Chapter 7
In _____ Britain withdrew from the European Union following _____.
2016, Brexit
The WTO reports that approximately _____ of all antidumping actions reported involve the basic metals, chemicals, plastics, and electrical equipment industries.
70 percent
What are four main instruments of trade policy?
Antidumping duties Import quotas Local content requirements Tariffs
China has been accused of prohibiting U.S. companies that offer cloud computing from offering their services in China. Which argument best explains this?
China wants to protect its firms from their more competitive U.S. rivals.
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
Free trade as a government policy was first officially embraced by Great Britain by the repeal of this particular tariff.
Corn Laws
The infant industry argument suggests that protecting infant industries from foreign competitors will allow them time to become large enough to enjoy economies of scale. Who typically wins and who loses from a government policy to protect infant industries?
Domestic consumers and foreign producers lose, while the home government and home producers gain.
Select the political or economic argument for intervention for each description. Developing countries with a comparative advantage in manufacturing should temporarily support new industries until they have grown strong enough to meet international competition.
Economic Arguments for Intervention
Select the political or economic argument for intervention for each description. Part of strategic trade policy suggesting that a government can help raise national income if it can ensure that the firm or firms with a first-mover advantage will be domestic.
Economic Arguments for Intervention
Select the political or economic argument for intervention for each description. Part of strategic trade policy that suggests it is a good idea to help domestic firms overcome barriers to entry created by foreign firms that have reaped first-mover advantages.
Economic Arguments for Intervention
Select the political or economic argument for intervention for each description. Poor-quality products may be sold, which lowers profits for firms that originally developed the product.
Economic Arguments for Intervention
Which function did the creators of the WTO hope it would perform?
Facilitate future trade deals
Krugman advocates that it is logical to expect the U.S. government to ignore special-interest politics when forming policy.
False
______ 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
In the mid-1800s, ______ was the first nation to officially follow free trade.
Great Britain
How did the Smoot-Hawley Act divert consumer demand away from foreign products?
It implemented a wall of tariffs.
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 three industries are frequently targeted by antidumping actions? Plastics Chemicals Financial services Basic metal Healthcare
Plastics Chemicals Basic metal
Select the political or economic argument for intervention for each description. A vocal and active segment of the population feels that domestic companies may shift factories to foreign locations.
Political Arguments for Intervention
Select the political or economic argument for intervention for each description. As societies get richer, citizens lobby for greater environmental protections.
Political Arguments for Intervention
______ 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
By the end of this in 1979, average tariff declined by nearly 92% in the United States
Tokyo Round
Following Brexit, Great Britain withdrew from the European Union in 2016.
True
The United States has imposed trade sanctions on other countries as a way to protect and promote human rights in those nations.
True
The United States has imposed trade sanctions on other countries as a way to protect and promote human rights in those nations. True false question.
True
One focus of strategic trade policy is to help domestic companies gain
a first-mover advantage.
United States imposes a 2.5% tarff on imported watches.
ad valorem tariff
United States stops medicine imports unapproved by FDA.
administrative policies
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
The WTO does allow ______ to be imposed on foreign goods sold below their cost of production when domestic producers are being hurt.
antidumping duties
EU imposes a special tariff on the offending foreign imports.
antidumping policies
Brazil used tariffs to protect its auto industry in the 1950s. Tariffs
are taxes levied on imports or exports.
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
The WTO is more successful than GATT because the WTO has ______ that make it more effective.
enforcement mechanisms
The United States has accused China of
exacerbating the global glut of steel by investing in additional production.
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 __________ trade.
free
______ trade is the economic policy of not discriminating against exports to or imports from foreign countries.
free
Which argument for government intervention in trade best describes the rationale behind the United States' interest in negotiating a trade deal with Kenya?
furthering foreign policy objectives
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
United States restricts the number of imported video games.
import quotas
A tariff rate quota provides a lower tariff rate to
imports within the quota.
The ______ argument for trade intervention states that developing countries need to support new industries until they are strong enough to compete globally.
infant industry
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
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. Multiple choice question.
interest groups
When governments intervene in foreign trade, they often claim they are protecting ______ from unfair foreign competition.
jobs
If the United States levies a tariff of $0.50 on every pound of coffee imported from Kenya, the United States has
levied a specific tariff on imported coffee from Kenya.
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.
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
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.
Specific percent of goods must be produced domestically.
local content requirements
A government would impose administrative trade policies in order to
make it difficult for imports to enter a country.
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
Subsidies and quotas are examples of __________ barriers a county might impose.
nontariff
Today, many nations are _____ new trade policies associated with the WTO.
opposed to
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
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. Multiple choice question.
political
Higher tariff rates on agricultural products come from a desire to
protect domestic agriculture from foreign competition.
By threatening ______ trade sanctions, one country can convince another country to open its markets.
punitive
A(n) __________ refers to the extra profit that producers make when supply is artificially limited by an import quota.
quota rent
The TRIPS agreement is based on the notion that inadequate protection of intellectual property __________ the incentive for innovation. (Choose reduces or increases.)
reduces
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 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
United States levies a $1 tariff on imported watches.
specific tariff
The United States is demanding that China reduce overcapacity in which industry?
steel
EU payments to European farmers.
subsidies
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
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
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
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
Krugman argues that if each country seeks to follow a strategic trade policy to protect its interests, this may lead to a ______.
trade war
To limit imports over the set quota, tariff rate quotas are common in agriculture. True false question.
true
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
Peru restricts sugar exports by United States request.
voluntary export restraints (VERs)
In order to encourage the wine production industry, the Italian government provided low-interest loans for the purchase of equipment and plants. The government also gave cash grants and made tax reductions. Which instrument of trade policy is being used by the Italian government?
Subsidies
If China provides cash assistance to its companies in the steel industry, China is using which type of trade instrument?
Subsidy
______ 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
What's the main reason a country would use export tariffs?
To ensure sufficient supply of a good within the country
One reason a government might intervene in foreign trade is to protect consumers from a potentially dangerous product that's being imported. This would be an example of a(n) _____ argument for government intervention.
political
What occurs when a company practices dumping?
The firm is unloading excess production in a foreign market.
GATT negotiations continue to deal with additional issues such as (Check the three that apply.) - agricultural subsidies. - exchange rates. - services. - intellectual property. - income inequality.
- agricultural subsidies. - services. - intellectual property.
The United States and Kenya are exploring the possibility of a trade deal. ________ refers to a situation in which a government does not attempt to restrict what its citizens can buy from or sell to another country.
Free Trade
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? Multiple choice question.
Lack of trust
Select the political or economic argument for intervention for each description. Certain foreign products seem attractive to consumers, but there are also significant concerns about the safety of the products over the long run.
Political Arguments for Intervention
Select the political or economic argument for intervention for each description. Certain key industries should be supported so that in case of national emergency or war the country will have access to key supplies and materials.
Political Arguments for Intervention
What are two ways trade barriers hamper a firm's productive activities? - They raise the cost of exporting products. - Quotas limit the ability to serve a country from outside locales. - They increase the ability to operate at full capacity. - They allow access to the imports a firm may need.
- They raise the cost of exporting products. - Quotas limit the ability to serve a country from outside locales.
Established in 1947, its objective was to liberalize trade by eliminating tariffs, subsidies, import quotas, and the like.
GATT
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
What are two reasons countries should remain focused on opening markets? - Because reducing tariffs will lead to substantial losses in global trade - Because average tariffs on manufactured goods remain higher than services - 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
- 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
What are the four issues currently at the forefront of the WTO agenda? - Protectionism in agriculture - Antidumping policies - Local content requirements - Entrepreneurial activities - Lack of intellectual property protection - High tariffs on nonagricultural goods and services
- Protectionism in agriculture - Antidumping policies - Lack of intellectual property protection - High tariffs on nonagricultural goods and services
What are three reasons that caused the global trading system erected under GATT to be strained during the 1980s and early 1990s? - The economic success of Japan - Countries found ways to get around GATT regulations - A wave of economic recession throughout Europe - The persistent trade deficit in the United States - The economic distress of many African countries
- The economic success of Japan - Countries found ways to get around GATT regulations - The persistent trade deficit in the United States
Which organization was created to implement the GATT agreement?
World Trade Organization
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? - Rising living standards - Economic growth - A decrease in trade - Decreasing inflation
Rising living standards Economic growth
Put in place to avoid rising unemployment by protecting domestic industries and diverting consumer demand away from foreign products.
Smoot-Hawley Act
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
Alexander Hamilton argued that tariffs are an effective means of protecting infant industries until they are better able to compete. Which is not true of tariffs used to protect infant industries?
They promote more efficient use of resources.
Currently, the United States and Kenya do not have a trade agreement. If the United States imposes an import tariff on products from Kenya typically
U.S. consumers lose, U.S. producers gain, and the U.S. government gains.
Among other things, negotiations that took place here reduced tariffs on industrial goods, reduced agricultural subsidies, and offered more protection for intellectual property rights.
Uraguay Round
Between 1995 and 2019 more than 500 trade disputes between member countries were brought before this organization.
WTO
As part of its effort to protect its auto makers from foreign competition, suppose Brazil levied a tariff based on a proportion of the value of the product. Brazil would be imposing a(n) _______ tariff.
ad valorem
