Deck 8: Cross-National Cooperation and Agreements

Question 1

Most MNEs generate a majority of their revenues in their home regions.

Answer 1

False

Question 2

Global integration occurs as countries from all over the world decide to cooperate through the ________.

A)EU
B)NAFTA agreement
C)WTO
D)CARICOM

Answer 2

C

Question 3

Baldani Manufacturing, an Italian firm, plans to expand into Asia.In order to take advantage of regional trading groups, Baldani will most likely need to change its ________.

A)operating strategies
B)selection test methods
C)bilateral trade agreements
D)economic integration methods

Answer 3

A

Question 4

In a brief essay, explain the roles of the World Trade Organization and the United Nations in international trade.

Question 5

Anderson Enterprises is a U.S.firm that manufactures light fixtures for commercial and residential consumers.Anderson is looking to expand internationally, so the firm should most likely ________.

A)focus on developing new recruitment strategies and selection tests
B)change their organizational structure to fit the norms of the foreign country
C)disregard changes in trading groups because they have little effect on a company
D)look to expand beyond the triad regions currently controlled by the top 500 MNEs

Question 6

As companies expand internationally, they must change their organizational structure and operating strategies to take advantage of regional trading groups.

Question 7

Which of the following primarily triggered Toyota's investment in the European Union?

A)Europeans demanded affordable, high quality cars from Japan.
B)A common currency gave Europeans more buying power.
C)The EU lowered trade barriers on foreign auto imports.
D)Japan and the EU formed a free trade agreement.

Question 8

The European Union is an example of regional integration.

Question 9

Country A and Country B make an agreement to cooperate more closely and implement tariff reductions.Which of the following best describes this agreement?

A)double commodity integration
B)multilateral integration
C)regional integration
D)bilateral integration

Question 10

Under the WTO agreement, ________.

A)a dispute resolution mechanism allows countries to bring grievances to the WTO against countries that levy inappropriate trade discrimination measures
B)there is no dispute resolution mechanism except for trade involving environmental products
C)countries are allowed to place trade barriers on member countries with no particular justification, because like GATT the WTO has no enforcement mechanism
D)tariffs are permitted to be levied by developed countries against developing countries but not against each other

Question 11

Which of the following accurately identifies a difference between GATT and the WTO?

A)GATT could enforce member compliance with agreements, but the WTO cannot.
B)At its inception, GATT had more member nations than the WTO currently has.
C)GATT withdrew the most-favored-nation clause, but the WTO reinstated it.
D)GATT rules did not cover trade in services, but the rules of the WTO do.

Question 12

The 27 member EU negotiates trade agreements as one.The EU and Brazil have negotiated a strategic trade alliance which is an example of a ________.

A)customs union
B)global free trade agreement
C)bilateral agreement
D)multilateral agreement

Question 13

The ________ clause embodied the fundamental principle of GATT-trade without discrimination.

A)most-favored-nation
B)nontariff barriers
C)free rider
D)normal trade relations

Question 14

GATT's contribution to trade liberalization made possible the expansion of world trade in the second half of the twentieth century.

Question 15

Which of the following statements most accurately describes the relationship between trading groups and MNEs?

A)Trading groups have no influence on the size of the regional market.
B)Regional trading groups can define the rules under which companies must operate within that region.
C)Companies never need to change their organizational structure to take advantage of regional trading groups.
D)Regional trading groups have no influence on an MNE's strategy since they operate worldwide.

Question 16

The European Union is an example of ________ integration.

A)regional
B)relative
C)global
D)bilateral

Question 17

The most-favored-nation policy is a WTO privilege that allows member nations to restrict tariff cuts to members.

Question 18

________ integration is the political and economic agreements among countries that give preference to member countries to the agreement.

A)Global
B)Economic
C)Bilateral
D)Regional

Question 19

Most MNEs generate a large portion of their revenues in their home regions.

Question 20

Regional integration is better known as global integration through the World Trade Organization.

Question 21

NAFTA was primarily formed because the member nations have ________.

A)static and dynamic liberalization policies
B)similarly sized economies and resources
C)geographic proximity to each other
D)competing interests with the EU

Question 22

Because the size of the market increases when trade barriers fall, companies can increase their production, which will result in lower costs per unit.This phenomenon is known as ________.

A)trade creation
B)economies of scale
C)diseconomies of scale
D)increased competition

Question 23

The 27-member EU negotiates trade agreements as one.The EU and Brazil have negotiated a strategic trade alliance, which is an example of a ________.

A)customs union
B)global free trade agreement
C)bilateral agreement
D)multilateral agreement

Question 24

________ effects of economic integration are the overall growth in the market and the impact on a company caused by expanding production and by the company's ability to achieve greater economies of scale.

A)Dynamic
B)Static
C)Economic
D)Barrier

Question 25

Most trade agreements contain countries in the same area of the world.Why is this so?

A)The distances that goods need to travel between such countries are short.
B)Distribution channels are not easily established in adjacent countries.
C)Adjacent countries are reluctant to coordinate policies.
D)Neighboring countries usually lack a common history and interests.

Question 26

Toyota has been successful in Europe by exporting cars to Europe as well as designing and manufacturing cars in Europe for the European market.

Question 27

The goal of a ________ is to abolish all tariffs among member countries.

A)customs union
B)common market
C)free trade agreement
D)common internal tariff

Question 28

The goal of a free trade agreement is to abolish all tariffs among member countries.

Question 29

Assume that U.S.companies are importing the same product from Mexico and Taiwan.The United States enters into an FTA with Mexico but not with Taiwan.Consequently, the United States begins to import more goods from Mexico (due to lower tariffs)than from Taiwan, even though the Mexican products are not any better or cheaper.This is most likely an example of ________.

A)trade specialization
B)trade internalization
C)trade creation
D)trade diversion

Question 30

Trade shifting to countries within a regional trade agreement at the expense of trade with countries not in the agreement is called ________.

A)a dynamic effect
B)trade creation
C)trade diversion
D)economy of scale

Question 31

When the European Union was formed, the size of the market increased for European companies.This is most likely an example of a ________.

A)dynamic effect
B)static effect
C)trade diversion
D)trade reflection

Question 32

Of the following possibilities, the European Union is best described as a ________.

A)customs union
B)domestic organization
C)global bargaining unit
D)common language agreement

Question 33

Why is geography important to most regional trade agreements? Provide examples of RTAs to illustrate your answer.

Question 34

Most trade groups contain countries in the same area of the world, even though neighboring countries usually lack a common history and interests.

Question 35

A ________ results when free mobility of factors of production is added to a customs union.

A)customs union
B)common market
C)free trade agreement
D)regional trade agreement

Question 36

________ effects of trade agreements are the shifting of resources from inefficient to efficient companies as trade barriers fall.

A)Dynamic
B)Static
C)Economic
D)Barrier

Question 37

Which of the following are members of NAFTA?

A)the United States, Canada, and Mexico
B)North America and Latin America
C)the United Kingdom, the United States, and Canada
D)the United States, Canada, and Brazil

Question 38

Since production has shifted to more efficient producers due to comparative advantage, consumers in Country X have had access to more goods at lower prices.Which of the following most likely exists?

A)trade specialization
B)trade diversion
C)trade creation
D)trade internalization

Question 39

One of the reasons that neighboring countries tend to ally is similar consumer tastes.

Question 40

A free trade agreement is likely to increase efficiency because of ________.

A)decreased competition
B)increased competition
C)decreased trade diversion
D)decreased trade creation

Question 41

Static effects are the overall growth in the market and the impact on a company caused by expanding production and by the company's ability to achieve greater economies of scale.

Question 42

Which of the following statements about the euro is true?

A)It was adopted by all existing EU members when it was first initiated.
B)It must be adopted by countries as a precondition to joining the EU.
C)It cannot be used by countries that are not members of the EU.
D)It was designed to eliminate currency as a barrier to trade in the EU.

Question 43

Explain the static effects and dynamic effects of economic integration.What is the difference between trade creation and trade diversion resulting from economic integration?

Question 44

The shifting of resources from inefficient to efficient companies as trade barriers fall produces static effects.

Question 45

The ________ is the European Union's ultimate decision-making body and is composed of the different ministers of the member countries.

A)European Commission
B)Council of the European Union
C)European Parliament
D)European Court of Justice

Question 46

The shifting of trade to countries in a regional group at the expense of trade with countries not in the group is known as trade internalization.

Question 47

The EU organization that ensures consistent interpretation and application of EU treaties is the ________.

A)European Commission
B)Council of Ministers
C)Court of Justice
D)Council of Treaties and Laws

Question 48

MNEs are attracted to regional trading groups because of their large market sizes and production locations, and because they ________.

A)are good sources for raw materials
B)implement trade restrictions
C)offer both internal and external tariffs
D)have very little competition

Question 49

Trade creation allows consumers access to more goods at a lower price than would have been possible without integration.

Question 50

When free mobility of factors of production is added to a common market, the result is a customs union.

Question 51

Hudson Manufacturing is an MNE based in the United States with operations in Asia.The firm is considering expansion into the European Union.Which of the following questions is most relevant to the decision?

A)What is the primary language of most workers?
B)Which country has the best production location?
C)Which currency has the most favorable value of the euro?
D)Which country has the lowest tariffs for manufactured products?

Question 52

The EU organization that provides political leadership, drafts laws, and runs the daily programs of the EU is the ________.

A)European Commission
B)Council of Ministers
C)European Parliament
D)European Central Bureaucracy

Question 53

Members of the Andean Community (CAN)have a common external tariff.CAN is most likely a ________.

A)free trade agreement
B)customs union
C)domestic trade zone
D)free trade sovereignty

Question 54

Which of the following was primarily responsible for establishing the euro?

A)Lisbon Treaty
B)Treaty of Maastricht
C)European Finance Act
D)Single European Act

Question 55

The ________ is the common currency of the European Union.

A)franc
B)pound
C)euro
D)mark

Question 56

Hudson Manufacturing is an MNE based in the United States with operations in Asia.The firm is considering expansion into the European Union.Executives at the firm are debating whether central Europe or Eastern Europe would be best for the firm.Which of the following best supports a decision to establish operations in Eastern Europe?

A)Hudson wants to implement a high-performance work system.
B)Hudson plans to staff the foreign facility with local managers.
C)Hudson wants to minimize costs by keeping wages low.
D)Hudson recently lost money in a joint venture.

Question 57

Which of the following groups of countries is most likely to form a regional trading group?

A)India, Argentina, France
B)Canada, United States, Mexico
C)Brazil, Ukraine, Japan
D)Spain, South Africa, Mongolia

Question 58

Which of the following members of the European Union has NOT adopted the euro?

A)Denmark
B)Estonia
C)Germany
D)Greece

Question 59

The three major responsibilities of the ________ are legislative power, control over the budget, and supervision of executive decisions.

A)European Commission
B)European Council
C)European Parliament
D)European Court of Justice

Question 60

Describe the different types of regional economic integration and give an example of each type.

Question 61

Which of the following is most likely a true statement about the relationship between the United Nations and NGOs?

A)The UN must license an NGO for it to be involved in any international relief efforts.
B)A UN committee discusses issues of importance to NGOs but does not regulate their activities.
C)The UN determines which NGOs can work on international humanitarian issues and relief efforts.
D)NGOs typically operate in only one country, whereas UN agencies can operate anywhere in the world.

Question 62

The introduction of the euro has eliminated currency as a barrier to trade in all European countries.

Question 63

Each country in NAFTA sets its own tariffs to the rest of the world.

Question 64

The formation of CARICOM has primarily been triggered by the desire of Jamaica, Trinidad, and Tobago to expand the region's market size and attract more FDI.

Question 65

According to regional content rules, at least ________ of the net cost of most products must come from the NAFTA region in order to get access to the tariff reductions of NAFTA.

A)62.5%
B)50%
C)45%
D)40.5%

Question 66

The most important rationales for NAFTA are geographic proximity and trading importance.

Question 67

Korman Industries is a foreign multinational that recently established operations in the European Union.What is the most likely advantage for Korman as a result?

A)Governance processes are streamlined because local governments have been eliminated.
B)Market size is larger because of the elimination of internal tariff barriers.
C)Differential external tariff barriers exist for product shipments.
D)The EU uses English as its official language.

Question 68

The Single European Act set steps to accomplish monetary union in the European Union, including the creation of the euro.

Question 69

________ is a preferential trade agreement that was organized in 1967 and comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.

A)APEC
B)OAU
C)ASEAN
D)CAFTA

Question 70

The major trade groups in South America are CAN and Mercosur.

Question 71

The major trade group in South America involving Brazil, Paraguay, Uruguay, and Argentina is ________.

A)Mercosur
B)UNASUR
C)APEC
D)CAN

Question 72

NAFTA is an example of a common market.

Question 73

Which of the following recently threatened the future of the EU's common currency?

A)refusal of the UK to use the euro
B)failed mergers and acquisitions
C)debt crisis in Greece
D)human rights issues

Question 74

Production location is not an important choice when doing business in the European Union.

Question 75

The European Commission is the European Union's ultimate decision-making body and is composed of the different ministers of the member countries.

Question 76

The three major responsibilities of the European Parliament are legislative power, control over the budget, and supervision of executive decisions.

Question 77

Which of the following is a unique provision of NAFTA?

A)tariff elimination
B)common currency
C)environmental standards
D)immigration oversights and policies

Question 78

Although the European Union is a common market, member countries have different economic growth rates.

Question 79

Under NAFTA, rules of origin ensure that ________.

A)only goods produced mostly within the region are eligible for liberal tariff conditions
B)only American products are shipped to Canada and Mexico duty-free
C)all members import products only from member nations
D)all members have the same external and internal tariffs

Question 80

An NGO is ________.

A)an agency of the United Nations
B)a private institution independent of a government
C)any organization working on environmental issues
D)an organization that is concerned only with workers' rights