Deck 6: The Political Economy of International Trade

Question 1

A __________ is a tax levied on imports.

A)tariff
B)special assessment
C)penalty
D)globalization assessment
E)GST

Answer 1

A

Question 2

Which of the following refers to a situation where a government does not attempt to restrict what its citizens can buy from another country or what they can sell to another country?

A)Free trade
B)Unencumbered trade
C)Sovereign trade
D)Autonomous trade
E)Open trade

Answer 2

A

Question 3

Tariffs fall into two categories--

A)specific tariffs and ad valorem tariffs.
B)global tariffs and domestic tariffs.
C)general tariffs and specific tariffs.
D)flexible tariffs and ad valorem tariffs.
E)domestic tariffs and GATT

Answer 3

A

Question 4

Tariffs on foodstuffs, cosmetics and chemicals into Japan cost the average Japanese consumer about __________ dollars per year.

A)890
B)650
C)900
D)1100
E)400

Question 5

According to your text in the opening case, the tariff on banana imports into the EU cost consumers about __________ per year.

A)$4 billion
B)$2 billion
C)$37 billion
D)$45 billion
E)$56 billion

Question 6

Components of ___________ include tariffs, subsidies, import quotas, voluntary export restraints, local content requirements, administrative policies, and antidumping duties.

A)trade policy
B)ad valorem
C)tradereconciliation
D)sociocultural dimension
E)national economic development

Question 7

Tariffs cause the most damage to __________, According to the author of the textbook, because this group bears the economic brunt of tariffs.

A)trade associations
B)governments
C)retailers
D)producers
E)consumers

Question 8

Which of the following is not an example of one of the main instruments in trade policy used by governments around the world?

A)Tariffs
B)Political mandate
C)Subsidies
D)Import quotas
E)Local content requirements

Question 9

In a 1999 study, Howard Wall found that while the United States exported more than $723 billion in merchandise to countries outside NAFTA in 1996, it would have exported over $________ billion more if those countries practiced free trade.

A)51
B)864
C)111
D)396
E)130

Question 10

In a 1999 study, Howard Wall found that while the United States imported more than $499 billion in merchandise from countries outside NAFTA in 1996, it would have imported over $________ billion more if it had a policy of pure free trade.

A)51
B)864
C)111
D)396
E)211

Question 11

According to the author of the textbook, tariffs benefit the following two groups:

A)government and producers.
B)consumers and trade associations.
C)government and consumers.
D)producers and consumers.
E)retailers and wholesalers.

Question 12

While __________ tariffs are levied as a fixed charge for each unit of a good imported, __________ tariffs are levied as a proportion of the value of the imported good.

A)general; special
B)ad valorem; special
C)global; special
D)specific; ad valorem
E)predatory; percentage

Question 13

According to the author of the textbook, tariffs are __________ and __________.

A)pro-producer and pro consumer
B)anti-consumer and pro-producer
C)anti-consumer and anti-producer
D)pro-producer and anti-consumer
E)pro-government and pro-consumer

Question 14

__________ are levied as a fixed charge for each for each unit of a good imported.

A)Specific tariffs
B)General tariffs
C)Ad valorem tariffs
D)Global tariffs
E)Sales taxes

Question 15

Which of the following is a government payment to a domestic producer?

A)Duty
B)Subsidy
C)Quota
D)Tariff
E)Grant

Question 16

The 15 to 20 percent tariff the EU placed on imported bananas from Latin America is an example of what kind of tariff?

A)General
B)Ad valorem
C)Special
D)Global
E)Anti-Dumping

Question 17

By lowering production costs, ____________ help domestic producers compete against foreign imports.

A)tariffs
B)duties
C)quotas
D)ad valorems
E)subsidies

Question 18

American Consumers for Affordable Homes calculated that the 27 percent tariff that the U.S.imposed on Canadian softwood lumber adds approximately _________ to the cost of a new home.

A)$750
B)$500
C)$800
D)$1100
E)$1000

Question 19

Tariffs

A)reduce the price of foreign goods.
B)reduce efficiency because a protective tariff encourages domestic firms to produce products at home.
C)create efficient utilization of resources.
D)are unambiguously pro-consumer and anti-producer.
E)help domestic producers increase their efficiency and resist foreign competition

Question 20

__________ are the oldest and simplest instrument of trade policy.

A)Subsidies
B)Administrative policies
C)Tariffs
D)Voluntary export restraints
E)Price discrimination

Question 21

Local content requirements benefit the ______________ of component parts, but they raise prices of imported components, which hurts _____________.

A)consumers; producers
B)producers; governments
C)consumers; governments
D)producers; consumers
E)users; importers

Question 22

_______________ tends to be one of the largest beneficiaries of subsidies in most countries.

A)Technology
B)Agriculture
C)Commodities
D)Domestic product
E)Consumers

Question 23

Bureaucratic rules that are designed to make it difficult for imports to enter a country are referred to as

A)situational trade policies.
B)ad valorem trade policies.
C)supplemental trade policies.
D)administrative trade policies.
E)public service intransigence

Question 24

According to _______, subsidies can help a firm achieve a first-mover advantage in an emerging industry.

A)strategic trade policy
B)antidumping policies
C)consumers
D)importers
E)farmers

Question 25

What demands that some specific fraction of a good be produced domestically?

A)International content requirement
B)Local content requirement
C)Specific content requirement
D)Ad valorem content requirement
E)WTO local content convention

Question 26

If Apple won an order to sell 500 of its new minicomputers to Australia, but the Australian government stipulated that 20 percent of the component parts of the minicomputers that it purchased must be produced in Australia, that stipulation would be an example of a(n)

A)ad valorem content requirement.
B)specific content requirement.
C)ad hoc content requirement.
D)local content requirement.
E)domestic producer content

Question 27

One of the most famous examples of a(n) __________ is the limitation on auto exports to the United States enforced by Japanese automobile producers in 1981.

A)involuntary import restraint
B)voluntary export restraint
C)trade reconciliation
D)referred export restraint
E)limited market access

Question 28

Local content requirements provide protection in the same way an import quota does _____________ for a domestic producer of component parts.

A)by limiting foreign competition
B)by increasing tariffs
C)by eliminating foreign competition
D)by encouraging foreign competition
E)by increasing the price of imported products

Question 29

Lowering production costs helps domestic producers

A)gain export markets.
B)develop trade reconciliation.
C)create voluntary export subsidy.
D)determine specialized quotas.
E)increase their value

Question 30

A quota on trade imposed by the exporting country, typically at the request of the importing country's government is referred to as a(n)

A)voluntary export restraint.
B)involuntary export restraint.
C)trade reconciliation.
D)refereed export restraint.
E)limited market access

Question 31

An import quota is a direct restriction on the quantity of some good that may be

A)subsidized by a country.
B)imported into a country.
C)exported out of a country.
D)produced in a country.
E)qualified for tariff relief

Question 32

At one time, the French government required that all imported videocassette recorders arrive in France through a small customs entry point that was both remote and poorly staffed.This policy, which in effect made it impractical for a foreign company to import videocassette recorders to France, is an example of a(n)

A)supplemental trade policy.
B)contingent trade policy.
C)administrative trade policy.
D)ad valorem trade policy.
E)administrative cost reduction strategy

Question 33

Consider the following scenario.The Netherlands exports tulip bulbs to almost every country in the world except Japan.The reason is that Japanese customs inspectors insist on checking every tulip bulb by cutting it down the middle (which destroys the bulb).The insistence on the part of the Japanese to inspect the bulbs in this manner (which makes it impractical for the Netherlands to export to Japan) is an example of a(n)

A)administrative trade policy.
B)ad valorem trade policy.
C)contingent trade policy.
D)supplemental trade policy.
E)Plant protection Law

Question 34

According to official national figures, during the late 1980s government subsidies to industry in most industrialized countries amounted to between

A)40% and 50% of the value of industrial output.
B)15% and 20% of the value of industrial output.
C)2% and 3.5% of the value of industrial output.
D)10% and 15% of the value of industrial output.
E)3.5% and 4% of the value of industrial output.

Question 35

If Westvaco decided to produce paper in Spain, and the Spanish government stipulated that 50% of the component parts that went into Westvaco's paper must be produced locally, that requirement would be an example of a(n)

A)ad valorem content requirement.
B)international content requirement.
C)specific content requirement.
D)local content requirement.
E)barter content

Question 36

The main gains from subsidies accrue to __________, whose international competitiveness is increased as a result of them.

A)traders
B)consumers
C)governments
D)importers
E)domestic producers

Question 37

VER stands for

A)Very economic reversal
B)Voluntary economic report
C)Voluntary economic restraint
D)Voluntary export restraint
E)Voluntary economic reversal

Question 38

Both import quotas and VERs benefit ___________ by limiting import competition, but they result in higher prices, which hurts __________.

A)domestic producers; consumers
B)governments; consumers
C)consumers; foreign producers
D)foreign producers; governments
E)balance of trade; consumers

Question 39

Some would argue that ___________ are the masters of administrative trade policies.

A)United States
B)Japan
C)France
D)Germany
E)Canada

Question 40

Local content regulations have been widely used by __________ to shift their manufacturing base from the simple assembly of products whose parts are manufactured elsewhere into the local manufacture of component parts.

A)United Nations
B)developed nations
C)developing nations
D)1^st world countries
E)Canadian governments

Question 41

The __________ is legislation that is similar to the Helms-Burton Act, but is aimed at Libya and Iran.

A)Perkin's Act
B)D'Amato Act
C)Williams Act
D)Cato Act
E)Harper Act

Question 42

In general, what are two types of arguments for government intervention into the free flow of trade?

A)Patriotic and sociocultural
B)Sociocultural and legal
C)Political and economic
D)Legal and patriotic
E)Socioeconomic and legal

Question 43

__________ are designed to punish foreign firms that engage in dumping.

A)Antidumping policies
B)Counterdumping policies
C)Statutory dumping policies
D)Civil dumping policies
E)Punitive dumping tariffs

Question 44

An indirect effect of protecting consumers from "unsafe" products is to ____________

A)decrease the costs of the products.
B)decrease the prices of the products.
C)limit or ban the importation of the products
D)both A and C are correct.
E)A, B and C are correct

Question 45

Perhaps the most common political argument for government intervention into the free flow of trade is that

A)it protects national pride.
B)politicians and their constituents tend to think that domestically produced products are.superior to products produced in another country.
C)it is necessary for protecting jobs and industries from foreign competition.
D)it is necessary to maintain domestic economic stability.
E)it is important for national security

Question 46

An alleged example of __________ occurred in 1997, when two Korean manufacturers of semiconductors, LG Semicon and Hyundai Electronics, were accused of selling dynamic random access memory chips in the U.S.market at below their costs of production.

A)dumping
B)forcing
C)slicing
D)subsidizing
E)skimming

Question 47

An administrative policy is an informal instrument or bureaucratic rule that can be used to restrict imports and boost exports.Such policies benefit __________ but hurt __________.

A)trade associations; producers
B)consumers; producers
C)consumers; trade associations
D)producers; consumers
E)consumer lobbyists; farmers

Question 48

An example of a(n) _______ that limits imports is if a country restricted the import of a particular good to a remote seaport that made it extremely difficult for any other country to import the good profitably.

A)ad valorem trade policy
B)administrative trade policy
C)situational trade policy
D)directional trade policy
E)anti-dumping policy

Question 49

In __________, the Canadian Government decided to permanently ban imports into Canada of baby walkers.

A)1996
B)1989
C)1998
D)2002
E)2004

Question 50

__________ arguments for government intervention into international trade are typically concerned with furthering the security of its citizens.

A)Economic
B)Political
C)Legal
D)Sociocultural
E)Constitutional

Question 51

The Canadian company Clearwater Seafoods sees China as both a current competitor and a large potential future consumer because of ____________.

A)the size of the population
B)environmental degradation of China's coastline
C)the inefficiencies of state-owned enterprises
D)the growing wealth of the population
E)the removal of import quotas on imported seafood

Question 52

If _______ exist, a charge of "dumping" can be levied against a foreign firm.

A)goods are being sold that do not meet local content requirements or goods are being sold that do not meet local quality standards
B)goods are being sold at predatory prices or goods are being sold that do not meet local product safety standards
C)goods are being sold without the consent of the host government or goods are being sold that do not meet local quality standards
D)goods are being sold at below their cost of production or goods are being sold at below their "fair" market value
E)goods are being sold at a price that domestic producers cannot match and workers are losing jobs

Question 53

In the context of international trade, __________ is defined as selling goods in a foreign market at a price below their costs of production or as selling goods in a foreign market at below their "fair" market price.

A)slicing
B)dumping
C)slashing
D)subsidizing
E)skimming

Question 54

__________ status allows countries to export goods to Canada under favorable terms.

A)Most favored nation
B)Preferential partner
C)Fully qualified
D)Cleared nation
E)NAFTA nation

Question 55

The EU decision to ban the importation of hormone treated beef into the European Union is an example of ______________.

A)consumer protection
B)anti-dumping actions
C)luddism
D)producer protection
E)Common Agricultural Policy

Question 56

__________ arguments for government intervention into international trade are typically concerned with boosting the overall wealth of a nation.

A)Economic
B)Political
C)Legal
D)Sociocultural
E)Constitutional

Question 57

Antidumping duties are often called _____________?

A)Import duties
B)Export duties
C)Special duties
D)Government duties
E)Countervailing duties

Question 58

What is the ultimate objective of antidumping policies?

A)Protect consumers from predatory pricing
B)Protect host governments from the loss of legitimate tax revenue
C)Protect domestic producers from "unfair" foreign competition
D)Protect foreign producers from "unfair" local competition
E)Promote "fair" trade

Question 59

Legislation that allows Americans to sue Canadian firms that use property in Cuba confiscated from them after the 1959 revolution is the

A)Frederick-Peterson Act.
B)D'Amato-Perkins Act.
C)Perkins-Dole Act.
D)Helms-Burton Act.
E)Martin-Duceppe Act

Question 60

In the United States, if a domestic producer believes that a foreign firm is dumping production in the U.S.market, it can file a petition with the following two government agencies

A)Treasury Department and the Senate Committee on Fair Trade.
B)Department of Agricultural and the Department of Labor.
C)Department of State and the Treasury Department.
D)Commerce Department and International Trade Commission.
E)U.S.office of the WTO

Question 61

According to the textbook, Paul Krugman, a professor at MIT, predicts that a country that attempts to use strategic trade policy to establish a domestic firm (or firms) in a dominant position in a global industry will probably

A)succeed fairly smoothly.
B)be viewed favorable in the international community.
C)provoke retaliation.
D)be successful if the policy is in force for at least three years.
E)experience strong foreign opposition, but succeed in the long-run

Question 62

By far, the oldest economic argument for government intervention into the free flow of trade is the __________ argument.

A)mature industry
B)infant industry
C)declining industry
D)proprietary industry
E)mercantilist

Question 63

The ____________ was a multilateral agreement whose objective was to liberalize trade by eliminating tariffs, subsidies, import quotas, and the like.

A)General Agreement of Tariffs and Trade
B)World Trade Supervisory Authority
C)United Nations
D)International Trade Organization
E)International Labour Organization

Question 64

GATT was, by most measures, ___________ in its early years.

A)very unsuccessful
B)slightly unsuccessful
C)slightly successful
D)very successful
E)ineffective

Question 65

One of the best known examples of ___________ is the agreement between the United States and Japan, under which Japanese producers promised to limit their auto imports to the United States as a way of defusing growing trade tensions.

A)voluntary export restraint
B)import quotas
C)local content requirement
D)ad valorem tariffs
E)administrative trade initiatives

Question 66

Aimed at avoiding rising unemployment by protecting domestic industry and diverting consumer demand away from foreign products, the ___________ tariff erected an enormous wall of tariff barriers.

A)Smoot-Hawley Act
B)Porter-Ricardo Act
C)Heckscher-Ohlin
D)Smith-Krugman
E)Vernon-Weimar

Question 67

In what year was the General Agreement on Tariffs and Trade (GATT) established?

A)1867
B)1908
C)1947
D)1983
E)1944

Question 68

When the British Parliament repealed the ______________, free trade as a government policy was first officially embraced by Great Britain in 1846.

A)Corn Laws
B)Steel Laws
C)Coal Laws
D)Apparel Laws
E)Child Labour Laws

Question 69

The infant industry argument has been recognized as a legitimate reason for protectionism by the _______,

A)GATT
B)North Atlantic Treaty Organization
C)United Nations
D)International Monetary Fund
E)World Bank

Question 70

________ arguments challenges the rationale for unrestricted free trade found in the work of classic trade theorists such as Adam Smith and David Ricardo.

A)Technological justification
B)Sociocultural justification
C)strategic trade policy
D)Political justification
E)National Security

Question 71

A government should use subsidies to support promising firms that are active in newly emerging industries, according to the ______ argument.

A)strategic trade policy
B)infant industry
C)declining industry
D)mature industry
E)strategic industry

Question 72

An important component of _____ is that it might pay governments to intervene in an industry if it helps domestic firms overcome the barriers to entry created by foreign firms that have already reaped first-mover advantages.

A)tactical trade policy
B)strategic trade policy
C)administrative trade policy
D)comparative trade policy
E)infant industry policy

Question 73

Primarily as a result of pressure from the developing world, it was recognized the ______ argument was a legitimate reason for protectionism.

A)declining industry
B)infant industry
C)strategic trade policy
D)mature industry
E)strategic industry

Question 74

According to the strategic trade policy argument, a government should use subsidies to

A)support promising firms in emerging industries.
B)support established firms in key industries.
C)support the import of goods that a country cannot produce domestically.
D)support the export of agricultural products.
E)support large employers

Question 75

According to the __________ argument, many developing countries have a potential comparative advantage in manufacturing, but new manufacturing industries there cannot initially compete with well-established industries in developed countries.To allow manufacturing to get a toehold, the argument is that governments should temporarily support new industries (with tariffs, import quotas, and subsidies) until they have grown strong enough to meet international competition.

A)proprietary industry
B)strategic trade policy
C)mature industry
D)infant industry
E)strategic industry

Question 76

The Corn Laws

A)were repealed after record harvests in Britain.
B)placed a high tariff on corn imported into Britain.
C)were repealed after a stinging speech in parliament by David Ricardo where he outlined the theory of comparative advantage.
D)were enacted by Britain after the shortages of corn during the Crimean War.
E)were repealed to reduce the production of non-quota corn

Question 77

The strategic trade policy argument of the new trade theorists advances an _______ justification for government intervention in international trade.

A)technological
B)sociocultural
C)economic
D)political
E)legal

Question 78

__________ is not one of the main reasons that protectionist pressures arose around the world during the 1980s.

A)Many countries found ways to get around GATT regulations
B)The opening of Japanese markets to imports
C)The economic successes of Japan
D)The persistent trade deficit in the United States
E)The growing resentment towards the U.S.

Question 79

Although the trade deficit in the U.S.peaked in 1987 at more than $170 billion, by the end of 1992, the annual deficit rate was still running about

A)125 billion.
B)80 billion.
C)40 billion.
D)15 billion.
E)25 billion

Question 80

The ______________ was a multilateral agreement whose objective was to liberalize trade by eliminating tariffs, subsidies, import quotas, and the like.

A)Multinational Agreement on Globalization
B)United Nations Charter on Free Trade
C)World Agreement on Trade and Free Commerce
D)International Market Fund
E)General Agreement on Trade and Tariffs