BUSN 3001 Exam #2 : Chapters 7-11

When the management team reviewed its government contract on office chairs, they noticed that in order to bid on the project, at least 37 percent of the value of the office chairs had to be produced in the United States. This stipulation 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.

nontariff barriers

nontax methods of increasing the cost or reducing the volume of imported goods; 1) subsidies 2)quotas 3)voluntary export restraints 4) antidumping duties

antidumping policies:

punish foreign firms that engage in dumping and protect domestic producers from "unfair" foreign competition

tariff rate quota

quota and tariff hybrid; a lower tariff is applied to imports within the quota than those over it

Voluntary Export Restraint (VER)

quota on trade imposed by exporting country at the request of the importing country's government (to benefit domestic producers)

dumping

selling goods in a foreign market below their cost of production or below their "fair" market value

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

What is free trade?

the absence of barriers to the free flow of goods and services between countries. Government does not attempt to restrict what it's citizens can buy from or sell to another country.

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

How did the US government receive most of its revenue before income tax was introduced?

through tariffs

what is the ultimate goal of the WTO

to bring tariff rates down to 0

Foreign producers agree to __________ imposed by an exporting country because they fear more damaging punitive tariffs or import quotas might follow if they do not.

voluntary export restraint

The theories of Smith, Ricardo, and Heckscher-Ohlin predict that the consequences of free trade include:

1) static economic gains, bc free trade supports a higher level of domestic consumption and more efficient utilization of resources 2) dynamic economic gain because free trade stimulates economic growth and the creation of wealth

While there were a total of 196 cases handled by GATT, records show that between 1995 and 2019, the WTO successfully handled more than _____ trade disputes.

500

import quota

A limit placed on the quantities of a product that can be imported

uruguay round

A series of negotiations under the General Agreement on Tariffs and Trade (GATT) that began in Uruguay in 1986 and concluded in 1994 with agreement to create the World Trade Organization. The Uruguay Round followed earlier GATT negotiations such as the Kennedy Round and the Tokyo Round.

Tariff

A tax on imports that effectively raises the cost of imported products relative to domestic products; oldest and simplest instrument of trade policy

Why do some African Governments have distrust and resentment towards China?

Because, some current Chinese projects have left african governments with billions of $s of debt to China. China often only uses Chinese companies and managers to complete projects, leading to charges of neocolonilism.Some managers have also made racist comments towards their african workers.

True or false: The fact that countries are using the WTO represents an important vote of confidence in the WTO's dispute resolution procedures.

Cutting tariff rates on services Phasing out agriculture subsidies Limiting antidumping laws

The _____ Round started in 2001 and still continues to this day: dealing with issues of agriculture protectionism, intellectual property protection, and other priorities of the WTO.

Doha

Smoot-Hawley Act

Enacted in 1930 by the U.S. Congress, this act erected a wall of tariff barriers against imports into the United States.The Smoot-Hawley Act had a damaging effect on employment abroad. Other countries reacted by raising their own tariff barriers. U.S. exports tumbled in response, and the world slid further into the Great Depression.

__________ was a multilateral agreement established in 1947 whose objective was to liberalize trade by eliminating tariffs, subsidies, import quotas, and the like.

General Agreement on Tariffs and Trade (GATT)

strategic trade policy

Government policy aimed at improving the competitive position of a domestic industry and/or domestic firm in the world market to raise national income

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

Great Britain

Laissez-faire policy

Hands off. No government intervention in business. Free market/free trade

What did Trump want to do in 2020 to counter China's influence in East Africa?

He wanted to negotiate a free trade deal with Kenya, since Africa is only a few years away from being the world's population hub?

What is East Africa's economic, financial, and transportation hub, with a reputation for entrepreneurial activity?

Kenya

first-mover advantage

Occurs when an organization can significantly impact its market share by being first to market with a competitive advantage

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

Ricardo

difference between static gains and dynamic gains

Static Gains means the increase in social welfare as a result of maximized national output due to optimum utilization of country's factor endowments or resources. Dynamic gains from trade, are those benefits which accelerate economic growth of the participating countries.

free trade policy

The elimination of tariffs and nontariff trade barriers so that international trade is expanded.

What are three reasons that caused the global trading system erected under GATT to be strained during the 1980s and early 1990s? (Check all that apply.)

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

In most cases, why are tariffs placed on imports?

To protect domestic producers from foreign competition by raising the price of imported goods

Which organization was created to implement the GATT agreement?

World Trade Organization

Paul Krugman characterizes strategic trade policy as being

a boost to national income at the expense of other countries. Paul Krugman argues that a strategic trade policy aimed at establishing domestic firms in a dominant position in a global industry is a beggar-thy-neighbor policy that boosts national income at the expense of other countries.

embargo

a government order imposing a trade barrier --aka a ban on trade

subsidy

a government payment to a domestic producer to help them (1) compete against low-cost foreign imports and (2) gain export markets Rarely successful at increasing the international competitiveness of domestic producers. Rather, tend to protect the inefficient and promote excess production.

Local Content Requirement (LCR)

a requirement that some specific fraction of a good be produced domestically

command economy

an economy in which production, investment, prices, and incomes are determined centrally by a government.

infant industry argument

an industry should be protected until it can develop and be viable and competitive internationally

countervailing duties

antidumping duties

administrative trade policy

bureaucratic rules designed to make it difficult for imports to enter a country

the fact that countries are using the WTO represents an important vote of ______ in the WTO's dispute resolution procedures.

confidence

planned economy

economy that relies on a centralized government to control all or most factors of production and to make all or most production and allocation decisions

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

enforcement mechanisms

quota rent

extra profit producers make when supply is artificially limited by an import quota

Global telecommunications and _____ have been targeted by the WTO as industries that need expanded trade agreements.

financial services

One focus of strategic trade policy is to help domestic companies gain

first mover advantage

The flow of FDI refers to the amount of FDI undertaken over a given time period (normally a year).

flow

Most economists would agree that the best interests of international business are found in a nation with a

free trade policy

The __________ argument was proposed by Alexander Hamilton in 1792 and is by far the oldest economic argument for government intervention.

infant industrry

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

intellectual property agricultural subsidies services

GATT (General Agreement on Tariffs and Trade)

international treaty that committed signatories to lowering barriers to the free flow of goods across national borders and led to the WTO

How did the Smoot-Hawley Act divert consumer demand away from foreign products?

it implemented a wall of tarrifs

specific tariffs

levied as a fixed charge for each unit of a good imported

ad valorem tariffs

levied as a proportion of the value of the imported good

An implication of trade barriers for business practice is that they

limit a firm's ability to serve a country from locations outside of that country.