Question 1

Countervailing duties are a method of trade restriction designed to offset

Accepted Answer

Countervailing duties are designed to offset subsidies that foreign governments provide to their exporting firms that give them an unfair advantage in the global market.

Question 2

Suppose the Canadian government began subsidizing wheat farmers by paying them $25 per bushel of wheat produced.According to existing international trade agreements,other countries would be allowed to react to this subsidy by imposing a

Accepted Answer

Other countries would be allowed to react to this subsidy by imposing a countervailing duty, which is a tariff or tax on imports that is equal to the amount of the subsidy provided to domestic producers. This is meant to offset the advantage the domestic producers would have due to the subsidy and keep trade fair.

Question 3

Canadian governments (provincial and federal)currently provide enormous protection (through tariffs)to which of the following domestic industries?

Accepted Answer

The dairy industry in Canada is heavily protected through tariffs to maintain prices and limit competition from imported dairy products.

Question 4

Suppose Canada implements new border procedures that require goods arriving from Country X to be held for 60 days in a bonded warehouse.This new policy is and is likely to .

Accepted Answer

Requiring goods to be held in a bonded warehouse is a form of non-tariff barrier, which places restrictions on trade through means other than tariffs. This policy will likely reduce imports from Country X as it adds time and costs to shipping and may deter some importers.

Question 5

The concept of ʺtrade diversionʺ refers to

Accepted Answer

Trade diversion occurs when a member of a trade agreement replaces a low-cost foreign supplier with a high-cost one based on membership in that agreement. This can lead to inefficiencies and economic losses for the member.

Question 6

The concept of ʺtrade creationʺ refers to

Accepted Answer

Trade creation refers to the increase in trade that occurs as a result of reducing or eliminating trade barriers, particularly tariffs. This allows countries to specialize in the production of goods and services they have a comparative advantage in, leading to increased efficiency and trade. Choices A, B, D, and E do not accurately describe trade creation.

Question 7

What is the main difference between a tariff and an ʺequivalentʺ voluntary export restriction (VER)? A tariff

Accepted Answer

A tariff allows the government of the importing country to collect revenue from the extra market value of the imported good, while with a VER, the extra market value accrues to the good's foreign producers. A VER is typically negotiated between two countries as a way to restrict the volume of imports of a particular good, rather than imposing a tariff.

Question 8

Suppose the Canadian government imposed more stringent environmental regulations on U.S.-owned pulp and paper mills than on Canadian-owned mills.This practice would be a violation of

Accepted Answer

The NAFTA principle of national treatment requires that each member country must treat the investments and businesses of the other member countries in the same way that it treats its own investments and businesses. Thus, if Canada imposed more stringent environmental regulations on U.S.-owned pulp and paper mills than on Canadian-owned mills, this would be a violation of the national treatment principle.

Question 9

Canada and the United States had a prolonged dispute about alleged government subsidies to the softwood lumber industry in Canada.Who loses and who gains from the situation in which Canadian governments impose taxes on Canadian exports of softwood lumber to the United States?

Accepted Answer

When Canadian governments impose taxes on Canadian exports of softwood lumber to the United States, it increases the cost of Canadian lumber in the U.S. market. This makes Canadian lumber more expensive for U.S. users, who lose due to higher prices. On the other hand, U.S. producers of lumber gain because the tax on Canadian lumber reduces competition, potentially allowing U.S. producers to increase their market share and possibly raise their prices.

Question 10

What is the fundamental guiding principle of the North American Free Trade Agreement (NAFTA)?

Accepted Answer

The fundamental guiding principle of NAFTA is national treatment, which means that each member country must treat goods and services from the other member countries as if they were their own. This includes equal treatment with regards to taxes, regulations, and other policies.

Question 11

Canada and the United States have been in a prolonged dispute about Canadaʹs supply -managed agricultural industries,such as dairy and poultry.If the United States is successful in having Canadaʹs ʺtariff equivalentsʺ removed,who will lose and who will gain?

Accepted Answer

The answer of Canada and the United States have been...

Question 12

An agreement among a group of countries that allows for tariff-free trade among the members but leaves each member free to levy its own tariffs on imports from other countries is called a

Accepted Answer

A free-trade area is an agreement among a group of countries that removes tariffs and trade restrictions among the members while allowing each member to maintain their individual trade policies towards non-member countries. This means that each member can set its own tariffs and restrictions on trade with non-member countries, but cannot set tariffs on imports from member countries.

Question 13

An agreement among a group of countries to eliminate trade barriers among themselves,to present a common trading front to the rest of the world in terms of common barriers to trade,and to permit free movement of factors of production among member countries is called a

Accepted Answer

A common market is an agreement among multiple countries to eliminate trade barriers between them, present a common front to the rest of the world, and allow free movement of factors of production. This includes the elimination of tariffs, quotas, and other barriers to trade between member countries.

Question 14

Which of the following actions (all of which affect international trade)would be undertaken by a private firm as opposed to a national government?

Accepted Answer

Dumping is a practice where a company exports a product at a price lower than the price it normally charges in its own home market. This is a strategy that can be undertaken by private firms to gain market share in foreign markets. Tariffs, countervailing duties, quotas, and import duties are all trade policies or measures that are typically implemented by national governments to regulate imports and exports for various economic, political, or social reasons.

Question 15

According to the principle of ʺnational treatmentʺ in the North American Free Trade Agreement (NAFTA),member countries

Accepted Answer

The principle of "national treatment" in NAFTA means that member countries must treat domestic and foreign-owned firms equally when it comes to laws and regulations. This means that member countries can establish new laws as they wish, as long as these laws apply equally to both domestic and foreign-owned firms. This principle is meant to promote fair competition among firms operating in member countries.

Question 16

Suppose Canada has a 20% tariff on the import of carpets,and Canada currently imports this product from India at a with-tariff price of $22.The with-tariff price of identical carpets from the United States is $24.Now suppose a free-trade agreement with the U.S.eliminates the tariff and so the no -tariff price from the U.S.is $20.Canada now purchases carpets from the U.S.This is an example of

Accepted Answer

Trade diversion occurs when a country switches its sourcing of imports from a more efficient producer to a less efficient one due to the implementation of a preferential trade agreement, such as a free trade agreement. In this case, Canada switches from importing carpets from India to importing from the U.S. because of the elimination of tariffs on U.S. carpets, despite the fact that the no-tariff price from India might still be lower or competitive. This switch does not necessarily reflect the inherent cost advantages of the U.S. as a supplier over India, but rather the artificial price changes created by the removal of tariffs.

Question 17

The General Agreement on Tariffs and Trade (GATT)was established in 1947.It has more recently been replaced by the

Accepted Answer

The General Agreement on Tariffs and Trade (GATT) was replaced by the World Trade Organization (WTO) in 1995. The WTO is an international organization that aims to promote free and fair trade among its member countries.

Question 18

Consider the North American Free Trade Agreement (NAFTA)between Canada,the United States and Mexico.Some industries in Canada,however,continue to have some trade protection.An example is

Accepted Answer

Dairy products in Canada continue to have protections under NAFTA, such as supply management systems which limit imports and keep domestic prices higher.

Question 19

Suppose Canada imposed more stringent quality standards on pharmaceutical products being imported from Mexico than were imposed on firms producing the same products in Canada.This action would be

Accepted Answer

This action would be a violation of NAFTA's principle of national treatment, which requires that imported goods receive the same treatment as domestically produced goods once they enter a member country's market. By imposing more stringent quality standards on Mexican pharmaceutical products, Canada would be treating them differently from domestically produced pharmaceutical products, which violates this principle.

Question 20

Trade-remedy policies commonly used to achieve a ʺlevel playing fieldʺ are

Accepted Answer

The answer of Trade-remedy policies commonly used to achieve a...

Quiz 34: Exchange Rates and the Balance of Payments

Countervailing duties are a method of trade restriction designed to offset

Suppose the Canadian government began subsidizing wheat farmers by paying them $25 per bushel of wheat produced.According to existing international trade agreements,other countries would be allowed to react to this subsidy by imposing a

Canadian governments (provincial and federal) currently provide enormous protection (through tariffs) to which of the following domestic industries?

Suppose Canada implements new border procedures that require goods arriving from Country X to be held for 60 days in a bonded warehouse.This new policy is and is likely to .

The concept of ʺtrade diversionʺ refers to

The concept of ʺtrade creationʺ refers to

What is the main difference between a tariff and an ʺequivalentʺ voluntary export restriction (VER) ? A tariff

Suppose the Canadian government imposed more stringent environmental regulations on U.S.-owned pulp and paper mills than on Canadian-owned mills.This practice would be a violation of

Canada and the United States had a prolonged dispute about alleged government subsidies to the softwood lumber industry in Canada.Who loses and who gains from the situation in which Canadian governments impose taxes on Canadian exports of softwood lumber to the United States?

What is the fundamental guiding principle of the North American Free Trade Agreement (NAFTA) ?

Canada and the United States have been in a prolonged dispute about Canadaʹs supply -managed agricultural industries,such as dairy and poultry.If the United States is successful in having Canadaʹs ʺtariff equivalentsʺ removed,who will lose and who will gain?

An agreement among a group of countries that allows for tariff-free trade among the members but leaves each member free to levy its own tariffs on imports from other countries is called a

An agreement among a group of countries to eliminate trade barriers among themselves,to present a common trading front to the rest of the world in terms of common barriers to trade,and to permit free movement of factors of production among member countries is called a

Which of the following actions (all of which affect international trade) would be undertaken by a private firm as opposed to a national government?

According to the principle of ʺnational treatmentʺ in the North American Free Trade Agreement (NAFTA) ,member countries

The General Agreement on Tariffs and Trade (GATT) was established in 1947.It has more recently been replaced by the

Consider the North American Free Trade Agreement (NAFTA) between Canada,the United States and Mexico.Some industries in Canada,however,continue to have some trade protection.An example is

Suppose Canada imposed more stringent quality standards on pharmaceutical products being imported from Mexico than were imposed on firms producing the same products in Canada.This action would be

Trade-remedy policies commonly used to achieve a ʺlevel playing fieldʺ are