Deck 3: The Political Economy of Trade and Investment

Question 1

One of the best known examples of economic integration (regional trade agreements)is that of the European Union.The text describes this example as:

A)a customs union.
B)a common market.
C)an economic union.
D)a political union.

Answer 1

C

Question 2

A subsidy subsumes grants.

Answer 2

True

Question 3

The recent decision by the Federal government to assist financially with the Australian motor firm General Motors Holden is because of national sovereignty.

Answer 3

False

Question 4

Two main threats to regional economic integration are:

A)the within-group business environment will become more competitive;firms outside the trading bloc are effectively locked-out of the single market.
B)the costs of doing business outweigh benefits;concerns over sabotage exist.
C)the growth of mergers within the single market;concerns over national sovereignty.
D)MNEs are exerting huge power;concerns over the Euro currency.

Question 5

Host governments use a wide range of controls to restrict FDI in all but one of the following:

A)establishment and entry.
B)ownership and control.
C)performance and procedural restrictions.
D)profiteering and dumping.

Question 6

The economic case for integration is:

A)bilateral and multilateral country agreements.
B)linking neighbouring economies and dependency on each other.
C)free trade and investment.
D)to eliminate 'winners' and 'losers'.

Question 7

The least integrated or shallowest form of economic integration to the most integrated or deepest form is known as:

A)a Free Trade AreA.
B)a Customs Union.
C)a Common Market.
D)an Economic Union.

Question 8

China is the main proponent of the beggar-thy-neighbour policy.

Question 9

There is a strong correlation between trade and FDI liberalisation.

Question 10

At the end of the day,Australia's richest women,Gina Rinehart of Hancock Prospecting,has very little political influence on changing Australian government policy,with regard to foreign workers entering and working in Australia at her mine sites.

Question 11

In general,there are two types of arguments for government intervention:

A)conciliatory and arbitration.
B)political and economic.
C)bargaining and enforcement.
D)social and political/legal.

Question 12

Recent failure of the DOHA Round is based on the premise that it would be a ______ound more than a ______round.

A)growth;global-recession
B)development;market-access
C)significant;loss-leader
D)production;blunt-disapproval

Question 13

It has been found that genetically modified products are harmful to humans.

Question 14

The infant industry argument is one of the oldest economic arguments for government intervention in trade.

Question 15

When the German supermarket chain Aldi came to Australia in the mid-2000s,the aim was to establish a new enterprise which in turn would increase the level of competition in the national market.This form of FDI is known as:

A)build-own-transfer.
B)licensing.
C)contract manufacturing.
D)greenfielD.

Question 16

An award of financial assistance in the form of grant money by the Federal government to an eligible grantee is usually with no expectation that the funds will be paid back.

Question 17

Australia's trade policy in the form of trade sanctions with Myanmar (formerly Burma)has been lifted in recent times,signalling that Myanmar:

A)is no longer a 'rogue state'.
B)was punished because of the disputed territory with China and Nepal which is now resolved.
C)now abides by international laws and norms.
D)can now access Australia's DFAT and other trade agencies to assist Myanmar to build strong relations with Australia.

Question 18

In recent times the cost of producing electricity and the manufacturing of solar panels in the solar energy industry has fallen,but the government subsidies to this industry remain the same (as at 30/6/2012).This is an example of:

A)growth leading to mature industry.
B)infant industry 'growing up'.
C)government inertia.
D)self-sufficient industry.

Question 19

The reasons why global food prices have risen substantially is because of increased demand and the effects of tariffs and subsidies for biofuels.

Question 20

In the advanced economies,there is no real difference between food security and food self-sufficiency.

Question 21

If ____________rge 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

Question 22

The employment effects of FDI are both:

A)significant and stringent.
B)adverse and beneficial.
C)large and small.
D)direct and indirect.

Question 23

The ____________ment is one of the oldest economic arguments for government intervention into the free flow of trade.

A)mature industry
B)infant industry
C)declining industry
D)institutional industry

Question 24

Which of the following has the highest level of integration?

A)economic union
B)customs union
C)common market
D)political union

Question 25

The General Agreement on Tariffs and Trade (GATT)and the World Trade Organization (WTO)were successful in ______riff barriers on manufactured goods and commodities,but there has been ______ogress on agricultural trade and FDI liberalisation.

A)raising;no
B)stopping;significant
C)enabling;disappointing
D)lowering;little

Question 26

A country's export and import of goods and services is referred to as the:

A)current account.
B)foreign account.
C)internal account.
D)tariff account.

Question 27

There are seven instruments in trade policy,namely,tariffs,subsidies,import quotas,voluntary export restraints,local content requirements,administrative policies and antidumping.Of the seven listed,which one is regarded as the oldest and simplest instrument in trade policy?

A)tariffs
B)voluntary export restraints
C)subsidies
D)import quotas

Question 28

The impact of FDI on competition in domestic markets may be particularly important in the case of the following industries:

A)electricity,gas and water supply.
B)agriculture,forestry and mining.
C)telecommunications,retailing and financial services.
D)transport,storage and logistics.

Question 29

Government actions that restrict or prohibit trade with a country in order to bring about a political change in that country is called:

A)embargo.
B)lock-out.
C)trade restrictions.
D)trade sanctions.

Question 30

There are two possible adverse effects of FDI on a host country's balance of payments.These are:

A)effects on the competition and adverse effects on the balance of payments.
B)transfer pricing and loss of sovereignty and autonomy.
C)repatriation of profits and inputs from abroad.
D)global marketing networks and control of supply chain logistics.

Question 31

Australia has a strict health quarantine regime that is designed to protect human,animal and plant life.Provided that this does not discriminate,or be used as disguised protectionism,it is used as a mechanism important for ________.

A)national security
B)proprietary industry
C)a declining industry
D)most favoured nation

Question 32

In general,what are two paths 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

Question 33

Host governments worry that FDI is accompanied by some loss of economic independence.Their fear is attributed to:

A)protectionism,tariffs and subsidies.
B)quotas,dumping and government capture.
C)export processing zones,rules of origin and quota rent.
D)transfer pricing,repatriation of funds and national sovereignty.

Question 34

Three main benefits of FDI to the home (source)country are called:

A)the resource-transaction effect,the employment effect and the balance-of-payments effect.
B)the capital-transfer effect,the technology effect and the currency exchange effect.
C)the balance-of-payments effect,the employment effects and the reverse resource-transfer effect.
D)the resource-transaction effect,the technology effect and the currency exchange effect.

Question 35

When FDI takes the form of a __________ investment,the result is to establish a new enterprise which,in turn,can increase the level of competition in a national market.

A)build-own-transfer
B)licensing
C)contract manufacturing
D)greenfield

Question 36

Which type of agreement is the most popular form of regional economic integration,accounting for almost 90 per cent of regional agreements?

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

Question 37

Since national governments and the general public dislike increasing foreign debt,this is known as running a:

A)current account surplus.
B)current account deficit.
C)payment surplus.
D)payment deficit.

Question 38

Three main benefits of inward FDI for a host country are called:

A)the resource-transfer effect,the employment effect and the balance-of-payments effect.
B)the capital-transfer effect,the technology effect and the currency exchange effect.
C)the cultural awareness effect,the technology effect and the balance-of-payments effect.
D)the resource-transfer effect,the technology effect and the currency exchange effect.

Question 39

It is increasingly common for governments to:

A)offer incentives to firms that invest in their countries.
B)penalise firms that invest in their countries.
C)offer incentives to firms from developed countries to invest in their countries,but not to firms from developing countries.
D)offer incentives to firms from developing countries to invest in their countries,but not to firms from developed countries.

Question 40

The ______ industry argument for government intervention contends that governments should temporarily support new industries.

A)mature
B)declining
C)infant
D)established

Question 41

Mercosur originated in 1988 as a free trade pact between __________.

A)Mexico and Brazil
B)Peru and Brazil
C)Brazil and Argentina
D)Venezuela and Peru

Question 42

COMESA is an agreement among ____ countries of Eastern and Southern Africa to work towards establishing a customs union.

A)19
B)20
C)21
D)22

Question 43

After the first decade of NAFTA,a study concluded that the overall effect of the agreement was:

A)negative and significant.
B)negative and small.
C)positive and significant.
D)positive and small.

Question 44

The phenomenon that occurs when low-cost external suppliers are replaced by high-cost suppliers inside the free trade area is called:

A)trade alteration.
B)trade qualification.
C)trade creation.
D)trade diversion.

Question 45

Closer Economic Relations (CER)is a free trade agreement between:

A)New Zealand and Japan.
B)Indonesia and Malaysia.
C)Australia and New Zealand.
D)China and Vietnam.

Question 46

If Australia started to import textiles from India according to a free trade agreement,but Australia previously acquired textiles from Indonesia for less money,what kind of trade situation would Australia be in?

A)trade alteration
B)trade qualification
C)trade creation
D)trade diversion

Question 47

Australia,the United States,Japan and China are among 21 member states of a trade organisation referred to as:

A)AAFTC (American-Asian Free Trade Congress).
B)APEC (Asia-Pacific Economic Cooperation).
C)USAEU (United States-Asian Economic Union).
D)ANAEPC (Asian-North American Economic and Political Coop).

Question 48

In the context of regional trade integration,concerns about _______ arise because close economic integration demands that countries give up some degree of their control over such key policy issues as monetary policy,fiscal and trade policy.

A)cost
B)national sovereignty
C)financial stability
D)cultural uniformity

Question 49

Formed in 1967,ASEAN was an attempt to establish a free trade area between:

A)Indonesia,Hong Kong,Singapore,Taiwan,Thailand and Japan.
B)Brunei,Indonesia,Malaysia,Philippines,Singapore and Thailand
C)Japan,Taiwan,Hong Kong,Singapore,China and Malaysia.
D)Brunei,Indonesia,Hong Kong,Thailand,Cambodia and Japan

Question 50

The case for regional economic integration is that there are:

A)no concerns over the safety of travel from one nation to another and concerns over dissimilar political ideologies.
B)no concerns over costs and concerns over national sovereignty.
C)the possibilities free trade will allow countries to specialise in the production of goods and services and produce them most efficiently.
D)the possibilities that free trade will allow countries to standardise and adapt the production of goods and services.