IntB Chapter 7 Government Policy and International Trade

As noted in the text, the US 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 US companies millions of dollars in lost revenue.

Chinese

With regard to strategic trade policy, which two actions can governments take in response to pressure from business firms? (Check all that apply.)

Increased protectionism Push for more open markets and freer trade

What are two drawbacks of government intervention in free trade? (Check all that apply.)

It invites retaliation and trade wars. It protects inefficient industries.

What occurs when a company practices dumping?

The firm is unloading excess production in a foreign market.

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

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

If a country places a 20% 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

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 where developing nations must protect their domestic industries until they are ready to compete globally is the ______ argument.

infant industry

Many developing nations use the ______ to justify high tariff rates on nonagricultural goods but the WTO believes the nations would benefit from increased international trade by lowering tariffs.

infant industry argument

Higher tariff rates on agricultural products come from a desire to domestic agriculture and traditional farming areas. (Choose protect or outsource.)

protect

By threatening ______ trade sanctions, one country can convince another country to open its markets.

punitive

The TRIPS agreement is based on the notion that inadequate protection of intellectual property the incentive for innovation. (Choose reduces or increases.)

reduces

The trade policy argument suggests that governments should subsidize promising domestic firms in emerging industries and should also assist firms in overcoming barriers to entry created by foreign firms due to first-mover advantages.

strategic

What's the main reason a country would use export tariffs?

to ensure sufficient supply of a good within the country

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.

Which three industries are frequently targeted by antidumping actions? (Check all that apply.)

Basic metal Plastics Chemicals

What are two reasons countries should remain focused on opening markets? (Check all that apply.)

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

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

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

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

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

Free

______ is the acronym for the multilateral agreement established in 1947 aimed at the abolition of quotas and the reduction of tariff duties among the contracting nations.

GATT

What are the two components of strategic trade policy? (Check all that apply.)

Governments should subsidize promising domestic firms in emerging industries. Governments should intervene to assist firms in overcoming barriers to entry created by foreign firms due to first-mover advantages.

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

Great Britain

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

In what two ways can a government use intervention in trade as a foreign policy instrument? (Check all that apply.)

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

What are the two reasons that export tariffs are levied? (Check all that apply.)

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

True or false: Export tariffs are sometimes levied to raise revenue for the government.

True

True or false: To limit imports over the set quota, tariff rate quotas are common in agriculture.

True

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

WTO

______ is the organization that encompasses GATT, GATS and TRIPS.

WTO

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

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

Member nations hoped that the WTO would do which two of the following?

be effective at policing global trade facilitate future trade deals

Protecting intellectual property through patents, trademarks, and copyrights, fosters innovation and can lead to what two results? (Check all that apply.)

economic growth rising living standards

According to the text, what two world events imply that free trade is not a global consensus?

election of Donald Trump withdrawal of Britain from EU

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

enforcement

GATT was put into place by the US 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

The WTO will work hard to reduce tariffs toward zero because this will lead to substantial ______ in trade.

gains

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

What are four main instruments of trade policy?

import quotas tariffs local content requirements antidumping duties

During the 1980s and early 1990s, protectionism around the world . (Choose increased or decreased.)

increased

Tariffs, quotas, and subsidies are forms of government _____.

intervention

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

jobs

What are the four issues currently at the forefront of the WTO agenda?

lack of intellectual property protection protectionism in agriculture high tariffs on nonagricultural goods and services antidumping policies

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

Export tariffs are (more or less?) common than import tariffs.

less

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% of the component parts of their vehicles in Mexico. This is an example of a

local content requirement.

The basic metals, chemicals, plastics, and machinery and electrical equipment industries account for the ______ of antidumping actions.

majority

A government would impose administrative trade policies in order to

make it difficult for imports to enter a country.

As the text notes, Donald Trump appears to embrace which view on trade?

mercantilist

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

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

Today, many nations are _____ new trade policies associated with the WTO.

opposed to

What are three ongoing priorities for the WTO and agenda items at Doha? Check all that apply.

phasing out agriculture subsidies limiting antidumping laws cutting tariff rates on services

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

Countries base the decision for intervention on ______ when protecting aerospace and semiconductor industries.

protecting national security

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

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

special interest groups

A tax on imports that is specified 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

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

What is considered the simplest instrument of trade policy?

tariffs

Unilateral lowering of trade barriers has not occurred mostly due to a lack of _____ among governments.

trust

Japan imposed a limit on auto exports to the US as a result of pressure by the US government. What instrument of trade policy does this represent?

voluntary export restraint

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.

While there were a total of 196 cases handled by GATT, records show that between 1995 and 2017, the WTO successfully handled about _____ trade disputes.

500

Company ABC in Scotland exports a pound of cheese to the US for $100. The US places a 9% tax on the cheese as a proportion of its value. What type of tariff is this?

Ad valorem

What are two ways trade barriers hamper a firm's productive activities? (Check all that apply.)

Quotas limit the ability to serve a country from outside locales. They raise the cost of exporting products.

The Uruguay Round started in 1986 and addressed which three issues?

Reducing agricultural subsidies Reducing tariffs on industrial goods Reducing tariffs on manufactured goods

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

Ricardo

______ 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

______ 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 extended GATT rules to provide enhanced protection for intellectual property and significantly reduced barriers on trade in textiles?

The Uruguay Round