Question 1

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

Accepted Answer

Local content requirements benefit producers of component parts, as it creates a domestic market for their goods. However, these requirements can raise the prices of imported components, which hurts consumers who have to pay higher prices for these goods.

Question 2

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.

Accepted Answer

This scenario describes an example of an administrative trade policy, where the government imposes restrictions on imports through administrative procedures such as licensing requirements, quotas, or specific port limitations. Ad valorem trade policies refer to taxes on imports based on their value, situational trade policies are not a recognized term, directional trade policies aim to promote trade with specific countries or regions, and anti-dumping policies target unfair pricing practices by foreign producers.

Question 3

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

Accepted Answer

Japan is often cited as a master of administrative trade policies due to its ability to use regulations, standards, and procedures to control access to its market, thereby protecting domestic industries.

Question 4

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

Accepted Answer

Local content requirements limit the amount of foreign competition by mandating that a certain percentage of the product must be produced locally. This is similar to an import quota, which limits the amount of foreign goods that can be brought into the domestic market. Both of these measures aim to protect domestic producers from foreign competition.

Question 5

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

Accepted Answer

Strategic trade policy argues that subsidies can help domestic firms gain a first-mover advantage in emerging industries by enabling them to invest in research and development or scale production more quickly than foreign competitors. Therefore, the best answer is A.

Question 6

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)

Accepted Answer

The requirement stipulated by the Spanish government is an example of a local content requirement, which requires a certain percentage of inputs used in production to be sourced locally. Ad valorem content requirements involve a specific percentage of the value of the product to be produced locally. International content requirements and barter content are not relevant to this scenario. A specific content requirement is a type of local content requirement that mandates a particular type of input to be used in production, which is not mentioned in the scenario.

Question 7

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)

Accepted Answer

The policy described in the passage is an example of an administrative trade policy, as it involves the use of administrative procedures to regulate trade (in this case, making it impractical for foreign companies to import videocassette recorders to France). It is not a supplemental or contingent trade policy, as those refer to specific measures taken in response to particular trade situations. It is also not an ad valorem trade policy, which involves the imposition of a specific tariff based on the value of the imported goods. Finally, it is not an administrative cost reduction strategy, as it does not seek to reduce administration costs.

Question 8

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

Accepted Answer

Domestic producers benefit the most from subsidies as they are given financial assistance from the government to produce goods at a lower cost. This allows them to increase production and compete more effectively in the international market. Traders, consumers, governments, and importers do not directly benefit from subsidies.

Question 9

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 __________.

Accepted Answer

Administrative policies that restrict imports and boost exports benefit producers by protecting domestic industries from foreign competition and increasing demand for their products. However, these policies hurt consumers by raising prices due to reduced competition and limited supply choices. Therefore, option D is the most appropriate choice.

Question 10

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

Accepted Answer

Import quotas and VERs limit the amount of competing imports, which benefits domestic producers as they face less competition. However, these restrictions result in higher prices for consumers, ultimately hurting them. Therefore, the correct option is A, where domestic producers benefit at the expense of consumers.

Question 11

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.

Accepted Answer

The term for selling goods in a foreign market at a price below their costs of production or below their "fair" market price is known as dumping. This can lead to unfair competition and harm producers in the importing country.

Question 12

The Canadian company Clearwater Seafoods has its fishing catches being subject to ______.

Accepted Answer

Clearwater Seafoods' fishing catches are subject to quotas, which limit the amount of certain fish species that can be caught within a specific period. These quotas are set by government agencies to ensure the sustainability of fish populations and protect the natural ecosystem. Clearwater Seafoods and other fishing companies are required to follow these quotas to avoid overfishing and penalties for violating regulations.

Question 13

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.

Accepted Answer

Local content regulations are typically used by developing nations to encourage the growth of their domestic industries and to reduce their dependence on imports. By requiring that a certain percentage of a product's components be manufactured locally, these regulations incentivize foreign companies to invest in local manufacturing operations, thereby creating jobs and stimulating economic development. Developed nations, while they may also use local content regulations in certain circumstances, typically already have established manufacturing bases and are less in need of these types of policies. The United Nations is an international organization that does not impose local content regulations, and the term "1^st world countries" is not a recognized classification of nations. Canadian governments may use local content regulations, but they are not unique in doing so.

Question 14

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

Accepted Answer

Bureaucratic rules that are designed to make it difficult for imports to enter a country are known as administrative trade policies. These can include quotas, licensing requirements, and technical standards that foreign goods must meet in order to be sold in the domestic market.

Question 15

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

Accepted Answer

An import quota restricts the amount of a good that can be imported into a country, making it the best choice among the options given. It is not a subsidy on a good, a restriction on export, or a limit on domestic production. And it is not related to tariff relief qualification.

Question 16

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)

Accepted Answer

A voluntary export restraint (VER) is a quota on trade imposed by the exporting country at the request of the importing country's government. The exporting country voluntarily agrees to limit the quantity or value of goods that it will export to the importing country in order to avoid the imposition of more stringent trade barriers. This is different from an involuntary export restraint, which is imposed by the importing country on the exporting country without its consent. Trade reconciliation, refereed export restraint, and limited market access are not accurate terms for this concept.

Question 17

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)

Accepted Answer

The stipulation given by the Australian government is an example of a local content requirement, which requires a certain percentage of the product or its components to be produced locally.

Question 18

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)

Accepted Answer

This scenario is an example of an administrative trade policy, which refers to measures taken by government agencies to manage or intervene in trade flows. In this case, the Japanese customs inspectors have a specific requirement that makes it difficult for the Netherlands to export to Japan, thus creating a barrier to trade.

Question 19

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

Accepted Answer

A local content requirement is a demand that a specific fraction of a good be produced domestically in order to stimulate domestic industries and create employment. It is usually achieved through government regulations or policies. The other answer choices do not accurately describe this concept.

Question 20

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.

Accepted Answer

The situation described in the question is an example of a voluntary export restraint, where the exporting country or industry voluntarily agrees to limit its exports to another country. In this case, Japanese automobile producers limited their exports to the United States in order to avoid tougher trade restrictions that the U.S. government was threatening to impose.

Quiz 6: The Political Economy of International Trade

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

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.