Deck 9: Nontariff Trade Barriers and the New Protectionism

Question 1

Which of the following is false with respect to strategic trade policy?

A) It postulates that a nation can gain by an activist trade policy.
B) It is practiced to some extent by most industrial nations.
C) It can easily be carried out.
D) All of the above

Answer 1

B

Question 2

A fallacious argument for protection is:

A) the infant industry argument
B) protection for national defense
C) the scientific tariff
D) to correct domestic distortions

Answer 2

C

Question 3

All of the following are examples of protectionism except

A) most favored nation treatment
B) voluntary export restraints
C) tariffs
D) dumping

Answer 3

A

Question 4

Quotas are similar to tariffs in that they do all of the following except

A) increase domestic production
B) decrease consumption
C) directly raise price
D) reduce imports

Question 5

The WTO was established during the

A) Kennedy Round
B) Uruguay Round
C) Tokyo Round
D) Doha Round

Question 6

The WTO grew out of the following organization

A) the Bretton Woods system
B) The UN
C) The World Bank
D) The GATT

Question 7

Game theory refers to:

A) a method of choosing the optimal strategy in conflict situations
B) the granting of a subsidy to correct a domestic distortion
C) the theory of tariff protection
D) the theory of comparative advantage

Question 8

The most-favored-nation principle refers to:

A) extension to all trade partners of any reciprocal tariff reduction negotiated by the U.S. with any of its trade partners
B) multilateral trade negotiation
C) the General Agreement on Tariffs and Trade
D) the International Trade Organization

Question 9

An import quota does all of the following except:

A) increases the domestic price of the imported commodity
B) reduces domestic consumption
C) increases domestic production
D) increases domestic social welfare

Question 10

One of the most dramatic examples of voluntary export restraints (VER's)centered around

A) agriculture
B) automobiles
C) textiles
D) pharmaceuticals

Question 11

Adjustment to any shift in the domestic demand or supply of an importable commodity occurs:

A) in domestic price with an import quota
B) in the quantity of imports with a tariff
C) through the market mechanism with an import tariff but not with an import quota
D) all of the above

Question 12

Industrial policy refers to:

A) an activist policy by the government of an industrial country to stimulate the development of an industry
B) the granting of a subsidy to a domestic industry to stimulate the development of an industry
C) the granting of a subsidy to a domestic industry to counter a foreign subsidy
D) all of the above

Question 13

An international cartel refers to:

A) dumping
B) an organization of exporters
C) an international commodity agreement
D) voluntary export restraints

Question 14

On which of the following principles does GATT rest?

A) nondiscrimination
B) elimination of nontariff barriers
C) consultation among nations in solving trade disputes
D) all of the above

Question 15

The type of dumping which would justify antidumping measures by the country subject to the dumping is:

A) predatory dumping
B) sporadic dumping
C) continuous dumping
D) all of the above

Question 16

An increase in the demand of the imported commodity subject to a given import quota:

A) reduces the domestic quantity demanded of the commodity
B) increases the domestic production of the commodity
C) reduces the domestic price of the commodity
D) reduces the producers' surplus

Question 17

Which of the following was not negotiated under the Uruguay Round?

A) reduction of tariffs on industrial goods
B) replacement of quotas with tariffs
C) reduction of subsidies on industrial products and on agricultural exports
D) liberalization in trade in most services

Question 18

The temporary sale of a commodity at below cost or at a lower price abroad in order to drive foreign producers out of business is called:

A) predatory dumping
B) sporadic dumping
C) continuous dumping
D) voluntary export restraints

Question 19

Which of the following is true with respect to the infant-industry argument for protection?

A) It refers to temporary protection to establish a domestic industry.
B) To be valid, the return to the grown-up industry must be sufficiently high also to repay for the higher prices paid by domestic consumers of the commodity during the infancy period.
C) It is inferior to an equivalent production subsidy to the infant industry.
D) All of the above

Question 20

Trade protection in the United States is usually provided to:

A) low-wage workers
B) well-organized industries with large employment
C) industries producing consumer products
D) all of the above

Question 21

What is a quota and how does it compare to the economic effects of a tariff?

Question 22

How can strategic trade policy justify trade protection? What difficulties arise in carrying out a strategic trade policy?

Question 23

What is an infant industry,and why would a country want to protect it?

Question 24

Summarize the Smoot-Hawley Tariff Act and its effects.

Question 25

Which of the following is a correct statement about tariffs and quotas?

A) Tariffs and quotas both increase social welfare.
B) Tariffs are less restrictive than quotas if demand increases.
C) Quotas have less of an impact on markets than tariffs do.
D) Tariffs are restricted under GATT rules but quotas are not.

Question 26

What is dumping and what are its various forms?

Question 27

As of 2015,the status of the Doha Round is

A) There is a new agreement in place.
B) Negotiations are continuing.
C) Negotiations have collapsed.
D) Negotiations have not yet begun.

Question 28

Carefully explain the current status of the Doha Round of trade negotiations and the challenges presented.

Question 29

Suppose that domestic demand for a product is more inelastic than demand in the foreign country.A seller with market power would set a price in the foreign market that is ______ than the domestic price; this is an example of _________.

A) higher, predatory dumping
B) lower, predatory dumping
C) higher, international price discrimination
D) lower, international price discrimination

Question 30

Explain why and under what conditions the infant-industry argument for an import tariff is valid.How must this argument be qualified?