MGT 302: Chapter 8

What are two main reasons countries should remain focused on opening markets?

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

Which three industries are more likely to be targeted by antidumping actions?

Chemicals, basic metal and plastics

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

Consumers and foreign producers

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

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

Countries can use _____ duties on an offending import to offset dumping.

countervailing

In the first two decades, the WTO has been successful based on what two reasons?

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

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

Strategic trade policy suggests a(n) _____ justification for government intervention in trade.

economic

Protecting intellectual property, such as patents, trademarks and copyrights, can lead to which two consequences?

economic growth and rising living standards

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

enforcement

What were two results of the Smoot-Hawley Act?

every industry encountered tariff barriers and US exports declined

Goods that are taxed as they ship out of a country have an _____ tariff.

export

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 _____ trade.

free

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

giving recipients an unfair competitive advantage.

During the 1980s, the trend was for _____ protectionism around the world.

greater

Tariff rates on agricultural products tend to be _____ tariff rates on a manufactured good.

higher than

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

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

industries

Patents, trademarks and copyrights are designed to protect _____ property.

intellectual

Under the umbrella of GATT, the two sister bodies of GATS and TRIPS focus on which two issues?

intellectual property and services

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

interest groups

Evan works in a country in which the government has stated that 65% of all goods must be produced domestically. What type of requirement does this country have in place?

local content requirement

As a result of Doha Round, _____ countries are entering into multilateral and bilateral trade agreements.

more

In response to the apparent failure of the current Doha Round, many nations have implemented _____.

multilateral trade agreements

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

national security

Based on the economic analysis of tariffs, it can be said that they are which two of the following?

pro-producer and anti-consumer

Developed countries have imposed local content requirements in order to

protect local fobs from foreign competition.

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

protecting jobs and industries

Import quotas are based on the _____ of a good.

quantity

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

quota rent

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

raise

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

services

The Uruguay Round extended trading policy to cover _____.

services

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

specific

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

subsidies

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

subsidies

What are three main instruments of trade policy?

subsidies, voluntary export restraints and import quotas

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

tariffs.

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

the government

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

the government

The main objective of GATT was to liberalize _____ restrictions.

trade

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

trust

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.

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 _____ 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

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

Domestic producers and government

What are the two events that pose a threat to the world trading system?

Election of Donald Trump and Britain's withdrawal from the European Union

What were the first two industries targeted by the WTO as part of its effort to include regulations governing foreign direct investment?

Global telecommunications and financial services

Which country was the first to officially follow a policy of free trade in the mid 1800s?

Great Britain

What are the four issues considered a priority on the WTO agenda?

High tariff rates on goods and services, high level of protectionism in agriculture, antidumping policies and lack of strong protection of intellectual property

With regard to strategic trade policy, what are two actions governments take in response to pressure from business firms?

Increased protectionism and push for more open markets and freer trade

What are two drawbacks of government intervention in free trade?

It protects inefficient industries and it invites retaliation and trade wars

The economic success of _____ put a strain on the world trading system in the 1980s and promoted protectionism measures.

Japan

In its first two decades, the WTO has been successful based on what two reasons?

Member countries have faith in the WTO's dispute resolution procedures and countries involved in formal procedures for trade disputes have adopted WTO recommendations

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

Pressure or punish "rogue states" and grant preferential trading terms to countries it wants to build relations with

What are two ways trade barriers hamper a firm's productive activities?

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

Many Western countries imposed trade sanctions against _____ during the 1980s and 1990s to encourage the country to improve human rights 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 while those exceeding the quantity are charged at a higher rate.

Tariff rate quotas

What round of GATT negotiations provide enhanced protection for intellectual property and significantly reduce barriers on trade in textiles?

The Uruguay Round

Which two of the following outcomes typically occur with the implementation of local content regulations?

The restrictions on imports raise the prices of imported components which lead to higher prices for the consumer and local content regulations provide protection for a domestic producer

Why do exporting countries agree to impose voluntary export restraints?

To avoid damaging tariffs and import quotas on their products

What are two objectives for levying an export tariff?

To reduce exports from an industry sector, often for political reasons and to raise revenue for the government

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

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.

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

Government policies can impact _____, especially if the government follows a strategic trade policy where tariffs, quotas and/or subsidies are used to assist industries in establishing a competitive advantage in the global economy.

businesses