Deck 6: The Political Economy of International Trade

Question 1

Tariffs are the most complex instrument of trade policy.

Answer 1

False
Explanation: Tariffs are the oldest and simplest instrument of trade policy.

Question 2

Dumping is variously defined as selling goods in a foreign market at below their costs of production,or as selling goods in a foreign market at below their "fair" market value.

Answer 2

True
Explanation: Dumping is defined as selling goods in a foreign market at below their costs of production or "fair" market value.Dumping is viewed as a method by which firms unload excess production in foreign markets.

Question 3

Ad valorem tariffs reduce the cost of imported products relative to domestic products.

Answer 3

False
Explanation: Tariffs,specific and ad valorem,are placed on imports to protect domestic producers from foreign competition by raising the price of imported goods.

Question 4

Tariffs are largely pro-producer and anti-consumer.

Question 5

The fair market value of a good is normally judged to be lesser than the costs of producing that good.

Question 6

Tariffs increase the overall efficiency of the world economy because a protective tariff encourages domestic firms to produce products more efficiently at home that,in theory,could be produced abroad.

Question 7

Export tariffs are far less common than import tariffs.

Question 8

Quotas benefit consumers the most.

Question 9

Administrative trade policies are bureaucratic rules that are designed to make it easy for imports to enter a country.

Question 10

Antidumping policies are designed to punish foreign firms that engage in dumping industrial waste into the environment.

Question 11

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

Question 12

Japan has a long history of supporting inefficient domestic producers with farm subsidies.

Question 13

In recent decades,a fall in subsidies,quotas,and voluntary export restraints has been accompanied by a corresponding fall in nontariff barriers.

Question 14

Nontariff barriers include subsidies,quotas,voluntary export restraints,and antidumping duties.

Question 15

The Buy America Act specifies that government agencies must give preference to American products when putting contracts for equipment out for bid unless the foreign products have a significant advantage.

Question 16

Countries sometimes argue that it is necessary to protect certain industries because they are important for national security.

Question 17

Subsidies are a trade policy instrument.

Question 18

Tariffs are the instrument that the GATT and WTO have been most successful in limiting.

Question 19

A direct restriction on the quantity of some good that may be imported into a country is a quota rent.

Question 20

Specific tariffs are levied as a proportion of the value of the imported good.

Question 21

Until the early 1980s,most economists saw little benefit in government intervention and strongly advocated a free trade policy.

Question 22

Protecting consumers from "dangerous" products and furthering the goals of foreign policy are types of economic arguments for intervention.

Question 23

The infant industry argument is the oldest economic argument for government intervention.

Question 24

The roots of strategic trade policy arguments can be traced back to the late 18th century and the works of Adam Smith and David Ricardo.

Question 25

According to experts,which of the following groups most benefits from the imposition of tariffs?

A)Government and producers
B)Consumers and trade associations
C)Exporters and importers
D)Producers and foreign competitors

Question 26

The relationship between pollution and income levels follows a linear pattern.

Question 27

Antidumping actions seem to be concentrated in certain sectors of the economy such as basic metal industries (e.g. ,aluminum and steel),chemicals,plastics,and machinery and electrical equipment.

Question 28

Brazil's auto industry,once the world's tenth-largest and built behind tariff barriers and quotas,has been proven as one of the world's most inefficient.

Question 29

Tariffs cause damage to _____ because this group must pay more for certain imports.

A)investors
B)governments
C)consumers
D)producers

Question 30

Free trade in agriculture could help to jump-start economic growth among the world's poorer nations and alleviate global poverty.

Question 31

Government intervention may invite retaliation and trigger a trade war.

Question 32

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)ground;ceiling
B)ad hoc;nonconvertible
C)posited;floating
D)specific;ad valorem

Question 33

The Smoot-Hawley Act was a multilateral agreement whose objective was to liberalize trade by eliminating tariffs,subsidies,and import quotas.

Question 34

Which of the following is one of the seven main instruments utilized in trade policy?

A)Local content requirements
B)Licensing
C)Foreign direct investment
D)Employment guarantees

Question 35

In the Uruguay Round of the WTO,member countries sought to exempt trade in services from GATT rules.

Question 36

Several economists,including Paul Krugman,point out that although free trade policy looks appealing in theory,in practice it may be unworkable.

Question 37

Protection of manufacturing from foreign competition does no good unless the protection helps make the industry efficient.

Question 38

The biggest defenders of agricultural subsidies are the developed nations of the world.

Question 39

The United States wanted the WTO to allow governments to impose tariffs on goods imported from countries that did not abide by what the United States saw as fair labor practices during a WTO meeting at the end of November 1999.

Question 40

The threat of antidumping action enhances the ability of a firm to use aggressive pricing to gain market share in a country.

Question 41

_____ tend(s)to be one of the largest beneficiaries of subsidies in most countries.

A)Banks
B)Commercial airlines
C)Agriculture
D)Defense

Question 42

Under a(n)_____,a lower tariff rate is applied to imports within the quota than those over the quota.

A)tariff rate quota
B)voluntary import restraint
C)import tariff rent
D)quota rent

Question 43

Advocates of _____ believe that subsidies can help a firm achieve a first-mover advantage in an emerging industry.

A)strategic trade policy
B)free trade
C)open market system
D)justice theories

Question 44

Both import quotas and VERs benefit _____ by limiting import competition,but they result in higher prices,which hurt _____.

A)domestic producers;consumers
B)governments;domestic producers
C)importers;foreign producers
D)consumers;governments

Question 45

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

A)tariff rate quota
B)quota rent
C)import quota
D)voluntary export restraint (VER)

Question 46

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

A)subsidized
B)imported
C)dumped
D)produced

Question 47

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

A)tariffs
B)custom duties
C)quotas
D)subsidies

Question 48

Tariffs:

A)reduce the price of foreign goods.
B)reduce the overall efficiency of the world economy.
C)help in efficient utilization of resources.
D)are unambiguously pro-consumer and anti-producer.

Question 49

The U.S.government imposed an eight to thirty percent tariff on steel imports into the United States in March 2002.This belongs to which of the following categories?

A)General
B)Ad valorem
C)Specific
D)Ad hoc

Question 50

Agreeing to a VER is seen by foreign producers as a way to make the best of a bad situation by appeasing _____ pressures in a country.

A)free trade
B)protectionist
C)libertarian
D)consumer

Question 51

Foreign producers agree to VERs because they fear:

A)a fall in demand for their products in foreign markets.
B)the aggravation of protectionist pressures in their home markets.
C)more damaging punitive tariffs or import quotas might follow if they do not.
D)political and economic instability in foreign markets.

Question 52

Governments typically pay for subsidies by:

A)selling junk bonds.
B)taxing individuals and corporations.
C)foreign direct investment in poorer countries.
D)privatization of public holdings.

Question 53

Which of the following groups would most benefit from receiving subsidies?

A)Governments
B)Consumers
C)Domestic producers
D)Importers

Question 54

By lowering production costs,subsidies help domestic producers in:

A)gaining export markets.
B)curtailing exports to other countries.
C)meeting voluntary export restraints.
D)regulating the quality of services they offer.

Question 55

The extra profit that producers make when supply is artificially limited by an import quota is referred to as a:

A)trade surplus.
B)quota rent.
C)trade reconciliation.
D)profit hike margin.

Question 56

One of the objectives of export tariffs is to:

A)improve the efficiency of utilization of resources.
B)curb the competition offered by foreign firms to domestic firms.
C)reduce exports from a sector,often for political reasons.
D)maintain a positive trade deficit.

Question 57

The Multi-Fiber Agreement (MFA)of 1974 fixed upper limits on exports of textiles from all major exporting countries to all major importing countries.The MFA is an example of:

A)voluntary export restraint.
B)local content requirement.
C)subsidy.
D)specific tariff.

Question 58

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

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

Question 59

A protective tariff encourages domestic firms to produce products at home that,in theory,could be produced more efficiently abroad.This results in:

A)an establishment of a comparative advantage over firms from other countries.
B)improved productivity of the labor workforce in that country.
C)higher mobility of resources within the country.
D)an inefficient utilization of resources.

Question 60

_____ take many forms including cash grants,low-interest loans,tax breaks,and government equity participation in domestic firms.

A)Ad valorem tariffs
B)Subsidies
C)Quota rents
D)Specific tariffs

Question 61

A(n)_____ requires that some specific fraction of a good must be produced domestically.

A)international allocation requirement
B)local content requirement
C)specific quota requirement
D)ad valorem portion requirement

Question 62

One of the motives for foreign firms engaged in dumping may be:

A)unloading excess production in foreign markets.
B)cutting labor costs to reduce the costs of production.
C)offering a wider range of products for consumers in foreign markets.
D)offering competitive pricing for goods that are not produced in foreign countries.

Question 63

Furthering the goals of foreign policy and advancing the human rights of individuals in exporting countries are examples of issues covered by _____ for government intervention.

A)political arguments
B)humanitarian arguments
C)legal arguments
D)economic arguments

Question 64

Local content regulations have been widely used by developing countries to shift their manufacturing base from the simple _____ of goods whose parts are manufactured elsewhere into the local _____ of component parts.

A)production;integration
B)assembly;manufacture
C)design;assembly
D)generation;packaging

Question 65

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)monopolizing
C)slicing
D)subsidizing

Question 66

_____ are specific duties representing a special tariff for punishing foreign firms engaged in dumping,which can be fairly substantial and stay in place for up to five years.

A)Punitive damages
B)Civil duties
C)Import damages
D)Countervailing duties

Question 67

The two US agencies that deal with antidumping complaints are the:

A)Economic Offences Wing and Conciliation Services.
B)International Trade Commission and the Industry Council.
C)Commerce Department and the International Trade Commission.
D)Federal Trade Commission and the Economic Council.

Question 68

In the context of dumping,predatory behavior can be described as foreign producers:

A)attempting hostile takeovers of domestic firms and usurping the available resources for production.
B)indiscriminately exploiting the natural resources of a foreign country to create a later demand that can be met only by imports.
C)eliminating competition by subsidizing prices in a foreign market with home market profits and eventually raising prices to earn substantial profits.
D)buying goods of competing domestic firms and hoarding them to create an artificial demand,and exporting those goods at higher prices.

Question 69

The _____ in the U.S.specifies that government agencies must give preference to American products when putting contracts for equipment out to bid unless the foreign products have a significant price advantage.

A)Export Administration Act
B)Helms-Burton Act
C)Hawley-Burton Act
D)Buy America Act

Question 70

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)monopolizing
B)dumping
C)slashing
D)subsidizing

Question 71

Local content regulations provide protection for a domestic producer of parts in much the same way a(n)_____ does,by limiting foreign competition.

A)greenfield investment
B)international content requirement
C)specific content requirement
D)import quota

Question 72

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

A)Political and cultural
B)Economic and legal
C)Political and economic
D)Legal and social

Question 73

If China were to export vast quantities of cheap toys to India,selling them at below their costs of production,it would constitute:

A)monopolism.
B)dumping.
C)slashing.
D)safeguarding.

Question 74

Which of the following is considered to be the ultimate objective of antidumping policies?

A)Protect consumers from competitive pricing
B)Prevent domestic firms from unloading their excess production in domestic markets
C)Protect domestic producers from unfair foreign competition
D)Protect consumers from substandard and hazardous products

Question 75

_____ 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)Commercial

Question 76

In addition to the formal instruments of trade policy,informal bureaucratic rules that are designed to make it difficult for imports to enter a country are referred to as:

A)regional trade inhibitors.
B)back-door trade policies.
C)domestic trade hurdles.
D)administrative trade policies.

Question 77

Which of the following is perhaps the most common political argument for government intervention into the free flow of trade?

A)Protecting national identity
B)Protecting national sovereignty from being usurped by supranational organizations
C)Protecting jobs and industries from unfair foreign competition
D)Improving efficiency of domestic labor

Question 78

At one time,the French government required that all imported videotape recorders arrive in France through a small customs entry point that was both remote and poorly staffed.This is an example of a(n):

A)regional trade inhibitor.
B)domestic business hurdle.
C)administrative trade policy.
D)ad hoc red tape.

Question 79

At times,countries contend that it is necessary to protect industries such as those related to defense-aerospace,advanced electronics,and semiconductors-because these industries are important for:

A)retaining innovation.
B)national entrepreneurial spirit.
C)national security.
D)diplomatic reasons.

Question 80

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

A)voluntary export restraint.
B)administrative policy.
C)import quota.
D)local content requirement.