Question 1

Boycotts, embargoes and sanctions are the most severe barriers to trade that are imposed usually to punish a company or a national government.

Accepted Answer

Boycotts, embargoes and sanctions are examples of nontariff trade barriers. They are the most severe barriers to trade and are imposed usually to punish a company or a national government.

Question 2

The "national defense" argument is not a legitimate argument for protectionism.

Accepted Answer

The "national defense" argument is regarded as justified in international trade forums and is widely accepted as a reasonable argument for protectionism. For example, the U.S. government would protect the U.S. aerospace industry. We would not want to become dependent upon other nations for the production of our military jets.

Question 3

Governments use currency flow restrictions primarily to get around WTO tariff policies.

Accepted Answer

Governments use currency flow restrictions primarily to influence the stability of the national currency.

Question 4

Paratariff measures are not a means for controlling prices.

Accepted Answer

Paratariff measures are charges that increase the costs of imports in a manner similar to tariffs.

Question 5

Excessive standards could and often do help local and international industry alike.

Accepted Answer

Excessive standards could and often do help local and international industry alike by deterring gray markets.

Question 6

Voluntary import expansions are not voluntary at all.

Accepted Answer

Voluntary import expansions are not voluntary at all. A country agrees to import products as a result of pressure from another country. An example of voluntary import expansion is Japan's decision to avert U.S. imposed trade sanctions by importing U.S. semiconductors.

Question 7

Local content requirements can often be met by manipulating and/or assembling the product on the territory of the exporting country.

Accepted Answer

Local content requirements can often be met by manipulating and/or assembling the product on the territory of the importing country-usually in a foreign trade zone.

Question 8

Voluntary export quotas are no longer used since they were banned by the International Monetary Fund.

Accepted Answer

Voluntary export quotas were banned by the Uruguay Round of the GATT. However, they are still used today. The United States is imposing them informally, for example, for Japanese steel imports.

Question 9

The natural resources conservation argument for protectionism is not considered to be valid in international trade organization forums, especially in light of worldwide shortages of raw materials.

Accepted Answer

The natural resources conservation argument for protectionism is considered to be valid in international trade organization forums, especially in light of worldwide shortages of raw materials. Found in the "Natural Resources Conservation and Protection of the Environment" section (3-1d).

Question 10

Because of high levels of underemployment, Eastern European countries are lobbying against granting import licenses while actively supporting foreign direct investment.

Accepted Answer

Because of high levels of underemployment, Eastern European countries are lobbying against granting import licenses while actively supporting foreign direct investment. Imports may compete with local production, which could lead to even worse underemployment. However, foreign direct investment has the potential to create jobs.

Question 11

An orderly market arrangement is a protectionist measure for establishing quotas in the textile and apparel industries.

Accepted Answer

An orderly market arrangement is a Protectionist measure involving intricate processes for establishing quotas in the textile and apparel industries.

Question 12

Arguments invoking employment protection are used to ensure that competing multinationals do not import products manufactured elsewhere that might drive local manufacturers out of business and create local unemployment.

Accepted Answer

Arguments invoking employment protection are used to ensure that competing multinationals do not import products manufactured elsewhere that might drive local manufacturers out of business and create local unemployment. The argument also is used against multinationals that might purchase local plants and fire most of the redundant workers to create acceptable levels of profitability.

Question 13

Tariffs are any type of tax imposed on goods entering a particular country.

Accepted Answer

Tariffs are any type of tax imposed on goods entering a particular country. This is defined in the "Tariffs" section (3-2a).

Question 14

In general, tariffs that are assessed by the United States are relatively high, over ten percent.

Accepted Answer

In general, tariffs that are assessed by the United States are relatively low, under ten percent.

Question 15

Because of the General Agreement on Tariffs and Trade (GATT), governments have created new nontariff barriers.

Accepted Answer

Because of the General Agreement on Tariffs and Trade (GATT), governments have created new nontariff barriers. GATT forces members to eliminate tariff barriers. In order to control trade, countries are forced to respond through nontariff barriers such as orderly market arrangements, voluntary import expansion, and voluntary export restraints.

Question 16

Nonautomatic import licenses are issued on a discretionary basis and are used to restrict imports of a given product.

Accepted Answer

Nonautomatic import licenses are issued on a discretionary basis and are used to restrict imports of a given product. Licensing requirements can restrict the volume of imports, as do quotas, or they can be used to impose on the exporter or importer specific conditions that will result in fewer imports.

Question 17

Quotas specify a minimum quantity or a value of a product that must be imported during a specified period.

Accepted Answer

Quotas specify a maximum quantity or a value of a product that may be imported during a specified period. Quotas are administered either on a global first-come, first-served basis or on a bilateral basis to restrict shipments from a specific supply source.

Question 18

Nontariff barriers lower prices of both imports and import-competing goods.

Accepted Answer

Nontariff barriers include all measures, other than traditional tariffs, that are used to distort international trade flows; they raise prices of both imports and import-competing goods and favor domestic over foreign supply sources by causing importers to charge higher prices and to restrict import volumes.

Question 19

Paratariff measures decrease the costs of imports.

Accepted Answer

Paratariff measures are charges that increase the costs of imports in a manner similar to tariffs. Such measures include: allowing an initial number of products units to enter the country duty-free and charging tariffs to subsequent shipments in excess of this quota.

Question 20

Embargoes and sanctions are imposed by a company against a foreign country.

Accepted Answer

Embargoes and sanctions are imposed by a country against another country.

Quiz 3: International Trade: Institutional Barriers and Facilitators