Question 1

Trade creation refers to:&#10;A) the redistribution of incomes derived from trade between industries in a country within a regional trade bloc.&#10;B) an additional amount of international trade resulting from trade preferences that a nation grants to a trading partner.&#10;C) a shift in international trade caused by one nation giving trade preferences to another, which can cause trade with a third country to decline.&#10;D) the movement of goods or components of goods from a country outside a regional trade bloc to one within the bloc so that the seller can benefit from trading preferences within the bloc.

Accepted Answer

Trade creation refers to the additional amount of international trade resulting from trade preferences that a nation grants to a trading partner. It is the opposite of trade diversion which occurs when a preferential trade agreement between two countries leads to trade being diverted from non-member countries to the member countries, even if the non-member countries are able to produce the goods more efficiently.

Question 2

The large majority of regional trade agreements cover trade in services rather than trade in physical merchandise.

Accepted Answer

The large majority of regional trade agreements traditionally focus on trade in physical merchandise rather than trade in services, although there is a growing trend towards including services in such agreements.

Question 3

In comparing the European Union and the Andean Community, the European Union has a larger trade share, but the Andean Community has a larger trade concentration ratio.

Accepted Answer

The European Union (EU) indeed has a larger share of global trade due to its larger economy and more member states, but the Andean Community, being smaller and more regionally focused, tends to have a higher trade concentration ratio, meaning a larger portion of its trade is concentrated among fewer countries.

Question 4

A regional trade agreement negotiated and agreed to years ago that has since fallen into a state of nonenforcement is known as a &#34;kaleidoscopic&#34; agreement.

Accepted Answer

The term "kaleidoscopic agreement" is not a commonly recognized term in international trade. If a regional trade agreement is no longer being enforced, it may be referred to as a dormant agreement, a lapsed agreement, or simply an ineffective agreement.

Question 5

A trading arrangement that commits participating nations to remove all barriers to trade among their group, to abide by common restrictions on trade with other countries outside the group, to allow unhindered movements of factors of production within the group, and to closely coordinate all economic policies with other participants is known as:

A) a customs union.
B) a common market.
C) a free trade area.
D) an economic union.

Accepted Answer

An economic union involves the removal of trade barriers between participating nations, a common policy towards non-participants, and the coordination of economic policies between participants, including the free movement of factors of production. This is a more integrated form of economic cooperation than a free trade area or a customs union.

Question 6

One nation's flow of international trade as a percentage of a regional or global trade total is called:&#10;A) a trade distribution ratio.&#10;B) a trade density ratio.&#10;C) a trade concentration ratio.&#10;D) a trade share.

Accepted Answer

The flow of international trade as a percentage of a regional or global trade total is commonly known as a trade share. It reflects a country's or region's importance in the global or regional trade network.

Question 7

Trade diversion refers to:&#10;A) the redistribution of incomes derived from trade between industries in a country within a regional trade bloc.&#10;B) an additional amount of international trade resulting from trade preferences that a nation grants to a trading partner.&#10;C) a shift in international trade caused by one nation giving trade preferences to another, which can cause trade with a third country to decline.&#10;D) the movement of goods or components of goods from a country outside a regional trade bloc to one within the bloc so that the seller can benefit from trading preferences within the bloc.

Accepted Answer

Trade diversion refers to the shift in international trade caused by one nation giving trade preferences to another, which can cause trade with a third country to decline. This means that a country may decide to import more from a trading partner within their regional trade bloc rather than from another country outside of the bloc, causing a diversion of trade.

Question 8

NAFTA resulted in more significant changes in trade patterns in Mexico and Canada than in the United States.

Accepted Answer

NAFTA led to a significant increase in trade for Mexico and Canada, while the impact on the United States was comparatively smaller. The agreement helped to boost Mexico's manufacturing sector and increase Canada's exports to the United States. However, some industries in the United States, such as manufacturing, were negatively impacted by competition from cheaper imports.

Question 9

Preferential trade arrangements and free trade areas are the strongest forms of trade arrangement.

Accepted Answer

Preferential trade arrangements and free trade areas are not the strongest forms of trade arrangement. The strongest form is a customs union, where members not only eliminate tariffs and quotas among themselves but apply a common external tariff to non-members.

Question 10

A customs union is a trading arrangement that entails eliminating barriers to trade among participating nations and common barriers to trade with other countries outside the group.

Accepted Answer

A customs union is a trade agreement that aims to eliminate tariffs and other trade barriers between participating countries, while maintaining common tariffs on goods imported from countries outside the union. This means that members of a customs union can trade with each other freely, without having to pay additional tariffs or fees, but they must apply the same tariffs to goods from non-member countries.

Question 11

Regulations governing conditions under which products are eligible for trading preferences under trade agreements are called:&#10;A) rules of origin.&#10;B) rules of multilateralism.&#10;C) GATT rules.&#10;D) GATS rules.

Accepted Answer

The answer of Regulations governing conditions under which products are...

Question 12

Which of the following regional trade blocs has the largest trade share?&#10;A) Mercosur&#10;B) ASEAN&#10;C) Andean Community&#10;D) NAFTA

Accepted Answer

The answer of Which of the following regional trade blocs...

Question 13

Which of the following regional trade blocs has the largest trade concentration ratio?&#10;A) Mercosur&#10;B) ASEAN&#10;C) Andean Community&#10;D) NAFTA

Accepted Answer

The answer of Which of the following regional trade blocs...

Question 14

A Canadian appliance manufacturer locates an assembly plant in Bolivia to gain Andean Community trade preferences on sales of the completed product in Colombia, even though the Bolivian plant operates at higher cost than the Canadian assembly plant. This is an example of:

A) trade redistribution.
B) trade deflection.
C) trade creation.
D) trade diversion.

Accepted Answer

The answer of A Canadian appliance manufacturer locates an assembly...

Question 15

In order to measure how regional trade arrangements affect the intensity of trade patterns within only the affected regions, one should examine:&#10;A) trade concentration ratios.&#10;B) regional trade shares.&#10;C) World Trade Organization enforcement actions.&#10;D) GATT and GATS compliance rates.

Accepted Answer

The answer of In order to measure how regional trade...

Question 16

A &#34;paper&#34; regional trade agreement:&#10;A) is an agreement that has yet to incorporate international trade initiated via online orders.&#10;B) is an agreement that nations established years back but no longer actively enforce.&#10;C) involves a number of intricate legal mechanisms by which nations can deflect trade.&#10;D) involves a number of intricate legal mechanisms by which nations can divert trade.

Accepted Answer

The answer of A &#34;paper&#34; regional trade agreement:&#10;A) is an...

Question 17

Regionalism refers to establishment of trading agreements among geographic groupings of nations.

Accepted Answer

The answer of Regionalism refers to establishment of trading agreements...

Question 18

A preferential trade arrangement is a trade agreement that removes all barriers to trade among participating nations.

Accepted Answer

The answer of A preferential trade arrangement is a trade...

Question 19

Trade deflection refers to&#10;A) the redistribution of incomes derived from trade between industries in a country within a regional trade bloc.&#10;B) an additional amount of international trade resulting from trade preferences that a nation grants to a trading partner.&#10;C) a shift in international trade caused by one nation giving trade preferences to another, which can cause trade with a third country to decline.&#10;D) the movement of goods or components of goods from a country outside a regional trade bloc to one within the bloc so that the seller can benefit from trading preferences within the bloc.

Accepted Answer

The answer of Trade deflection refers to&#10;A) the redistribution of...

Deck 5: Regionalism and Multilateralism