Chapter 7 extra credit
According to the strategic trade policy argument, a government can help raise national income if it can somehow ensure that the firms that gain a first-mover advantage in an industry are_____.
domestic firms
The argument for strategic trade policy suggests a(n) ______ justification for government intervention in trade.
economic
True or false: Krugman advocates that it is logical to expect the U.S. government to ignore special-interest politics when forming policy.
false
Global telecommunications and _____ have been targeted by the WTO as industries that need expanded trade agreements.
financial services
______ trade is the economic policy of not discriminating against exports to or imports from foreign countries.
free
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
free trade
A consequence of subsidies paid to companies during difficult economic times—for example, the Japanese farm subsidies—is
giving recipients an unfair competitive advantage.
Which two groups are positively impacted when an import tariff is enacted?
government domestic producers
American car makers promote the idea that Japan makes it difficult for others to compete in the industry because the country has
implemented vehicle parts standards that no other country uses.
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.
import
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
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 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.
interest groups
When governments intervene in foreign trade, they often claim they are protecting ______ from unfair foreign competition.
jobs
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
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.
Developing countries use ______ to move their manufacturing base from simply assembling component parts to the manufacturing of those parts by requiring that a specific fraction of a good be produced domestically.
local content requirements
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
Governments occasionally protect certain industries, like defense-related industries, for ______ reasons.
national security
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
The main objective of antidumping policies is to
protect domestic producers from unfair foreign competition.
Developed countries use local content requirements to
protect local jobs from foreign competition
Countries base the decision for intervention on ______ when safeguarding aerospace and semiconductor industries.
protecting national security
Sometimes governments pay subsidies to help companies survive challenging economic climates. In effect, these companies have
received an unfair competitive advantage.
If we accept that the tenets of strategic trade policy are correct, then the government _____ intervene in international trade.
should
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
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
According to strategic trade policy, governments should use ______ to support development work aimed at commercializing target technologies.
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
Taxes placed on imports to protect domestic producers from foreign competition and to produce revenue for the government are called
tariffs
What is considered the simplest instrument of trade policy?
tariffs
True or False: The United States has imposed trade sanctions on other countries as a way to protect and promote human rights in those nations.
true
True or false: Export tariffs are sometimes levied to raise revenue for the government.
true
True or false: The fact that countries are using the WTO represents an important vote of confidence in the WTO's dispute resolution procedures.
true
true or false: Export tariffs are sometimes levied to raise revenue for the government.
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
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.
In 2012, Brazil was concerned about a surge of vehicles coming in from Mexico and considering protectionist measures. Mexico decided to be proactive and imposed _____ to limit the shipments of vehicles to Brazil.
voluntary export restraints
What group worked to extend GATT rules to provide enhanced protection for intellectual property and significantly reduce barriers on trade in textiles?
The Uruguay Round
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
True or false: Critics say that protectionism afforded by the infant industry argument has helped eliminate inefficient industries.
false
During the 1980s and early 1990s, protectionism around the world
increased
Government intervention is said to be self-defeating because it tends to protect _____.
inefficient firms
export tariffs are ____ common than import tariffs
less
A government would impose administrative trade policies in order to
make it difficult for imports to enter a country.
A tax on goods coming into or leaving a country is called a(n) ______.
tariff
______ 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
True or false: Government-imposed import quotas can limit a company's ability to serve a country from a foreign location.
true
What are two reasons countries should remain focused on opening markets?
-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 three reasons that caused the global trading system erected under GATT to be strained during the 1980s and early 1990s?
-Countries found ways to get around GATT regulations -The persistent trade deficit in the United States -The economic success of Japan
What were the first two service industries targeted by the WTO as part of its effort to include regulations governing foreign direct investment?
-Financial services -Global telecommunications
What are the two components of strategic trade policy?
-Governments should intervene to assist firms in overcoming barriers to entry created by foreign firms due to first-mover advantages. -governments should subsidize promising domestic firms in emerging industries.
What are two drawbacks of government intervention in the process of free trade?
-It's unlikely to be well-executed. -it invites retaliation and trade wars.
What two issues were addressed by the Uruguay Round?
-Reducing agricultural subsidies -Reducing tariffs on manufactured goods
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.
In what two ways can a government use intervention in trade as a foreign policy instrument?
-To pressure or punish "rogue states" -To grant preferential trading terms to countries it wants to build relations with
Which two groups are negatively impacted when an import tariff is enacted?
-consumers -foreign producers
What are three trade barriers that can constrain a firm's ability to disperse productive activities?
-local content regulations -quotas -tariffs
Which two actions can governments use to intervene in business with the intent of helping firms establish a competitive advantage?
-subsidies -antidumping actions
What are two characteristics of countervailing duties?
-they can be substantial and stay in place for 5 years -they are a special tariff
What are four main instruments of trade policy?
1) tariffs 2) local content requirement 3) import quotas 4) antidumping duties
In _____ Britain withdrew from the European Union following _____.
2016, Brexit
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
japan imposed a limit on auto exports to the United States as a result of pressure by the U.S. government. What instrument of trade policy does this represent?
Voluntary export restraint
Countries can use ______ duties on an offending import to offset dumping.
countervailing
What's the main reason a country would use export tariffs?
To ensure sufficient supply of a good within the country
The infant industry argument has what potential negative consequence?
Causing infant industries to lack efficiency
What is a bound tariff rate?
The highest tariff rate that can be charged.
Why do exporting countries agree to impose voluntary export restraints?
To avoid damaging tariffs and import quotas on their products
A(n)______ tariff is a tax that is levied on a good on the basis of its value, not on the basis of its weight or quantity.
ad valorem
Company ABC in Scotland exports a pound of cheese to the United States for $100. The United States places a 9 percent tax on the cheese as a proportion of its value. What type of tariff is this?
ad valorem -if it says "percent" know its ad valorem
The Japanese government is used in the text as an example of how governments have effectively used ______ to limit imports of vehicle parts through bureaucratic rules
administrative trade policies
The Japanese government is used in the text as an example of how governments have effectively used ______ to limit imports of vehicle parts through bureaucratic rules.
administrative trade 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
Governments develop ______ policies to punish foreign companies that sell their products at below fair market value.
antidumping
