Deck 6: The Political Economy of International Trade

Question 1

GATT has not recognized the infant industry argument as a legitimate reason for protectionism.

Answer 1

False

Question 2

Bureaucratic rules designed to make it difficult for imports to enter a country are local content requirements.

Answer 2

False

Question 3

When governments intervene in international trade,they often do so by restricting domestic production and exports,while adopting policies that promote imports of goods and services into their nation.

Answer 3

False

Question 4

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

Question 5

Krugman has suggested that trade policy designed to retaliate against another country's trade policy would hurt the citizens of both countries.

Question 6

Tariffs are unambiguously pro-consumer and anti-producer.

Question 7

Many governments have long had regulations to protect consumers from unsafe products.

Question 8

The Buy America Act 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 disadvantage.

Question 9

Unlike other trade policies,local content regulations tend to benefit consumers and not producers.

Question 10

A company that sells its product in a foreign market below the cost of production may be accused of dumping.

Question 11

Strategic trade policy suggests that a government should use subsidies to support promising firms that are active in newly emerging industries.

Question 12

The U.S.government has used the threat of punitive trade sanctions to try to get the Chinese government to enforce its intellectual property laws.

Question 13

The infant industry argument is the latest argument for government intervention in trade.

Question 14

The Helms-Burton Act of 1996 was aimed at foreign companies that were undermining U.S.trade sanctions against Libya and Iran.

Question 15

Antidumping policies vary drastically from country to country.

Question 16

Under a tariff rate quota,a higher tariff rate is applied to imports within the quota than those over the quota.

Question 17

Export tariffs are far less common than import tariffs.

Question 18

Antidumping polices are designed to punish firms that are engaged in dumping.

Question 19

By lowering production costs,subsidies help domestic producers compete against foreign imports and gain export markets.

Question 20

A common hybrid of a quota and a rent is known as a quota rent.

Question 21

To conform to local content regulations,a firm may have to locate more production activities in a given market than it would otherwise.

Question 22

The WTO does not have the power to impose trade sanctions.

Question 23

WTO rules do not allow countries to impose antidumping duties on foreign goods that are being sold cheaper than at home,or below their cost of production,even when domestic producers can show that they are being harmed.

Question 24

The Smoot-Hawley Act raised tariff barriers in the hope of protecting jobs and diverting consumer demand away from foreign products.

Question 25

Inadequate protections for intellectual property reduce the incentive for innovation.

Question 26

The WTO has the ability to force any member nation to take an action to which it is opposed.

Question 27

During the 1980s and early 1990s,the world trading system erected by the GATT gained momentum as protectionist demands generally decreased across the world.

Question 28

Tariff barriers lower the costs of exporting products to a country.

Question 29

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

Question 30

Governments do not always act in the national interest when they intervene in the economy; politically important interest groups often influence them.

Question 31

The World Trade Organization was created as part of the Uruguay Round.

Question 32

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

Question 33

A key issue in the "millennium round" of the WTO was to reduce barriers to cross-border trade in agricultural products.

Question 34

A key goal of the 1986 Uruguay Round was to extend GATT to cover trade in services.

Question 35

Tariffs on industrial goods remain higher than tariffs on services.

Question 36

To date,the WTO's policing efforts have been a major failure.

Question 37

Tariff rates on agricultural products are generally much lower than tariff rates on manufactured products or services.

Question 38

Human rights activists see WTO rules as outlawing the ability of nations to stop imports from countries where child labor is used or working conditions are hazardous.

Question 39

One issue at the forefront of the current agenda of the WTO is the increase in continued high tariff rates on nonagricultural goods and services in many nations.

Question 40

The TRIPS regulations oblige WTO members to grant and enforce patents lasting at least 20 years and copyrights lasting 50 years.

Question 41

Which of the following is not one of the main instruments of trade policy?

A)Tariffs
B)Credit portfolios
C)Local content requirements
D)Administrative policies

Question 42

A common hybrid of a quota and a tariff is known as a(n):

A)quota rent.
B)voluntary export restraint.
C)ad valorem tariff.
D)tariff rate quota.

Question 43

A quota rent is:

A)a quota on trade imposed by the exporting country.
B)levied as a fixed charge for each unit of a good imported.
C)levied as a proportion of the value of the imported good.
D)the extra profit producers make when supply is artificially limited by an import quota.

Question 44

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

A)Specific tariff
B)Import quota
C)Subsidy
D)Ad valorem tariff

Question 45

Which of the following observations about subsidies is false?

A)Government subsidies must be paid for,typically by taxing individuals and corporations.
B)They mainly benefit domestic producers,whose international competitiveness is increased.
C)Whether they generate national benefits that exceed their national costs is debatable.
D)They help foreign producers gain a competitive advantage over domestic producers.

Question 46

Which of the following 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?

A)Export restraint
B)Dumping
C)Local content requirement
D)Ad valorem

Question 47

Which of the following statements concerning a voluntary export restraint is false?

A)It benefits domestic producers by limiting import competition
B)In most cases,it benefits consumers
C)It raises the domestic price of an imported good
D)It is a variant of the import quota

Question 48

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

A)strategic trade
B)antidumping
C)tariff quota
D)free trade

Question 49

Specific tariffs are:

A)levied as a proportion of the value of the imported good.
B)levied as a fixed charge for each unit of a good imported.
C)in the form of manufacturing or production requirements of goods.
D)government payment to domestic producers.

Question 50

Tariffs do not benefit:

A)consumers.
B)domestic producers.
C)governments.
D)domestic firms.

Question 51

The _____ 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)Buy America Act
B)Anti-Dumping Act
C)Helms-Burton Act
D)D'Amato Act

Question 52

These are requirements that some specific fraction of a good be produced domestically.

A)Import quotas
B)Voluntary export restraints
C)Local content requirements
D)Antidumping duties

Question 53

Import tariffs:

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

Question 54

Agricultural subsidies have been criticized for all of the following reasons except:

A)they allow inefficient farmers stay in business.
B)they discourage countries to overproduce heavily subsidized agricultural products.
C)they encourage countries to produce products that could be grown more cheaply elsewhere and imported.
D)they reduce international trade in agricultural products.

Question 55

Administrative trade policies are:

A)requirements that some specific fraction of a good be produced domestically.
B)quotas on trade imposed by the exporting country.
C)bureaucratic rules designed to make it difficult for imports to enter a country.
D)designed to punish foreign firms that engage in dumping.

Question 56

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

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

Question 57

Foreign producers typically agree to voluntary export restrictions because:

A)their manufacturing capacity is limited.
B)they can divert their exports to other countries and charge more for their products.
C)they fear far more damaging punitive tariffs or import quotas might follow if they do not.
D)they are required to by the World Trade Organization.

Question 58

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):

A)voluntary export restraint.
B)specific tariff quota.
C)trade reconciliation.
D)ad valorem tariff.

Question 59

All of the following are true of tariffs except:

A)they reduce the revenue for the government.
B)they can be levied as a proportion of the value of the imported good.
C)they can be levied as a fixed charge for each unit of a good imported.
D)they impose significant costs on domestic consumers.

Question 60

In the United States,the only firms allowed to import cheese are certain trading companies,each of which is allocated the right to import a maximum number of pounds of cheese each year.Identify the trade restriction being imposed by the United States.

A)Import quota
B)Subsidy
C)Ad valorem tariff
D)Specific tariff

Question 61

The "millennium round" ended in 1999 with:

A)a successful record on agricultural products.
B)a new agenda for the next round focusing on financial services.
C)no agreement on the reduction of barriers to cross-border trade and investment.
D)a decision to avoid FDI.

Question 62

The U.S.government using the threat of punitive trade sanctions to try to get the Chinese government to enforce its intellectual property laws is an example of government intervention based on:

A)human rights protection.
B)national security.
C)consumer protection.
D)retaliation.

Question 63

Which of the following is not a reason for the pressure for greater protectionism that occurred during the 1980s and early 1990s?

A)The growing U.S.trade surplus with Japan strained the world trading system.
B)Japanese economic success strained the world trading system.
C)The persistent trade deficit in the United States strained the world trading system.
D)Many countries found ways to get around GATT regulations.

Question 64

Which of the following is not a reason why WTO is being criticized by those opposing free trade?

A)Its trade laws allow imports from low-wage countries and result in a loss of jobs in high-wage countries.
B)Its rules outlawing the ability of nations to stop imports from countries where working conditions are hazardous.
C)The adverse impact that some of its rulings have had on environmental policies.
D)Its lack of ability to force any member nation to take an action to which it is opposed.

Question 65

According to the _____ argument,governments should temporarily support new industries until they have grown strong enough to meet international competition.

A)retaliatory action
B)human rights
C)infant industry
D)anti-dumping

Question 66

This act allows Americans to sue foreign firms that use property in Cuba confiscated from them after the 1959 revolution.

A)The Buy America Act
B)The Anti-Dumping Act
C)The Helms-Burton Act
D)The D'Amato Act

Question 67

If a government grants preferential trade terms to a country it wants to build strong relations with,the government is employing a policy:

A)of retaliation.
B)of human rights protection.
C)to protect national security.
D)to further foreign policy objectives.

Question 68

Economic problems during the Great Depression were compounded in 1930 when the U.S.Congress passed the _____,aimed at avoiding rising unemployment by protecting domestic industries and diverting consumer demand away from foreign products.

A)Smoot-Hawley Act
B)Anti-Dumping Act
C)Helms-Burton Act
D)D'Amato Act

Question 69

The WTO argues that by removing all tariff barriers and subsidies to agriculture,all of the following would occur except:

A)the overall level of trade would increase.
B)there would be overproduction of products that are heavily subsidized.
C)prices would fall for consumers.
D)global economic growth would rise.

Question 70

Identify the incorrect statement about trade barriers.

A)They raise the costs of exporting products to a country.
B)They may put a firm at a competitive advantage to indigenous competitors.
C)They may limit a firm's ability to serve a country from locations outside of that country.
D)To conform to local content regulations,a firm may have to locate more production activities in a given market than it would otherwise.

Question 71

According to the 1986 Uruguay Round,the _____ was to be created to implement the GATT agreement.

A)World Trade Organization
B)International Monetary Fund
C)United Nations
D)World Bank

Question 72

The EU's Common Agricultural Policy is an example of a tax policy designed to benefit:

A)consumers.
B)taxpayers.
C)special-interest politics.
D)free trade in developed countries.

Question 73

After the Uruguay Round of GATT extended global trading rules to cover trade in services,the first two industries targeted for reform by the WTO were:

A)textiles and technology.
B)telecommunications and financial services.
C)automotives and aerospace.
D)agriculture and consulting services.

Question 74

Until 1995,GATT rules applied to all of the following except:

A)manufactured goods.
B)services.
C)textiles.
D)agricultural products.

Question 75

In the 1986 Uruguay Round,GATT members sought to write rules for promoting all of the following except:

A)intellectual property protection.
B)agricultural subsidies.
C)GATT's monitoring and enforcement mechanisms.
D)GATT rules to cover trade in services.

Question 76

The TRIPS regulations established at the 1995 Uruguay Round:

A)established regulations on patents and copyrights.
B)set a new level of agriculture subsidies.
C)organized OECD countries to eliminate tariffs on textiles.
D)established new tariff levels on technology.

Question 77

TRIPS regulations oblige WTO members to all of the following except:

A)grant and enforce patents lasting at least 20 years.
B)grant and enforce copyrights lasting 50 years.
C)comply with the rules within five years in the case of rich countries.
D)comply with the rules within 10 years in the case of the poorest countries.

Question 78

_____ suggests that a government should use subsidies to support promising firms that are active in newly emerging industries.

A)The infant industry argument
B)Strategic trade policy
C)Retaliation policy
D)The national security argument

Question 79

Antidumping duties are often called:

A)special circumstance duties.
B)positive duties.
C)retroactive duties.
D)countervailing duties.

Question 80

_____ are the highest rate that can be charged,which is often,but not always,the rate that is charged.

A)Ad valorem tariff rates
B)Tariff rents
C)Specific tariff rates
D)Bound tariff rates