International Business Ch 7

What are two reasons countries should remain focused on opening markets?

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

Political Arguments for Intervention

- protecting jobs and industries - national security - retaliating - protecting consumers - furthering foreign policy objectives - protecting human rights

The ________ benefits inefficient farmers and the politicians in the EU who rely on the farm vote, but not consumers in the European Union, who end up paying more for their foodstuffs. General Agreement on Tariffs and Trade (GATT) Common Agricultural Policy (CAP) Smoot-Hawley Act Commerce Department

Common Agriculture Policy (CAP)

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. Washington Uruguay Berlin Doha

Doha

One way the GATT hoped to achieve its objective was by _____. eliminating tariffs organizing "bail outs" providing loans minimizing exports

Eliminating exports

Which country was the first to officially follow a policy of free trade in the mid 1800s? Great Britain Sweden France United States

Great Britain

import quotas

a direct restriction on the quantity of a good that can be imported into a country

export ban

a policy that partially or entirely restricts the export of a good

local content requirements (LCR)

a requirement that some specific fraction of a good must be produced domestically

export tariff

a tax placed on the export of a good

Subsidies are a form of payment that is provided by _____. a. the government b. a trading partner c. the domestic producer d. consumers

a. the government

Governments implement _____ trade policies that are designed to make it difficult for imports to enter a country. consequential valorem residual administrative

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. voluntary export restraint antidumping local content embargo

antidumping

Based on the theories of Ricardo and Smith, the consequences of free trade include ______ economic gains in terms of economic growth and wealth creation. a. static b. dynamic

b. dynamic

Taxes placed on imports to protect domestic producers from foreign competition and to produce revenue for the government are a. quotas b. tariffs c. income d. embargos

b. tariffs

During the 1970s, Congress did not allow US industries to export crude oil production. This action is an example of an export _____. a. tariff b. embargo c. dumping d. ban

d. ban

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 a. local distribution requirement. b. international content requirement. c. local supplier requirement. d. local content requirement.

d. local content requirement

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

enforcement

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. restricted free fair constant

free

During th 1980s, the trend was for ______ protectionism around the world. lesser greater

greater

Tariff rates on agricultural products tend to be ____ tariff rates on a manufactured good. similar to higher than lower than

higher than

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. subsidy specific tariff ad valorem tariff import quota

import quota

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. local content voluntary export restraint national security infant industry

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. national security local content infant industry voluntary export restraint

infant industry

f a country does not have protections in place for ______ property, it is likely that businesses will be less inclined to pursue innovation. domestic public tangible intellectual

intellectual

Krugman argues that strategic trade policy should not be embraced because many times governments are influenced by politically important _____ to intervene in the economy. consumers domestic firms interest groups foreign heads of state

interest groups

What are the four issues considered a priority on the WTO agenda? lack of strong protection of intellectual property the effects of global warming on trade increasing income inequality in many countries high level of protectionism in agriculture high tariff rates on goods and services antidumping policies

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

Evan works in a country in which the government has stated that 45% of all goods must be produced domestically. What type of requirement does this country have in place? voluntary export restraint ad valorem tariff government subsidy local content requirement

local content requirement

The text states that Donald Trump's _____ views threaten the idea of a world trading system. socialism mercantilism capitalism communism

mercantilism

tariff rate quotas

provide a lower tariff rate to imports within the quota than those over the quota

Voluntary Export Restraint (VER)

quota on trade imposed by the exporting country

quota rent

refers to the extra profit producers make when supply is artificially limited by an import quota

Member nations hoped that the WTO would be a facilitator of future trade deals especially in the area of _____. logistics technology services manufacturing

services

The main objective of GATT was to liberalize _____ restrictions. product voting marketing trade

trade

True or false: Governments do not always act in the national interest when intervening in the economy.

true

Import quotas are based on the _____ of a good. a. quality b. value c. quantity d. cost

c. quantity

What are two events that pose a threat to the world trading system? Britain's withdrawal from the European Union election of Donald Trump human rights abuses in many countries confirmation of global warming

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

Economic Arguments for Intervention

-infant industry argument -strategic trade policy

subsidies

A grant or contribution of money, especially one made by a government in support of an undertaking or the upkeep of a thing

Which country is pointed to as the master of administrative trade policies? China Mexico Japan US

Japan

______ trade is the economic policy of not discriminating against exports to or imports from foreign countries. a. Free b. Fair c. Restricted d. Balanced

a. free

A tax on imports that is levied as a fixed charge per unit of an imported good is called a(n) ______ tariff. a. specific b. local content c. primary d. ad valorem

a. specific

Administrative policies

bureaucratic rules designed to make it difficult for imports to enter a country

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. equalize monopolize decrease increase

decrease

antidumping policies

designed to punish foreign firms that engage in dumping and thus protect domestic producers from unfair foreign competition

What can a country use to counter-act a country that uses subsidies to support an industry? reduce local content requirements establish anti-dumping regulations establish export tariffs engage in a licensing deal

establish anti-dumping regulations

Which round of GATT negotiations provided enhanced protection for intellectual property and significantly reduced barriers on trade in textiles? The Uruguay Round The Washington Round The Bretton Woods Round The DOHA Round

the Uruguay Round

What is NOT included in the Doha agenda? limiting antidumping laws phasing out subsides to agriculture producers reducing cross-border investment barriers raising tariffs on industrial services

raising tariffs on industrial services

What are two ways trade barriers hamper a firm's productive activities? They raise the cost of exporting products. They increase the ability to operate at full capacity. Quotas limit the ability to serve a country from outside locales. They limit imports a firm may need.

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

In response to the apparent failure of the current Doha Round, many nations have implemented _____. better intellectual property rights farm subsidies higher tariff barriers multilateral trade agreements

multilateral trade agreements

7 main instruments of trade policy

1. tariffs 2. subsidies 3. import quotas 4. voluntary export restraints 5. local content requirements 6. administrative policies 7. antidumping duties

ex of an export ban

1975 ban on US crude oil exports

What are two ways a government uses intervention in trade as a foreign policy instrument? a. pressure or punish "rogue states" b. grant preferential trade terms to countries that don't abide by trade laws c. pressure or punish countries that produce most efficiently d. grant preferential trading terms to countries it wants to build relations with

A and D

Three provisions of The Uruguay Round started in 1986

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

Which economist was a key figure in the early free trade movement in Great Britain? Marx Samuelson Ricardo Keynes

Ricardo

Tariffs

Taxes on imports or exports

What industry tends to benefit the most from subsidies in most countries? a. banking b. manufacturing c. agriculture d. transportation

c. agriculture

______ 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. a. Ad valorem tariffs b. Quota tariffs c. Tariff rate quotas d. Specific tariffs

c. tariff rate quotas

Which instrument of trade policy has been in use the longest? a. antidumping b. local content requirements c. tariffs d. import quotas

c. tariffs

Krugman promoted the idea that if each country seeks to follow a strategic trade policy to protect its interests, this may lead to ______. free trade trade war local content requirement trade restriction

trade war