Chapter 7 Smart Book Questions

What industry tends to benefit the most from subsidies in most countries

Agriculture

How did the Chinese government respond when the U.S. government tried to pressure it to enforce its intellectual property laws

China initially threatened to raise trade barriers

Which 2 groups are negatively impacted when an import tariff I enacted

Consumers foreign producers

In an attempt to bring down the Communist government in ______, the US initially maintained long-running trade sanctions against the country.

Cuba

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

Based on the theories of Ricardo and Smith, the consequences of free trade include _ economic gains in terms of economic growth and wealth creation

Dynamic

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

Great Britain

According to a study cited in the test, if advanced countries stopped providing subsidies to farmers, global trade in agricultural products would

Increase by 50%

Developed countries have imposed local content requirements in order to

Protect local jobs from foreign competition

Import quotas are based on the _ of a good

Quantity

How do import tariffs affect the overall efficiency of the world economy

They reduce the efficiency

Why do exporting countries agree to impose voluntary export restraints

To avoid damaging tariffs and import quotas on their products

After analyzing current practices, it can be said that subsidies are not that successful at increasing the international competitiveness of domestic producers

True

If Italy places a fixed charge of $5 for every unit of rice imported, that $5 is an example of a specific tariff

True

To limit imports over quota, tariff rate quotas would be used for agricultural products to limit the amount entering a country

True

What policies are intended to protect domestic producers from foreign competitors that dump their products at below fair market value

antidumping

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

enforcement

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

higher than

What are two drawbacks of government intervention in free trade

it invites retaliation and trade wars it protects inefficient industries

In order to win a contract from Mexico, QVB Autos Manufacturing must make 65% of the component parts of their autos in Mexico. This is an example of a

local content requirement

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

national security

Rising pressures for _____ lead to ongoing GATT negotiations via the Uruguay Round

protectionism

Reducing many of the tariffs that are still in existence will lead to

substantial gains in global trade

The main objective of GATT was to liberalize _____ restrictions

trade

In 2003, Libya announced it would terminate a program to build nuclear weapons. This is thought to be a result of ______ placed against Libya by the United States

trade sanctions

The ultimate goal of the WTO is to reduce tariff rates to

0

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 n it. What type of tariff is this

Ad valorem

Goods that are taxed as they ship out of a country have a(n) _ tariff

Export

In 2004, China tried to moderate the growth of textiles gong out of Chin in order to alleviate tensions with other trading partners. To do this, China enacted a(n)

Export tariff

Quota rent provides producers with

Extra profit

__ trade is the economic policy of not discriminating against exports to or imports from foreign countries

Free

What are 3 main instruments of trade policy

Import quotas voluntary export restraints subsidies

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

Japan

Which country is pointed to as the master of administrative trade policies

Japan

Evan works in a country in which thee government has stated that 45% of all goods must be produced domestically. What type of requirement does this country have in place

Local content requirements

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

Ricardo

Many Western countries imposed trade sanctions against ______ during the 1980s and 1990s to encourage the country to improve human rights policies

South Africa

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

Specific

Taxes placed o imports to protect domestic reducers from foreign competition and to reduce revenue for the government are

Tariffs

Subsidies are a form of payment that is provided by

The government

What are 2 objectives for levying an export tariff

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

Ad valorem tariffs are based on the _ of a product

Value

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

Tariff rates on ______ products are generally much higher than tariffs on manufactured products or services

agricultural

The purpose of the Smoot-Hawley Act, passed by the US Congress in 1930, was to

avoid rising unemployment

During the 1970s, Congress did not allow US industries to export crude oil production. This action is an example of an export

ban

What are two reasons countries should remain focused on opening markets

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

Countries can use ______ duties on an offending import to offset dumping

countervailing

The protection of intellectual property has becoming increasingly important to the WTO. The basis for this is that without this protection, the incentive for innovation would _____ and economies would suffer

decrease

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

economic

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

election of Donald Trump Britain's withdrawal from the European Union

One way the GATT hoped to achieve its objective was by

eliminating tariffs

What can a country use to counteract a country that uses subsidies to support an industry

establish anti-dumping regulations

Countervailing duties are placed on foreign firms to encourage them to sell products below their "fair" market value.

false

The strategic trade policy may look good in theory, but in practice it may be unworkable. As a result, the case for ___ trade may come to the forefront

free

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

government

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

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

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

industries

The oldest argument for government intervention in trade where developing nations must protect their domestic industries until they are ready to compete globally is the ______ argument

infant industry

If a country does not have protections in place for ______ property, it is likely that businesses will be less inclined to pursue innovation

intellectual

As noted in the text, in the past, the US government has tried to convince the Chinese government to enforce its _____ laws by threatening punitive trade sanctions.

intellectual property

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

intellectual property services

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 countries involved in formal procedures for trade disputes have adopted WTO

The text states that Donald Trump's _____ views threaten the idea of a world trading system

mercantilism

As a result of the 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

The WTO will continue to work to ______ markets because this will lead to an increase in world income, including an increase in income to developing nations

open

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

plastics chemicals basic metal

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

protecting jobs and industries

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

push for more open markets and freer trade increased protectionism

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

quota rent

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

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

What is NOT included in the Doha agenda

raising tariffs on industrial services

Government intervention may NOT be well executed due to the possibility that policy will be captured by

special interest groups

A loophole that many countries are exploiting to pursue protectionism dealing with antidumping is

the vague definition of dumping

______ 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

trade barriers

Krugman promoted the idea that if each country seeks to follow a strategic trade policy to protect its interests, this may lead to

trade war

Since countries are using the WTO to resolve disputes, it is an indication that the organization is successful in this responsibility

true

The United States has imposed trade sanctions on other countries in order to protect and promote human rights

true

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

trust

When considering the benefit of free trade in neighboring countries, one government might favor lowering trade barriers but won't do it because of a lack of ______ in the other nation

trust

Sometimes governments pay insides to help companies survive challenging economic climates. In effect these companies receive

An unfair competitive advantage

Based on the economic analysis of tariffs, it ca be said that they are

Anti-consumer pro-producer

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

In 2003, Japan decided to ban imports of beef from America because of the threat of mad cow disease. This ban was implemented to directly protect

consumers

For national security reasons, the _____ industry is often protected by the national government

defense

At the end of the fiscal year, Jack's company sells their bicycles in Thailand at below what it costs to produce the bikes in order to unload excess inventory. This is an example of

dumping

What were two results of the Smoot-Hawley Act

every industry encountered tariff barriers US exports declined

GATT has NOT recognized the infant industry argument as a legitimate reason for protectionism.

false

Strategic trade policy does not advocate for government intervention in international trade

false

What were the first two 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

During the 1980s, the trend was for ______ protectionism around the world

greater

Political opposition to the WTO has been _____ in many nations

growing

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

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

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

interest groups

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

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 two outcomes typically occur as the result of of local content regulations

the restriction in imports raise the prices of imported components which lead to higher prices for the consumer local content regulations provide protection for a domestic producer

Governments do not always act in the national interest when intervening in the economy

true

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

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

Giving recipients an unfair competitive advantage

Which 2 groups are positively impacted when an import tariff is enacted

Government domestic producers

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

A tariff is a tax levied on

Imports or exports

When the US government "bailed out" the automobile industry starting in 2009 by loaning money to keep General Motors and other automakers in business, it e=was an example of a(n)

Subsidy

_ 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

Which instrument or trade policy has been in use the longest

Tariffs

Which round of GATT negotiations provided enhanced protection for intellectual property and significantly reduced barriers on trade in textiles

Uruguay Round

Brazil was concerned about a surge of vehicles coming in from Mexico an considered protectionist measures. When Mexico responded by limiting the shipments of vehicles to Brazil it was using a(n)

Voluntary export restraint (VER)

Japan imposed a quota on auto exports into the US as a result of pressure form the American government. This action is an example of a(n)

Voluntary export restraint (VER)

What organization now arbitrates trade disputes and monitors trade policies of member countries

WTO

Governments implement _____ trade policies that are designed to make it difficult for imports to enter a country

administrative

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

anitdumping