International Business Chapter 7
What are two reasons countries should remain focused on opening markets? (Check all that apply.)
- 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
Which three industries are frequently targeted by antidumping actions? (Check all that apply.)
- Chemicals - Basic metal - Plastics
Protecting intellectual property, through patents, trademarks, and copyrights, fosters innovation and can lead to what two results?
- Economic growth - Rising living standards
Which two functions did the members of the WTO expect it to perform? (Check all that apply.)
- Facilitate future trade deals. - Be effective at policing global trade.
What are the four issues currently at the forefront of the WTO agenda?
- High tariffs on nonagricultural goods and services - Protectionism in agriculture - Antidumping policies - Lack of intellectual property protection
With regard to strategic trade policy, which two actions can governments take in response to pressure from business firms?
- Increase protectionism. - Push for more open markets and freer trade.
What are two drawbacks of government intervention in free trade? (Check all that apply.)
- It invites retaliation and trade wars. - It protects inefficient industries.
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.
The Uruguay Round started in 1986 and addressed which three issues?
- Reducing tariffs on manufactured goods - Reducing tariffs on industrial goods - Reducing agricultural subsidies
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 economic success of Japan - Countries found ways to get around GATT regulations - The persistent trade deficit in the United States
Which two world events imply that free trade is not a global consensus?
- The election of Donald Trump - The withdrawal of Britain from EU
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 three ongoing priorities for the WTO and agenda items at Doha? Check all that apply.
- phasing out agriculture subsidies - limiting antidumping laws - cutting tariff rates on services
While there were a total of 196 cases handled by GATT, records show that between 1995 and 2017, the WTO successfully handled about _____ trade disputes.
500
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
The _____ 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
True or false: Krugman advocates that it is logical to expect the U.S. government to ignore special-interest politics when forming policy.
FALSE
an ad valorem tariff is levied as a fixed charge for each unit of an imported good
FALSE
in most countries, the retail industry tends to be one of the largest recipients of subsidies
FALSE
the World Trade Organization's TRIPS agreement focuses on extending free trade agreements to services
FALSE
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 (General Agreement on Tariffs and Trade)
was a multilateral agreement established in 1947 whose objective was to liberalize trade by eliminating tariffs, subsidies, import quotas, etc.
General Agreement on Tariff's and Trade (GATT)
In the mid-1800s, ______ was the first nation to officially follow free trade.
Great Britain
Which economist was a key figure in the early free trade movement in Great Britain?
Ricardo
Many Western countries imposed trade sanctions against ______ during the 1980s and 1990s to encourage the country to improve human rights policies.
South Africa
After th great depression, there was a favorable shift in the US government toward free trade
TRUE
Dumping occurs when companies sell goods in a foreign market below their costs of production
TRUE
Government intervention can be self defeating because it tends to protect the inefficient rather than help become efficient global competitors
TRUE
The british decision to withdraw from the EU suggest that there isn't a global consensus on the issue of free trade
TRUE
True or False: The United States has imposed trade sanctions on other countries in order to protect and promote human rights.
TRUE
True or false: Export tariffs are sometimes levied to raise revenue for the government.
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
export tariffs are not as common as import tariffs
TRUE
import tariffs protect domestic producers against foreign competitors
TRUE
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
What is considered the simplest instrument of trade policy?
Tariffs
What are four main instruments of trade policy?
Tariffs Import quotas Local content requirements Antidumping duties
What extended GATT rules to provide enhanced protection for intellectual property and significantly reduced barriers on trade in textiles?
The Uruguay Round
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.
In order to preserve protectionism, many countries are looking to which of these loopholes associated with antidumping?
The vague definition of dumping
True or false: To limit imports over the set quota, tariff rate quotas are common in agriculture.
True
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
What organization now arbitrates trade disputes and monitors trade policies of member countries?
WTO
which organization was created to implement the GATT agreement
WTO
The ______ is the organization that encompasses GATT, GATS, and TRIPS.
WTO (The World Trade Organization)
One focus of strategic trade policy is to help domestic companies gain
a first mover advantage
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
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
If France decides it wants to make it difficult for other countries to export wine to French businesses and creates bottling standards that don't exist anywhere else in the world, it would be implementing _____ policies as a way to restrict these imports.
administrative trade
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
Tariff rates on ______ products are generally much higher than tariffs on manufactured products or services.
agricultural
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
The TRIPS agreement is based on the notion that inadequate protection of intellectual property _______ the incentive for innovation. (Choose reduces or increases.)
decreases
the group that benefits the most from receiving subsidies is
domestic producers
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
is variously defined as selling goods at below their costs of production or as selling goods in a foreign market at below their "fair" market value
dumping
Strategic trade policy suggests a(n) ______ justification for government intervention in trade.
economic
The WTO is more successful than GATT because the WTO has ______ that make it more effective.
enforcement mechanisms
some countries have a policy that entirely restricts the export of coffee products, this is called 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
one way to ensure that there is sufficient supply of a good within a country is to enact a(n) ____ which discriminates against producers from exporting goods
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
______ trade is the economic policy of not discriminating against exports to or imports from foreign countries.
free
A tiny South Pacific island country produces large quantities of coconut-based products. To protect this industry, the island government mandates that only designated trading companies can import the crop, each of which is allocated the right to import a maximum number of pounds of coconuts each year. 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) _____.
important quota
a tariff import quota provides a lower tariff rate to
imports within the quota
During the 1980s and early 1990s, protectionism ________ around the world . (Choose increased or decreased.)
increased
high tariffs and subsides in the agricultural industry ultimately lead to
increased prices for consumers
the ____ argument was proposed by Alexander Hamilton in 1792 and is by far the oldest economic argument for government intervention
infant industry
Many developing nations use the _____ to justify high tariff rates on nonagricultural goods, but the WTO believes that the nations would benefit from increased international trade by lowering tariffs.
infant industry argument
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
Tariffs, quotas, and subsidies are forms of government _____.
intervention
what is the result of the treat of antidumping action?
it limits the ability of a firm to use aggressive pricing to gain market share in a country
When governments intervene in foreign trade, they often claim they are protecting ______ from unfair foreign competition.
jobs
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
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
ComTek Limited has an order to sell 50,000 central processing units (CPUs) to Brazil, but the Brazilian government stipulated that 35 percent of the component parts of those CPUs must be produced in Brazil. This stipulation is an example of a(n)
local content requirement
For years, the world used a small nation in Central America as a place to assemble goods and benefit from cheap labor. To shift its manufacturing base from simple assembly to full-fledged manufacture of components and finished goods, the nation introduced a policy that stated 35 percent of the value of a product must be produced locally. This is an example of a(n)
local content requirement
When the management team reviewed its government contract on office furnishings, they notices that in order to bid on the project, at least 44 percent of the value of the office furniture had to be produced in the US. this stipulation is an example of a
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.
The basic metals, chemicals, plastics, and machinery and electrical equipment industries account for the ______ of antidumping actions
majority
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
The WTO will continue to work to ______ markets because this will lead to an increase in world income, including an increase in income to developing nations.
open
Today, many nations are _____ new trade policies associated with the WTO.
opposed to
A foreign nation is concerned that all jobs in the computer manufacturing industry will be lost to another country. The government decides to step in and prevent this from happening and implements tariffs on certain imports. The leader is praised for this action and reminds voters of this during the next election. In this situation, government intervention is based on a _____ argument.
political
Higher tariff rates on agricultural products come from a desire to _______ domestic agriculture and traditional farming areas.
protect
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
Paul Krugman believed that a country that attempts to use a strategic trade policy to establish a domestic firm in a dominant position in a global industry, is most likely to
provoke retaliation
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
a foreign government was not enforcing its intellectual rights, which resulted in massive copyright infringements...the underlying motive for intervention by the US government was
retaliation
Government intervention may NOT be well executed due to the possibility that policy will be captured by ______.
special interest groups
A tax on imports that is designated as a fixed monetary amount per unit of import is called a(n) ______ tariff.
specific
f a country assesses a fixed charge of $5 per unit of rice that's imported, it is using a(n) ______ tariff.
specific
A nation that imposes a fixed charge of $3 per barrel of oil imported into the country is relying on which instrument of trade?
specific trade
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. Multiple choice question.
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
The country of Plena imposes an ad valorem tariff of 10 percent on 1 million tons of rice imports, after which an out-of-quota tariff of 80 percent is applied. What trade policy instrument is Plena using?
tariff rate quota
Taxes placed on imports to protect domestic producers from foreign competition and to produce revenue for the government are called
tariffs
one of the reasons why protectionist pressures arose the world during the 1980s was
the different ways many countries found to get around GATT regulations
What's the main reason a country would use export tariffs?
to ensure sufficient supply of a good within the country
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
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 policies to punish rogues 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.
