsible for the removal of the formal trade barriers EXCEPT

D) the World Bank and the IMF.

18) Define labor standards as proposed by the ILO.

Prohibition of forced labor, freedom of association, the right to organize and bargain collectively, an end to the exploitation of child labor, and nondiscrimination in employment

Which of the following is NOT a true statement about the WTO and the protection of endangered species

The WTO did not allow the U.S. to protect sea turtles

Is the claim that environmental standards reduce industrial competitiveness valid?

Yes, because environmental standards raise costs to businesses

Harmful carbon emissions

are increasingly produced by industrializing countries such as China and India

15) Which region has the largest number of children working?

asia

10) There is clear evidence of a race-to-the-bottom internationally, regarding working conditions and the environment.

false

11) Empirical studies show that countries with low standards are very successful at attracting foreign investment.

false

12) While Africa has the largest numbers of working children, Asia has the highest proportion of working children, with an estimated one in four employed.

false

16) Low-income countries are largely responsible for excess carbon dioxide emissions globally.

false

17) Mutual recognition is more efficient than other approaches to setting standards.

false

7) Health and safety standards are generally similar in most countries.

false

9) The International Labor Organization has been around since 1919, and has a consistent record of being willing to take action against countries that violate core labor standards.

false

Low standards reduce production costs and change a nation's comparative advantage

false

The WTO encourages nations to take unilateral action on trade issues, including issues involving environmental protection

false

The best way to address differences in labor and environmental standards is through trade barriers.

false

One claim that trade barrier proponents use to enforce environmental standards is that

high standards in industrialized nations motivates some firms to "export pollution" to developing countries by relocating their dirty industries

The claim that lower environmental standards in foreign countries reduce industrial competitiveness for high standard countries is on firm theoretical ground because

higher environmental standards requirements raise the cost of production to a firm or industry abiding by the rules

Trade measures are usually not the best way of addressing problems such as pollution and child labor because

it is more efficient to address these problems at the production and consumption level