Chapter 7 International Business

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

The argument for strategic trade policy suggests a(n) ______ justification for government intervention in trade.

economic

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

GATT was put into place under the leadership of the U.S. government as a way to

foster free trade.

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 oldest argument for government intervention in trade in which developing nations must protect their domestic industries until they are ready to compete globally is the ______ argument.

infant industry

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 percent of the component parts of their vehicles in Mexico. This is an example of a(n)

local content requirement.

A government would impose administrative trade policies in order to

make it difficult for imports to enter a country.

In _____ Britain withdrew from the European Union following _____.

2016, Brexit

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

What are three reasons that caused the global trading system erected under GATT to be strained during the 1980s and early 1990s?

Countries finding ways to get around GATT regulations The economic success of Japan The persistent trade deficit in the United States

Which function did the creators of the WTO hope it would perform?

Facilitate future trade deals

True or false: Krugman advocates that it is logical to expect the U.S. government to ignore special-interest politics when forming policy.

False

In the mid-1800s, ______ was the first nation to officially follow free trade.

Great Britain

What are four main instruments of trade policy?

Import quotas Tariffs Local content requirements Antidumping duties

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

Which economist was a key figure in the early free trade movement in Great Britain?

Ricardo

Protecting intellectual property, through patents, trademarks, and copyrights, fosters innovation and can lead to what two results? (Check all that apply.)

Rising living standards Economic growth

Many Western countries imposed trade sanctions against ______ during the 1980s and 1990s to encourage the country to improve human rights policies by dropping its apartheid policies.

South Africa

______ 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 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

What are two ways trade barriers hamper a firm's productive activities? (Check all that apply.)

They raise the cost of exporting products. Quotas limit the ability to serve a country from outside locales.

What's the main reason a country would use export tariffs?

To ensure sufficient supply of a good within the country

True or False: The United States has imposed trade sanctions on other countries as a way to protect and promote human rights in those nations.

True

True or false: To limit imports over the set quota, tariff rate quotas are common in agriculture.

True

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 (blank) the incentive for innovation.

reduces

A tax on imports that is designated as a fixed monetary amount per unit of import is called a(n) ______ tariff.

specific

If a country assesses a fixed charge of $5 per unit of rice that's imported, it is using a(n) ______ tariff.

specific

A tax on goods coming into or leaving a country is called a(n) ______.

tariff

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

tariffs.

Unilateral lowering of trade barriers has not occurred mostly due to a lack of _____ among governments.

trust

Paul Krugman would agree that while strategic trade policy seems appealing in theory, in reality, strategic trade policy is _____.

unworkable

Following Brexit, Great Britain withdrew from the European Union in 2016.

True

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

Higher tariff rates on agricultural products come from a desire to

protect domestic agriculture from foreign competition.

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.

What occurs when a company practices dumping?

The firm is unloading excess production in a foreign market.

The ______ argument for trade intervention states that developing countries need to support new industries until they are strong enough to compete globally.

infant industry

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

jobs

Today, many nations are _____ new trade policies associated with the WTO.

opposed to

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

GATT rules initially only dealt with trade in manufactured goods and commodities. With the increase in trade in the ______ sector, the Uruguay Round sought to establish agreements to cover this area.

service

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

During the 1980s and 1990s, the world trading system was strained by the persistent trade deficit in the world's largest economy, which was:

the United States.

Krugman argues that if each country seeks to follow a strategic trade policy to protect its interests, this may lead to a ______.

trade war

______ is the acronym for the multilateral agreement established in 1947 aimed at the abolition of quotas, tariffs, and subsidies in order to liberalize trade.

GATT

Which three industries are frequently targeted by antidumping actions? (Check all that apply.)

Plastics Basic metal Chemicals

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 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

What are the four issues currently at the forefront of the WTO agenda?

lack of intellectual property protection protectionism in agriculture high tariffs on nonagricultural goods and services antidumping policies

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

The WTO reports that approximately _____ of all antidumping actions reported involve the basic metals, chemicals, plastics, and electrical equipment industries.

70%

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

The WTO is more successful than GATT because the WTO has ______ that make it more effective.

enforcement mechanisms

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

free

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

GATT negotiations continue to deal with additional issues such as (Check the three that apply.)

agricultural subsidies. services. intellectual property.