Chapter 14

True

A customs union is a free trade area with a common external tariff. a. True b. False

a free trade area with a common external tariff.

A customs union is: a. a group of customs laws intended to reduce tariffs and stimulate trade. b. a free trade area with a common external tariff. c. a free trade area with no tariffs between the member nations. d. a union of nations that promotes lower tariffs for international trade.

True

A free trade area is a group of two or more sovereign countries in which import duties and other trade barriers are reduced or eliminated. a. True b. False

a group of two or more countries in which import duties and other trade barriers are reduced or eliminated.

A free trade area is: a. two countries that have a common external tariff. b. a geographic area between two countries where there are no tariffs. c. a group of two or more countries in which import duties and other trade barriers are reduced or eliminated. d. a geographic area between two countries where tariffs are reduced, but not necessarily eliminated.

U.S. shipments to Mexico faced tariffs two-and-a-half times the average U.S. rates.

An argument that was used in support of NAFTA's passage in the U.S. was that: a. U.S. shipments to Mexico faced tariffs two-and-a-half times the average U.S. rates. b. tougher environmental laws in Mexico would eventually be applied to all three countries. c. lower wages in Mexico would lead to more jobs being created in Mexico. d. the cultures of all three countries would not be affected by NAFTA.

an issue concerning a particular area of the economy.

An example of a sectoral issue is: a. a dispute regarding the tariffs on a product. b. an issue concerning a particular area of the economy. c. an issue concerning the environmental effects of a product. d. a dispute regarding quotas.

The Extraordinary Challenge Committee.

Appeals of a binational panel decision may be taken to: a. The World Trade Organization. b. the court of law in the country in which the dispute took place. c. The Extraordinary Challenge Committee. d. The NAFTA Fair Trade Commission.

True

Canada and the United States are each other's largest trading partners. a. True b. False

True

Canada, Mexico, and the United States phased out, over a ten-year period, all tariffs on textile and apparel goods that met the North American rules of origin. a. True b. False

True

For most products undergoing a transformation in North America, the rule of origin is based on its tariff classification. a. True b. False

its tariff classification.

For most products undergoing a transformation in North America, the rule of origin will be based on: a. its tariff classification. b. the source of the raw material used in the production of the product. c. its point of origin. d. the product's label.

all of these are correct.

Goods that may not contain any non-North American parts or materials in order to obtain NAFTA tariff rates include: a. minerals mined in North America. b. vegetables grown in North America. c. live animals born and raised in North America. d. scrap derived from production in North America. e. all of these are correct.

10 digits.

Harmonized tariff schedules break down product classifications into: a. 6 digits. b. 8 digits. c. 10 digits. d. 12 digits.

True

In Kirk v. New York State Education Department, the court compared the NAFTA provision about professional licensing of veterinarians to that of New York and ruled that under the Supremacy Clause of the U.S. Constitution, the NAFTA provision preempted the New York law. a. True b. False

False

In Samsonite Corporation v. United States, the Court ruled out the lower's court decision as the luggage handles were assembled in Mexico and therefore are not subjected to duties. a. True b. False

processing of the metal strips was a fabrication, and therefore not qualified for duty-free treatment.

In Samsonite v. United States, the court found that: a. Samsonite luggage was causing serious injury to the Canadian luggage market. b. processing of the metal strips was a fabrication, and therefore not qualified for duty-free treatment. c. the processing of the metal strips was a mere assembly and therefore qualified for duty-free treatment. d. Samsonite luggage did not cause serious injury to the Mexican luggage industry.

False

Mexico's marking and labeling requirements are very easy to comply with and help promote trade with both the U.S. and Canada. a. True b. False

True

NAFTA eliminated all tariffs on telephones, cellular phones, and trade in communicates equipment in 2004. a. True b. False

True

NAFTA has had a modest positive effect on U.S. net exports, income, investment, and jobs. a. True b. False

False

NAFTA members have raised tariffs on products that are not North American to stimulate trade between the U.S., Canada, and Mexico. a. True b. False

False

NAFTA sets environmental standards for all three countries that were met in 2004. a. True b. False

True

NAFTA tolerates the imposition of regulations when they are based on health or safety standards and are not implemented as non-tariff barriers. a. True b. False

the U.S.-Canada Free Trade Agreement.

NAFTA was based on: a. the U.S.-Canada Free Trade Agreement. b. the General Agreement on Tariffs and Trade. c. the Generalized System of Preferences. d. the North American Agreement on Labor Cooperation.

False

NAFTA was built on the Mexico-Canada Free Trade Agreement. a. True b. False

False

NAFTA's national treatment principle states that differing standards for North American products must be justified. a. True b. False

all of these are correct.

The North American Agreement on Labor Cooperation promotes: a. freedom of association. b. restrictions on child labor. c. equal pay for men and women. d. prohibition of forced labor. e. all of these are correct.

all imports from a NAFTA country must be treated like similar domestically produced goods.

NAFTA's national treatment principle states: a. all goods claiming to be from a country must be produced in that country. b. all products from a country must have the same amount of tariffs placed on them. c. all imports from a NAFTA country must be treated like similar domestically produced goods. d. all exports from a NAFTA country must meet certain quality standards.

False

NAFTA, an economic union, has evolved into a political union similar to the European Union. a. True b. False

all of these are correct.

NAFTA: a. lowers tariffs. b. liberalizes trade in goods. c. addresses many regional issues that are of concern to the three countries. d. liberalizes trade in services. e. all of these are correct.

True

Production sharing is intended to create U.S. jobs by encouraging the use of U.S.-made components when assembly of a product takes place in a foreign country. a. True b. False

firms operating in any NAFTA country can convert foreign exchange at local banks.

Regarding NAFTA's investment provisions: a. domestically owned companies are given priority over foreign-owned firms. b. Mexico has stricter environmental laws than the United States. c. firms operating in any NAFTA country can convert foreign exchange at local banks. d. local firms owned by investors from other NAFTA countries must fill senior management positions with local citizens.

NAFTA calls for the three countries to work together to develop common environmental standards.

Regarding environmental issues and NAFTA: a. NAFTA sets strict environmental and ecological standards for all three countries. b. NAFTA calls for the three countries to work together to develop common environmental standards. c. NAFTA countries can continue to ban pesticides without informing each other. d. NAFTA created the NAFTA Commission for Environmental Cooperation, which acts in a purely advisory role in regard to environmental issues.

all of these are true.

Regarding marking and labeling rules in Mexico: a. the cost of complying with the rules is so costly that many small companies cannot afford to sell their products in Mexico. b. product warranties must be clearly stated. c. exporters to Mexico need to seek good advice in labeling and marking products to avoid long delays in getting their goods to markets in Mexico. d. there are specific labeling requirements for certain products. e. all of these are true.

NAFTA contains specific rules of origin for determining when a textile product has originated in North America.

Regarding sectoral issues and NAFTA: a. Mexico has long had an open automobile market, which has encouraged trade. b. NAFTA contains specific rules of origin for determining when a textile product has originated in North America. c. no other trade sector is as complex or highly regulated as agricultural trade. d. NAFTA has no rules regarding government procurement.

all of these are correct.

Regarding trade in services under NAFTA: a. no NAFTA country can require a North American service provider to have a residence or office within its border. b. the most important impact of NAFTA's financial services provisions is that they open Mexican financial service industries to investment by Canada and the United States. c. NAFTA does not affect regulations applied to purely domestic truck or bus transportation. d. NAFTA eliminated all tariffs on telephones, cellular phones, and trade in communications equipment in 2004. e. all of these are correct.

True

Sectoral issues are issues of concern to a particular industrial, agricultural, or service sector of the economy. a. True b. False

False

Since NAFTA was signed, Mexico has reduced its average applied tariffs on U.S. imports by slightly more than 1%. a. True b. False

attempts to settle disputes that arise over NAFTA.

The Fair Trade Commission: a. attempts to settle disputes that arise over NAFTA. b. is a law-making body that was formed by NAFTA. c. was created by NAFTA to help promote fair trade. d. will be phased out over the next ten years.

False

The maquiladoras along the U.S. and Mexican border are regulated under NAFTA. a. True b. False

False

The passage of NAFTA is unpopular with private sector of the economy in Mexico. a. True b. False

False

Trademarks are not protected under NAFTA and the owner of the trademark must register with the United States, Canada, and Mexico. a. True b. False

False

Two U.S. groups that have tended to oppose NAFTA are labor unions and the Free Enterprise Institute. a. True b. False

False

U.S. businesspeople complain that the quality of manufactured goods in the Mexican maguiladoras plants are below industry standards. a. True b. False

False

Under NAFTA as a common market for labor and workers have the freedom of movement within the United States, Canada, and Mexico. a. True b. False

False

Under NAFTA, a country can make citizenship a requirement for intellectual property rights protection. a. True b. False

False

Under NAFTA, a customs broker must have an office or residence within the borders of a country in order to do business in that country. a. True b. False

By creating a regional trading block, NAFTA would strengthen GATT's global trade liberalization achievements

Which of the following arguments was not raised in opposition to NAFTA? a. By creating a regional trading block, NAFTA would strengthen GATT's global trade liberalization achievements b. NAFTA would permit firms to take advantage of weaker environmental laws and low cost labor by locating plants in Mexico c. NAFTA would allow U.S. products and advertising to weaken the distinctive cultures and traditions of Canada and Mexico d. NAFTA would cause Mexican companies to suffer in competition against larger and better capitalized U.S. and Canadian firms

NAFTA prohibits new export taxes on goods under any circumstances.

Which of the following statements is untrue regarding NAFTA and nontariff barriers? a. Most nontariff barriers were to be eliminated within five years under NAFTA. b. NAFTA prohibits new export taxes on goods under any circumstances. c. Special rules allow each country to impose import restrictions to protect human, animal or plant life, or the environment. d. Customer user fees were to be eliminated by 1999.

The country using them must offer the exporting country trade compensation.

Which of the following statements is untrue regarding emergency safeguard actions under NAFTA? a. Special safeguards for textiles may be applied where increased imports cause "serious damage" to the domestic industry. b. Safeguards are available for ten years for certain agricultural products. c. The country using them must offer the exporting country trade compensation. d. Safeguards can take the form of both tariffs and quotas.

All of these statements are true.

Which of the following statements is untrue regarding intellectual property rights as covered under NAFTA? a. NAFTA's provisions protect the intellectual property rights of North American firms. b. NAFTA requires that each country enforce its intellectual property rights to prevent smuggling of counterfeit items. c. Specific provisions prohibit the use of geographic regions (e.g. Kentucky bourbon) unless the products are actually derived from that area. d. Copyrights will be protected equally in all three countries. e. All of these statements are true.

Mexico has had a traditionally open market that encourages foreign investment.

Which of the following statements is untrue regarding trade between the U.S., Canada, and Mexico? a. Canada and the United States are each other's largest trading partners. b. Mexico underwent a serious financial crisis in 1994. c. Some key industries in Mexico are government-owned monopolies. d. Mexico has had a traditionally open market that encourages foreign investment. e. All of these statements are correct.