International Business Ch 7: Govt Policy and Intl Trade

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

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

What policies are intended to protect domestic producers from foreign competitors that dump their products at below fair market value?

antidumping

Quota rent provides producers with _____.

extra profit

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 compete globally is the ______ argument.

infant industry

As noted in the text, in the past, the US government has tried to convince the Chinese government to enforce its _____ laws by threatening punitive trade sanctions.

intellectual property

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

protecting jobs and industries

Ad valorem tariffs are based on the ____ of a product.

value

Which country is pointed to as the master of administrative trade policies?

Japan

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

agriculture

Which two groups are negatively impacted when an import tariff is enacted? (Check all that apply.)

foreign producers and consumers

Import quotas are based on the _____ of a good.

quantity

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

true

When supply of a product is artificially limited by an import quota, a producer receives extra profit that is known as _____.

quota rent

Subsidies are a form of payment that is provided by _____.

the government

In an attempt to bring down the Communist government in ______, the US initially maintained long-running trade sanctions against the country.

Cuba

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

South Africa

What are three main instruments of trade policy?

voluntary export restraints, subsidies and import quotas

Company ABC in Scotland exports a pound of cheese to the US for $100. Based on the value of the cheese, the US places a 20% tax on it. What type of tariff is this?

ad valorem

Governments implement _____ trade policies that are designed to make it difficult for imports to enter a country.

administrative

Sometimes governments pay subsidies to help companies survive challenging economic climates. In effect, these companies receive

an unfair competitive advantage

During the 1970s, Congress did not allow US industries to export crude oil production. This action is an example of an export _____.

ban

For national security reasons, the _____ industry is often protected by the national government.

defense

Goods that are taxed as they ship out of a country have a(n) ____ tariff.

export

True or false: GATT has NOT recognized the infant industry argument as a legitimate reason for protectionism.

false

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

free

A consequence of subsidies paid to companies during difficult economic times is

giving recipients an unfair competitive advantage

Which two groups are positively impacted when an import tariff is enacted? (Check all that apply.)

government and domestic producers

What are two ways a government uses intervention in trade as a foreign policy instrument?

grant preferential trading terms to countries it wants to build relationships with and pressure or punish rogue states

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

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

local content requirement

Governments occasionally protect certain industries, like defense-related industries, for ______ reasons.

national security

A tax on imports that is levied as a fixed charge per unit of an imported good is called a(n) ______ tariff.

specific

______ permit a specific quantity of imported goods to enter the country under a reduced rate while those exceeding the quantity are charged at a higher rate.

tariff rate quotes

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

tariffs

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

tariffs

In 2003, Libya announced it would terminate a program to build nuclear weapons. This is thought to be a result of ______ placed against Libya by the United States.

trade sanctions

True or false: If Italy places a fixed charge of $5 for every unit of rice imported, that $5 is an example of a specific tariff.

true

True or false: To limit imports over quota, tariff rate quotas would be used for agricultural products to limit the amount entering a country.

true

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

unsafe

The trade sanctions on Iraq that were imposed in 1991 after the Gulf War are an example of

using trade policy to punish rogue 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

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

How did the Chinese government respond when the U.S. government tried to pressure it to enforce its intellectual property laws?

China initially threatened to raise trade barriers

The infant industry argument has potential negative consequences, including

causing infant industries to lack efficiency

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

compete globally

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

consumers