BUS 5 187: Smartbook Chp 7

Based on the theories of Ricardo and Smith, the consequences of free trade include _____ economic gains in terms of economic growth and wealth creation.

dynamic

One way the GATT hoped to achieve its objective was by _______

eliminating tariffs

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

enforcement

The strategic trade policy argument may look good in theory, but it practices it may be unworkable. As a result, the case for _____ trade may come to the forefront

free

Political opposition to the WTO has been ______ in many nations

growing

A(n) ______ 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

import quota

A tariff is a tax levied on _______.

imports or exports

Evan works in a country in which the government has stated that 45% of all goods must be produced domestically. What type of requirement does this country have in place?

local content requirement

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

Sergei believes that a Japanese-based company is selling digital cameras well-below market costs in the United States and thereby gaining all of the business. He plans to report this to the Commerce Department who can examine the case based on US _____ policies

antidumping

At the end of the fiscal year, Jack's company sells their bicycles in Thailand at below what it costs to produce the bikes in order to unload excess inventory. This is an example of _____.

dumping

In the past, China enacted a(n) ______ in grain to make sure there was a sufficient supply within the nation

export tariff

During the 1980s, the trend was for _______ protectionism around the world

greater

When governments intervene in foreign trade, they often claim they are protecting ______ from unfair foreign competition

industries

The oldest argument for government intervention in trade where developing nations must protect their domestic industries until they are ready to complete globally is the _______ argument

infant industry

Krugman argues that strategic trade policy should not be embraced because many times governments are influenced by politically important ______ to intervene in the economy

interest groups

What is considered the most common political argument for government intervention in foreign trade?

protecting jobs and industries

Why do exporting countries agree to impose voluntary export restraints?

to avoid future tariffs and import quotas on their products

The main objective of GATT was to liberalize _____ restrictions

trade

Select all that apply: What are two reasons why countries should remain focused on opening markets?

1. because average tariffs on services remains higher than on industrial goods 2. because of high tariff rates on imports of selected goods from developing nations into developed nations

Select all that apply: Which two groups are negatively impacted when an import tariff is enacted?

1. consumers 2. foreign producers

Select all that apply: What two outcomes typically occur as the result of local content regulations?

1. local content regulations provide protect for a domestic producer 2. the restrictions on imports raise the prices of imported components which lead to higher prices for the consumer

Select all that apply: What are the two reasons why countries should remain focused on opening markets?

1. because of high tariff rates on imports of selected goods from developing nations into developed nations 2. because average tariffs on services remains higher than on industrial goods

Import quotas are based on the _____ of a good

quantity

_____ 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

Select all that apply: What are three main instruments of trade policy?

1. import quotas 2. subsidies 3. voluntary export restraints

Select all that apply: Why would a country enact an export tariff?

1. to discriminate against exports in order to guarantee a sufficient supply of a good within the country 2. to reduce exports from an industry sector, often for political reasons

Select all that apply: Why would a country enact an export tariff?

1. to reduce exports from an industry sector, often for political reasons 2. to discriminate against exports in order to guarantee a sufficient supply of a good within the country

The net effect of high tariff barriers and subsidies on agricultural products is to _______ prices to consumers

raise

Which instruments of trade policy has been in use the longest?

tariffs

True or False: Since countries are using the WTO to resolve disputes, it is an indication that the organization is successful in this responsibility.

true

True or False: The United States has imposed trade sanctions on other countries in order to protect and promote human rights.

true

As the text notes, unrestricted free trade is impossible if there is a lack of _____ between nations

trust

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

Japan imposed a quota on auto exports into the US as a result of pressure from the American government. This action is an example of a(n) ______

voluntary export restraint

What measure did many countries use to get around regulations in the 1980s?

voluntary export restraints

Select all that apply: In its first two decades, the WTO has been successful based on what two reasons?

1. countries involved in formal procedures for trade disputes have adopted WTO recommendations 2. member countries have faith in the WTO's dispute resolution procedures

What organization now arbitrates trade disputes and monitors trade policies of member countries?

WTO

Krugman promoted the idea that if each country seeks to follow a strategic trade policy to protect its interest, this may lead to _____.

a trade war

When manufactures export a product to another country at a price either below the price charged in its home market or below its cot of production, as a way to get rid of excess product, it is called _______.

dumping

Strategic trade policy suggests a(n) ______ justification of government intervention in trade

economic

What can a country use to counteract a country that uses subsides to support an industry?

establish anti-dumping regulations

______ trade is the economic policy of not discriminating against exports to or imports from foreign countries.

free

In order to win a contract from Mexico, QVB Autos Manufacturing must make 65% of the components parts for their automobiles in Mexico. This is an example of a ____

local content requirement

Developed countries have imposed local content requirements in order to ______.

protect local jobs from foreign competition

Government intervention may NOT be well executed due to the possibility that policy will be captured by

special interest groups

When the US government "bailed out" the automobile industry starting in 2009 by loaning money to keep General Motors and other automakers in business, it was an example of a(n) ________.

subsidy

According to the text, reducing many of the tariffs that are still in existence will lead to

substantial gains in global trade

Taxes placed on imports to protect domestic producers from foreign competition and to produce revenue for the government are ____

tariffs

True o False: Government do not always act in the national interest when intervening in the economy

true

By limiting or banning certain products through regulations, governments can protect consumers from products that are _____.

unsafe

Brazil was concerned about a surge of vehicles coming in from Mexico and considered protectionist measures. When Mexico responded by limiting the shipments of vehicles to Brazil it was using a(n) ______.

voluntary export restraint

The ultimate goal of the WTO is to reduce tariff rates to

zero

True or False: Strategic trade policy does not advocate for government intervention in international trade

false

True or False: Countervailing duties are placed on foreign firms to encourage them to sell products below their "fair" market value

false

Member nations hoped that the WTO would be a facilitator of future trade deals especially in the area of _______.

services

Many Western countries imposed trade sanctions against _______ during the 1980s and 1990s to encourage the country to improve human rights policies

south africa

According to strategic trade policy, governments should use _____ to support development to work aimed at commercializing target technologies

subsidies

Protectionism measures in the agriculture industry encourage the overproduction of products which are then typically purchased by

the government

Select all that apply: Which two groups are positively impacted when an import tariff is enacted?

1. domestic producers 2. government

Select all that apply? What are the two components of strategic trade policy?

1. governments should intervene to assist firms in overcoming barriers to entry created by foreign firms due to first-mover advantages 2. governments should subsidize promising domestic firms in emerging industries

Select all that apply: What are two drawbacks of government intervention in free trade?

1. it invites retaliation and trade wars 2. it protects inefficient industries

Select all that apply: What are the four issues considered a priority on the WTO agenda?

1. lack of strong protection of intellectual property 2. high tariff rates on goods and services 3. high level of protectionism in agriculture 4. antidumping policies

Select all that apply: Under the umbrella of GATT, the two sister bodies of GATS and TRIPS focus on which two issues?

1. services 2. intellectual property

Select all that apply: What are two ways trade barriers hamper a firm's productive activities?

1. they raise the cost of exporting products 2. quotas limit the ability to serve a country from outside locales

What industry tends to benefit the most from subsidies in most countries?

agriculture

The infant industry argument for trade intervention states that developing countries need to support new industries until they are strong enough to _______.

complete globally

In 2003, Japan decided to ban imports of beef from America because of the threats of mad cow disease. This ban was implemented to directly protect ________.

consumers

Countries can use ______ duties on an offending import to offset dumping

countervailing

Which policy is intended to protect domestic producers from foreign competitors who sell goods in foreign markets below their costs of production?

antidumping policy

An advocate of the strategic trade policy argument would agree that a government should use _____ to help promising businesses that are active in emerging industries

subsidies

When considering the benefit if free trade in neighboring countries, one government might favor lowering trade barriers but won't do it because of a lack of ________ in the other nation.

trust