Deck 5: Political Forces That Affect Global Trade

Question 1

Kidnap,ransom,and extortion are techniques often used by terrorists against which no insurance is available.

Answer 1

False
Explanation: There is kidnap, ransom, and extortion (KRE) insurance.

Question 2

The only reason firms are nationalized is to spread a socialist-communist ideology.

Answer 2

False
Explanation: Many other reasons exist for nationalization, including to extract more money from the firms, to increase profitability, to preserve jobs, and as a result of government investments.

Question 3

The national defense argument for trade restrictions is based on the development level of the country.

Answer 3

False
Explanation: The level of development is not important with regard to trade restrictions. A nation would protect its own industry, even though foreign nations could be more advanced in the sector.

Question 4

Country risks are often political in nature.

Question 5

Businesses favor unstable governments because they present more profit opportunities.

Question 6

The length of the investment in a foreign country has no impact on the risk assessment for that investment.What matters are the economic and political situations in the country.

Question 7

When the U.S.military contracts out security details in war zones,it is engaged in privatization.

Question 8

To protect an infant industry,trade restrictions might be effective.

Question 9

Sanctions are a trade restriction that is effective in forcing change.

Question 10

Subsidies that confer a benefit may well evoke countervailing duties.

Question 11

A comparison based on hourly wages is a reasonable guide to a need to protect domestic jobs.

Question 12

Concession dumping is a type of trade discrimination.

Question 13

Unpredictable government actions create many business opportunities.

Question 14

U.S.ocean shipping companies are benefiting from U.S.government subsidies.

Question 15

Retaliatory trade restrictions are not made for dumping because price competition is protected by the WTO.

Question 16

When people are kidnapped for ransom,the right response is to pay the ransom,get the hostages released,and then retaliate.

Question 17

Fair competition is a strong rationale for trade barriers.

Question 18

Only in communist countries do governments own the factors of production.

Question 19

Voluntary export restraints are imposed by the importing nation to avoid violating WTO rules.

Question 20

The practice of country risk assessment is an exercise in xenophobic and ethnocentric thinking.

Question 21

Government protection of economic activities is

A) an historical function of government.
B) a recent responsibility of government.
C) a socialist characteristic.
D) stronger in democracies.

Question 22

Nontariff barriers that are not quantitative can be divided into two groups,those established by the government participation in trade and those that are administrative.

Question 23

What is the role of the home country in risk assessment?

A) It has no role. What matters is the country in which the business is conducted.
B) It is a significant consideration.
C) It is used initially, but then more micro issues become the focus of CRA.
D) Country risk does not involve political considerations at all.

Question 24

Unlike the topography,the political climate of a country has relatively little influence on its exports.

Question 25

Arguments for trade restrictions include all but

A) national defense, infant industry, and job protection.
B) punishment of offending nations.
C) fair competition and retaliation.
D) sovereignty rights.

Question 26

Terrorists avoid kidnapping because the repercussions can be harmful to their movement.

Question 27

The British prime minister David Cameron led the privatization movement.

Question 28

Dumping is

A) selling a product abroad for less than its production cost or cost in the home market.
B) selling a product abroad tax-free and with an extended warrantee.
C) exporting a product to a third country without correct documentation.
D) selling a product at its domestic market value.

Question 29

The trend for firms in regard to country risk assessment (CRA)is to

A) avoid it as an added cost in competitive markets.
B) concentrate much more on CRA in making decisions about foreign activities.
C) use CRA in obviously dangerous locations, but only in those situations, to control costs.
D) hire consultants to reduce CRA insurance costs.

Question 30

Government stability refers to all but one of the following of a government:

A) policies, that they endure over time.
B) ability to keep itself in power.
C) ability to hold to predictable fiscal, monetary, and political policies.
D) ability to adjust to sudden changes by making radical policy changes.

Question 31

One historic function of government has been the protection of the economic activities within its borders.

Question 32

Paying ransom makes sense because a life is saved and the payments can be traced.

Question 33

Nationalization and privatization are

A) similar trends.
B) opposing trends.
C) both risks faced by privately held firms.
D) both risks not encountered in capitalist democracies.

Question 34

When government-owned companies compete with private companies,the private companies have the advantage.

Question 35

Policy continuity and government stability are more important to a business than the type of political system.

Question 36

One example of nationalization of private companies is with the nationalization of French-owned firms in Europe after WWII.

Question 37

With privatization,all of these may occur,except

A) assets are transferred from the public sector to the private sector.
B) government control of business management may be increased.
C) state activities are moved into private management through contracts.
D) business loses its right to hire new employees.

Question 38

To hedge the terrorism risk,there are insurance,antiterrorist schools,and even companies to handle negotiations.

Question 39

When governments nationalize a firm,they don't seek to

A) extract more money from the firm.
B) increase the firm's profitability.
C) preserve jobs.
D) sell the firm to foreign investors.

Question 40

A government protects its citizens when they are abroad in the following way:

A) A powerful country can send in the marines to protect citizens.
B) A government can assert the rights of its citizens and that its laws follow its citizens, no matter where they are (extraterritoriality).
C) Politicians can influence how a foreign country's rules are applied to its own nationals.
D) Government embassies can provide information and emergency assistance, monitor and where appropriate, make protests.

Question 41

Examples of orderly marketing arrangements are

A) voluntary export restraints.
B) Jamaica Agreement treaties.
C) textile agreements.
D) Japanese truck export quotas.

Question 42

An example of environmental dumping is not found in the

A) maquiladora plants of Mexico, located near the U.S. border and operating at lower environmental standards than would be required in the U.S.
B) nuclear waste shipments to developing nations.
C) garbage shipments from New Jersey to developing nations.
D) recycling and processing of Virginia garbage to yield fuel and fertilizer.

Question 43

Non-quantitative nontariff barriers

A) are not counted as nontariff barriers.
B) often involve government participation in trade, especially in customs and other administrative procedures.
C) often involve ownership.
D) are virtual barriers.

Question 44

Subsidies are problematic because they

A) are administered as a form of political patronage.
B) aid a nation's export businesses or protect its domestic businesses from imports.
C) encourage nationalization.
D) violate UN agreements.

Question 45

Although the U.S.supports free trade,since 1789 it has supported tariffs to protect domestic

A) wheat.
B) palm oil.
C) sugar.
D) corn.

Question 46

Nuisance tariffs

A) annoy importers with red tape, administrative paperwork, and added expense.
B) are an historical anomaly.
C) are found in developed nations more than in developing nations.
D) have no point other than to indicate that tariffs regulations change quickly.

Question 47

Transshipping is used to

A) reduce shipping costs, as a form of consolidation.
B) avoid import administration.
C) evade allocated quotas.
D) evade local manufacture requirements.

Question 48

Official prices ensure all but that

A) imported goods will be sold at minimum prices, to avoid dumping.
B) a black market will be healthy and available for imported goods.
C) low-priced invoices to avoid tariffs will not be successful.
D) corruption will be minimal.

Question 49

The most common form of direct government participation in trade is

A) the subsidy.
B) shipping on national vessels.
C) import duties.
D) a combination of subsidy, shipping, and import duties.

Question 50

Import duties can be set to encourage

A) increased imports based on sales volumes.
B) local input.
C) price fixing.
D) imports from other suppliers.

Question 51

A nontariff barrier is illustrated by all but

A) the French requirement in 1982 that all Japanese VCRs be inspected in Poitiers, far from the port and up a windy mountain road.
B) the widespread Japanese belief that American rice can cause cancer.
C) the European attitude toward genetically modified crops.
D) the preference of some Indonesians for betel nut.

Question 52

The primary motivation of tariffs is to

A) raise government revenue at the cost of importers.
B) raise the price of imports, to protect domestic goods.
C) punish countries over political issues.
D) encourage foreign consumption.

Question 53

Quotas are a quantitative barrier that sets

A) limits, established by the importer.
B) goals, established by the exporter.
C) precise quantities of imports or exports, based on price.
D) expectations on domestic and foreign sales.

Question 54

Social dumping occurs when an exporting country

A) imposes an export tax on domestic businesses that export, to compensate for the opportunity cost to the domestic market.
B) creates unfair competition based on lower costs because the exporting country provides little social support system to the worker.
C) targets markets that consist of specific vulnerable groups in the importing country.
D) exports good that are not sellable in the domestic environment due to hazards and safety issues.

Question 55

In the U.S.,the Smoot-Hawley Tariff Act did not

A) outlaw tariffs for U.S. imports.
B) lead to the Wall Street crash of 1929.
C) establish the highest tariffs the U.S. has known.
D) intend to protect U.S. agriculture.

Question 56

Dumping includes

A) the foreign exporter's selling better products into the market than those manufactured in the home country.
B) black market sales to avoid prohibited substances, such as weapons, alcohol, and pornography.
C) selling goods priced lower in a foreign market than in the home market to build market share.
D) expanding fast-food franchise operations in foreign markets.

Question 57

The U.S.has been concerned about dumping and

A) yet only enacted antidumping measures in 2006.
B) enacted antidumping measures for its exporting companies as early as 1856.
C) became one of the first countries to prohibit dumping into its own market, in 1916.
D) illustrated this with the Boston Tea Party in 1773.

Question 58

Home country subsidies can be retaliatory because

A) they decrease the operating costs of local manufacturers compared to foreign manufacturers, thereby harming the competitive profile of the foreign firms.
B) they may discriminate against companies that have not contributed to the president's campaign.
C) they reduce the cost basis of the foreign manufacturers.
D) they are funded by taxpayers, which is all of the home country's nationals.

Question 59

Unlike quotas,voluntary export restraints (VERs)are imposed by

A) the importing country's government.
B) the exporting country's government.
C) either the importing or exporting country's government; what matters is that they are voluntary.
D) the importing company.

Question 60

The U.S.allocates quotas to 40 countries for specific tonnages of

A) sugar.
B) roast beef.
C) malt beer.
D) rice.

Question 61

International business can be a power political force,in part because

A) a recent Supreme Court ruling in the U.S. allows corporate contributions to political campaigns.
B) many top management team members are willing to accept roles with national security agencies.
C) about half of the world's 100 largest economic units are firms.
D) business is all about achieving political goals.

Question 62

Government stability is a characteristic of a government that

A) makes sudden radical policy changes.
B) readily shifts alliances to maintain power.
C) maintains predictability in fiscal, monetary, and political policies.
D) maintains authoritarian rule over an extended period of time.

Question 63

Nuisance tariffs

A) require importers to go through the administrative paperwork, even for a small payment.
B) can be declined at the point of import.
C) are used to activate larger duty payments related to quantity.
D) can be paid in kind.

Question 64

Trade barriers create costs that are paid ultimately by the

A) government erecting the barrier.
B) consumer.
C) country exporting the goods.
D) exporter.

Question 65

Customs procedures in many countries often

A) are transparent and fair.
B) discriminate against imports and favor exports.
C) are online and impersonal.
D) aid importers and exporters in estimating their total costs.

Question 66

Sanctions against nations are

A) not a form of trade restriction because the motivation is political.
B) a form of trade restriction that has economic and political impact.
C) ineffective, because other nations will violate them.
D) a way to conduct peaceful trade without disturbing commerce.

Question 67

Barriers to trade

A) are a political issue, but don't affect the cost of imports except marginally.
B) cost consumers billions of dollars per year.
C) save jobs in unprotected industries at $231,289 per job per year.
D) None of these responses completes the phrase accurately.

Question 68

Productivity per worker in economically developed countries tends to be

A) higher, due to management skills and advanced technology.
B) lower, due to higher wages.
C) irrelevant, because most factory floors are automated.
D) the equivalent of productivity in less developed countries, due to motivation issues.

Question 69

Tariff barriers may be used to

A) protect domestic industry from foreign, lower-cost producers.
B) reduce the need for foreign workers.
C) increase government revenues.
D) protect borders from gray market goods.

Question 70

The national defense argument for trade restrictions suggests that

A) some industries, even if they are not competitive, may need protection from imports.
B) the military is an area that can be exempted from import restrictions.
C) national defense requires no trade restrictions.
D) exporters of matériel would do well to monitor trade restrictions and permissions.

Question 71

Businesses that conduct country risk assessment do so

A) as part of their legal profile.
B) to protect their assets, including people and property.
C) to satisfy their top management teams.
D) because, much as with executive salaries, there is a herd mentality.

Question 72

Duties may be used to

A) encourage local input.
B) stimulate imports.
C) reward compliant manufacturers.
D) increase government expenditures.

Question 73

Counterarguments to the "protect domestic jobs from cheap foreign labor" argument include that

A) the labor rate is not all of the labor cost.
B) wage rates are incidental.
C) cheap foreign labor is a natural occurrence.
D) comparative advantage recognizes cheap labor as a competitive right.

Question 74

Country risk assessment is a measure of the

A) threat of nationalization.
B) threat of losing an investment or not being paid.
C) kidnapping rate.
D) rate of unfunded exposures.

Question 75

Social dumping occurs when exporting producers

A) have lower wage rates, social costs, and environmental regulations.
B) allow for free migration, thereby exporting poverty.
C) allow the import of environmentally sensitive waste.
D) take knowing advantage of a social class system.

Question 76

The national defense argument for trade restrictions has been used in the U.S.to argue for restriction on exports

A) of subway cars.
B) of uniforms.
C) of high technology items.
D) of ethanol.

Question 77

An argument against using trade restrictions to punish an offending nation is that

A) sanctions seldom achieve their goal of forcing change in the offending country.
B) sanctions are relatively harmful to the citizens of the offending country.
C) sanctions are not condoned by the UN.
D) sanctions decrease the cost of doing business.

Question 78

An example of retaliatory trade restrictions is

A) the U.S. response to the EU ban of hormone-treated beef.
B) the EU restraint on Microsoft for bundling its product.
C) the Japanese refusal to allow U.S. military equipment in Japan.
D) China's tightening control of the export of rare earths.

Question 79

"In nearly every economic crisis,the root cause is political,not economic," observed

A) Abraham Lincoln.
B) Lee Kuan Yew.
C) Adam Smith.
D) Ben Bernake.

Question 80

The imposition of standards is a way to establish nontariff barriers,and the following are examples of the imposition of standards,except for:

A) Japan's refusal to import light mayonnaise containing potassium sorbate.
B) Canada's categorization of orange juice with added calcium as a drug, subject to special requirements.
C) the prohibition of imported drugs at the consumer level in the U.S.
D) tariffs on certain barbiturate imports into the U.S.