ch 7

________ represent a major driver of market globalization. A) Continued reductions B) Export controls C) Import controls D) Prohibitive tariffs

A) Continued reductions

In Cadmia, foreign-owned automobile manufacturing companies must be managed by a Cadmian national and most board members must be Cadmian citizens. This exemplifies ________. A) FDI and ownership restrictions B) administrative and bureaucratic procedures C) Regulations and technical standards D) Anti-dumping duty

A) FDI and ownership restrictions

Which of the following statements is true about protection of an infant industry? A) Governments can impose temporary trade barriers on foreign imports to ensure that young firms gain a large share of the domestic market. B) Such protection is easy to remove. C) Protected companies become more efficient and produce products with lower prices. D) Protecting infant industries rarely allows countries to develop a modern industrial sector.

A) Governments can impose temporary trade barriers on foreign imports to ensure that young firms gain a large share of the domestic market.

What is the primary ethical concern regarding the import of products from poor countries? A) Higher tariffs hurt poor nations more than developed nations. B) Nations lacking economic freedom cannot afford to export. C) Emerging nations use government intervention to protect domestic industries. D) Lack of subsidies adversely affect poor countries.

A) Higher tariffs hurt poor nations more than developed nations.

________ are transfer payments or tax concessions made directly to foreign firms to entice them to invest in the country. A) Investment incentives B) Antidumping duties C) Countervailing duties D) Quotas

A) Investment incentives

Members of ________ benefitted the most from the maquiladora program. A) NAFTA B) EFTA C) EU D) MERCOSUR

A) NAFTA

Which of the following is a method used by some manufacturers to avoid paying high tariffs? A) assemble products in the target market B) produce a large number of less expensive items in the target market C) employ highly skilled workers in the export location regardless of the cost D) ship products to fewer international locations

A) assemble products in the target market

NAFTA is an example of which of the following levels of regional integration? A) free trade area B) political union C) economic union D) common market

A) free trade area

Products are classified under about 8,000 different unique codes in the ________ schedule, a standardized system used worldwide. A) harmonized tariff B) protective tariff C) revenue tariff D) specific tariff

A) harmonized tariff

Protectionist policies may also lead to ________. A) price inflation B) increased choices for buyers C) easy availability of products D) high incentive to improve quality

A) price inflation

Which of the following is responsible for determining the admission of new member countries to the EU? A) the Council of the European Union B) the European Parliament C) the European Court of Justice D) the European Commission

A) the Council of the European Union

Which of the following entry strategies do most firms use in the absence of high tariffs? A) FDI B) licensing C) joint ventures D) exporting

D) exporting

Which of the following exemplifies local content requirements? A) Titania charges a 27 percent tariff on imported dairy products. B) At least 40 percent of the value of all computers assembled in Titania must be from parts or other inputs produced in Titania. C) Titania bans imports of firearms. D) Titania imposes extensive inspections and bureaucratic procedures on the import of alcoholic beverages.

B) At least 40 percent of the value of all computers assembled in Titania must be from parts or other inputs produced in Titania.

________ are checkpoints at the ports of entry in each country where government officials inspect imported products and levy tariffs. A) Nontariff trade barriers B) Customs C) Quotas D) Subsidies

B) Customs

Which of the following economic blocs includes Switzerland as a member country? A) EU B) EFTA C) CAN D) APEC

B) EFTA

________ refers to a government measure intended to manage or prevent the export of certain products or trade with certain countries. A) Quota B) Export control C) Customs D) Subsidy

B) Export control

Which of the following was the first major effort to systematically reduce trade barriers worldwide? A) WIPO B) GATT C) NAFTA D) WTO

B) GATT

Which of the following has occurred as a result of NAFTA? A) workers at maquiladoras have instigated union strikes B) Mexico's per-capita income has risen substantially C) Canadian exports to Europe and Asia have doubled D) foreign investors have been replaced by U.S. firms

B) Mexico's per-capita income has risen substantially

________ is at odds with free trade, the unrestricted flow of products, services, and capital across national borders. A) Lower-cost import B) Trade openness C) FDI D) Factors of production

B) Trade openness

Nontariff trade barriers have increased in popularity partly because they ________. A) generate profits for foreign firms B) are easier to conceal from the WTO C) restrict trade by imposing direct tax D) have been fairly successful in eliminating smuggling along international borders

B) are easier to conceal from the WTO

Firms use foreign trade zones to ________. A) consolidate market monopolies B) assemble foreign dutiable materials and components into finished products, which are then re-exported C) create employment opportunities for the local people D) meet quota demands established by the government

B) assemble foreign dutiable materials and components into finished products, which are then re-exported

Tariffs that are ad valorem are ________. A) based on the weight or size of the imported product B) assessed as a percentage of the imported product's value C) intended to provide a steady flow of income for the government D) charged regardless of the imported product's value

B) assessed as a percentage of the imported product's value

The Chinese government's policy of requiring foreign firms to enter the Chinese market via joint ventures is intended to ________. A) limit the amount of FDI B) create jobs for Chinese workers C) protect China's national security D) stimulate foreign investment

B) create jobs for Chinese workers

Members of ________ agree to adopt common tariffs and non-tariff barriers that are applied to imports from nonmember countries. A) free trade areas B) customs unions C) the NAFTA D) the EFTA

B) customs unions

A formal arrangement between two or more countries to reduce or eliminate tariffs is known as a(n) ________. A) quota arrangement B) free trade agreement C) memorandum of association D) memorandum of understanding

B) free trade agreement

Typically, administrative and bureaucratic procedures ________. A) speed up the investment activities of firms B) hinder the activities of importers C) boost investment activities D) harm late importers

B) hinder the activities of importers

A quantitative restriction on specific imports for a set period of time is referred to as ________. A) tariff B) quota C) investment barrier D) country risk

B) quota

Which of the following may allow a manufacturer to practice dumping? A) countervailing duties B) subsidies C) currency control D) import license

B) subsidies

The ________ is the simplest and most common level of regional integration. A) common market B) political union C) customs union D) free trade area

D) free trade area

Which of the following situations is an example of country risk? A) Fiesta Corp. is an automobile manufacturer based in the U.S. The company's negotiation attempts with China to open a manufacturing factory in Beijing failed owing to cultural differences. B) Frostees Inc. is a food and beverages company based in the U.S. Its attempt to set up an outlet in Thailand failed primarily owing to a misinterpretation of the memorandum of understanding by a potential business partner in Thailand. C) Alpha Corp., a rice manufacturer based in Pakistan, suffered losses when the U.S. Department of Commerce decided to impose tariffs on the import of paddy rice to avoid competition for the domestic industry. D) Tamiaz LLC is a U.S. based manufacturer of clothing with outlets in China, Vietnam, and India. The company incurred a loss due to delayed payments from India owing to fluctuations in the currency exchange rates.

C) Alpha Corp., a rice manufacturer based in Pakistan, suffered losses when the U.S. Department of Commerce decided to impose tariffs on the import of paddy rice to avoid competition for the domestic industry.

________ refer to rules that limit the ability of foreign firms to invest in certain industries or acquire local firms. A) Quotas B) Regulations and technical standards C) FDI and ownership restrictions D) Administrative and bureaucratic procedures

C) FDI and ownership restrictions

Which of the following Asian countries had launched an ambitious program of industrialization and export-led development that contributed to its rise from poverty in the 1940s to one of the world's wealthiest countries by the 1980s? A) Indonesia B) China C) Japan D) India

C) Japan

Which of the following is an example of a customs union? A) NAFTA B) ASEAN C) MERCOSUR D) EFTA

C) MERCOSUR

Which of the following is an example of nontariff trade barrier? A) Gayle Inc. is a U.S.-based retailer that imports cosmetic products manufactured in Thailand. These products pass through U.S. customs and are subject to a 5 percent import duty. B) The U.S. imports chocolates manufactured in Belgium that cost $65 a box with taxes. C) The U.S. Department of Commerce announced that white sugar imports will be limited to 7,500 million tons. D) Spices imported from India to the U.S. for sale in the domestic market are subject to a 10 percent import duty.

C) The U.S. Department of Commerce announced that white sugar imports will be limited to 7,500 million tons.

Which of the following is the most likely reason for the establishment of the European Community? A) broaden the power of communism within East Germany B) create strict tariffs for trade and international business C) combine forces against the powerful former Soviet Union D) establish judicial procedures to handle trade violators

C) combine forces against the powerful former Soviet Union

Governments sometimes retaliate against subsidies by imposing ________, tariffs on products imported into a country to offset subsidies given to producers or exporters in the exporting country. A) local content requirements B) investment incentives C) countervailing duties D) antidumping duties

C) countervailing duties

Restrictions on the outflow of hard currency from a country or on the inflow of foreign currencies is called ________. A) antidumping duty B) currency appreciation C) currency control D) currency depreciation

C) currency control

Which of the following terms refers to two or more geographically connected nations in pursuit of free trade relations? A) grey market B) trading diaspora C) economic bloc D) business strategic unit

C) economic bloc

A ________ is an area within a country that receives imported goods for assembly or other processing and subsequent re-export. A) single market B) trade bloc C) foreign trade zone D) common market

C) foreign trade zone

Governments impose offensive barriers to ________. A) protect domestic industries B) promote national security C) increase employment D) safeguard the interests of special interest groups

C) increase employment

The ________ is the level of regional integration that remains an ideal and is yet to be achieved. A) free trade area B) common market C) political union D) customs union

C) political union

Governments impose export controls for the purpose of ________. A) improving available opportunities for domestic sales B) boosting derived demand in the domestic market C) preventing the export of certain products to certain countries D) boosting derived demand in foreign markets

C) preventing the export of certain products to certain countries

Which of the following refers to an often-used form of nontariff trade barrier? A) premium B) subsidy C) quota D) grant

C) quota

Blocking imports ________. A) increases the availability of raw materials B) increases the availability of products sold in the home market C) reduces the availability of products sold in the home market D) decreases the cost of products sold in the home market

C) reduces the availability of products sold in the home market

The so-called ________ specifies that a certain proportion of products and supplies, or of intermediate goods used in local manufacturing, must be produced within the bloc. A) safe harbor B) local content requirement C) rules of origin requirement D) ad valorem tariff

C) rules of origin requirement

Which of the following is true with regard to protectionism? A) It increases the availability of raw materials for domestic industries. B) It decreases the cost of products sold in the home market. C) It increases the availability of products sold in the home market. D) It can trigger retaliation from foreign governments, which reduces sales prospects for exports.

D) It can trigger retaliation from foreign governments, which reduces sales prospects for exports.

Under the ________, Canada, Mexico, and the United States have eliminated nearly all tariffs on product imports from each other. A) APEC B) FTAAP C) GATT D) NAFTA

D) NAFTA

Which of the following is an example of an offensive rationale for government intervention? A) The government of Erbia imposes trade restrictions on the export of plutonium to certain countries. B) The government of Berylia imposes a trade barrier to curtail the import of low-priced products from manufacturers in the developed economies. C) The government of Argonia imposes investment barriers to safeguard special interest groups. D) The government of Rhodia requires foreign companies to enter its huge markets through joint ventures with local firms.

D) The government of Rhodia requires foreign companies to enter its huge markets through joint ventures with local firms.

Governments support domestic industries by ________. A) incentivize dumping B) increase the costs of production of domestic industries C) alienate domestic industries D) adopting procurement policies that restrict purchases to home-country suppliers

D) adopting procurement policies that restrict purchases to home-country suppliers

Nations pursuing regional integration seek to ________. A) increase the scale of the marketplace for firms inside the economic bloc B) help firms increase the scale of operations and enhanced productivity C) attract direct investment from outside the bloc D) all of the above

D) all of the above A) increase the scale of the marketplace for firms inside the economic bloc B) help firms increase the scale of operations and enhanced productivity C) attract direct investment from outside the bloc

An import license refers to a(n) ________. A) tax charged on an imported product whose price is below usual prices in the local market B) list of complex procedures imposed on importers that hinder trade and investment C) complicated system of establishing quotas D) government authorization granted to a firm for importing a product

D) government authorization granted to a firm for importing a product

The United Nations estimated that trade barriers alone cost developing countries ________ in lost trading opportunities with developed countries every year. A) $100 billion B) $200 billion C) less than $100 billion D) more than $500 billion

D) more than $500 billion

A government policy that impedes trade through means other than explicit tariffs is known as a(n) ________. A) investment incentive B) subsidy C) maquiladora D) nontariff trade barrier

D) nontariff trade barrier

Governments impose defensive barriers to ________. A) generate tax revenues B) increase employment C) pursue strategic policy objectives D) promote national security

D) promote national security

In 1938, the United States passed the Smoot-Hawley Tariff Act, which ________. A) opened foreign markets for U.S. agricultural products B) led to the consolidation of the U.S. banking system C) instituted strict regulations to contain intellectual property theft D) raised U.S. tariffs to near-record highs of more than 50 percent

D) raised U.S. tariffs to near-record highs of more than 50 percent

A countervailing duty slows the import of products or services and hinders the investment activities of firms.

FALSE

A revenue tariff aims to protect domestic industries from foreign competition.

FALSE

Currency controls harm companies that export their products from the host country, but favor those that rely heavily on imported parts and components.

FALSE

Export-led development refers to government policies that impose high tariffs and quotas on imports from the developed world.

FALSE

FDI and ownership restrictions increase the competitive advantage of foreigners while diminishing that of the local firms.

FALSE

Governments impose defensive barriers to pursue strategic or public policy objectives, such as increasing employment or generating tax revenues.

FALSE

Governments impose offensive barriers to safeguard industries, workers, and special interest groups and to promote national security.

FALSE

Governments intervene in international trade and investments in order to protect the interests of foreign investment firms.

FALSE

Increasing trade barriers are a major factor in the growth of developing nations and global commerce.

FALSE

MERCOSUR, an economic bloc in Latin America, is an example of an economic union.

FALSE

Nations with economies based on agriculture and textile manufacturing generate more economic revenue than do nations with many high-tech industries.

FALSE

Obtaining economic development incentives from host-or home-country governments increases the cost of trade and investment barriers.

FALSE

Tariffs and most nontariff trade barriers apply to FDI, whereas investment barriers apply to exporting.

FALSE

Tariffs rarely vary with the form of an imported product.

FALSE

The WTO was created in order to reduce tariffs through continuous negotiations among member nations.

FALSE

The level of integration of free trade areas is greater than that of customs unions.

FALSE

A nontariff trade barrier is a government policy, regulation, or procedure that impedes trade through means other than explicit tariffs.

TRUE

Dumping violates WTO rules because it amounts to unfair competition.

TRUE

Governments often impose trade barriers to restrict imports of products or services seen to threaten national assets.

TRUE

Harmonization of standards is one of the steps taken by the EU to become an economic union.

TRUE

If high tariffs are present, managers may consider other strategies, such as FDI, licensing, and joint ventures that allow the firm to operate directly in the target market, avoiding import barriers.

TRUE

Maquiladoras refer to export-assembly plants in northern Mexico along the U.S. border that produce components and typically finished products destined for the United States on a tariff-free basis.

TRUE

NAFTA is a treaty entered into by Canada, Mexico, and the United States.

TRUE

One approach for reducing exposure to trade barriers is to have exported products classified in the appropriate harmonized product code.

TRUE

Regional integration greatly increases the scale of the marketplace for firms inside the economic bloc.

TRUE

Singapore and South Korea used export-led development to achieve high growth from the 1970s onward.

TRUE

Subsidies can help counterbalance harmful consequences that disproportionately affect the poor.

TRUE

Subsidies may allow a manufacturer to practice dumping-that is, to charge an unusually low price for exported products.

TRUE

The GATT created a forum for resolving trade disputes.

TRUE

The global recession and financial crisis that began in 2008 arose largely from inadequate regulation and insufficient enforcement of current regulations in the banking and finance sectors.

TRUE