Question 1

Which of the following is a loophole in antidumping laws that is being exploited by many countries to pursue protectionism?

Accepted Answer

The vague definition of what constitutes "dumping" is the loophole that many countries are exploiting to pursue protectionism. This ambiguity allows for subjective interpretations and inconsistent enforcement of antidumping laws.

Question 2

Which of the following multilateral agreements was established under U.S.leadership in 1947,with the objective to liberalize trade by eliminating tariffs,subsidies,import quotas,and the like?

Accepted Answer

The General Agreement on Tariffs and Trade (GATT) was established under U.S. leadership in 1947 with the objective of promoting free trade by reducing barriers, such as tariffs and quotas, and preventing discrimination among trading partners. The GATT later evolved into the World Trade Organization (WTO) in 1995.

Question 3

The WTO was encouraged to extend its reach to encompass regulations governing foreign direct investment,something the GATT had never done.Two of the first industries targeted for this reform were

Accepted Answer

The passage mentions that the reform to extend regulations governing foreign direct investment was first targeted towards two industries. Among the given options, only choice A includes both the global telecommunication and financial services industries, making it the best choice.

Question 4

Which of the following best explains the reason for the rise in protectionist pressures around the world during the 1980s?

Accepted Answer

The persistent trade deficit in the world's largest economy, the United States, led to the rise in protectionist pressures around the world during the 1980s. As the US imported more than it exported, politicians and industries became concerned about foreign competition and called for protectionist measures.

Question 5

According to Krugman,which of the following best indicates the dangers of a strategic trade policy?

Accepted Answer

Krugman warns that implementing a strategic trade policy could lead to a retaliation from other countries, which could escalate into a large-scale trade war. This would harm all countries involved by reducing overall trade and potentially causing economic damage. Therefore, the occurrence of a trade war is the best indication of the dangers of a strategic trade policy, according to Krugman.

Question 6

The WTO's Agreement on which of the following is an attempt to narrow the gaps in the way intellectual property rights are protected around the world and to bring them under common international rules?

Accepted Answer

The Trade-Related Aspects of Intellectual Property Rights (TRIPS) is the agreement under the World Trade Organization (WTO) that aims to narrow the gaps in the way intellectual property rights are protected around the world and to bring them under common international rules. The other choices presented are not WTO agreements, and the Court of Arbitration of Intellectual Property (CAIP) and International Body on Intellectual Property (IBIP) do not exist as formal international entities. The Intellectual Property Rights Enforcement Directive (IPRED) and Intellectual Property Rights Enforcement and Resolution (IPER) are specific to the European Union and do not apply globally.

Question 7

Which of the following statements is true regarding GATT?

Accepted Answer

The statement that the last round for tariff reduction, the Uruguay Round, was launched in 1986 and completed in December 1993 is true. The other options are false. GATT attempted to liberalize trade restrictions gradually, GATT was not superseded by the World Bank, mutual monitoring was a key part of GATT’s enforcement mechanism, and tariff reductions were completed in eight rounds.

Question 8

Which of the following is NOT a constraint on a firm's ability to disperse its productive activities to foreign countries?

Accepted Answer

Increasing integration of the world economy actually facilitates a firm's ability to disperse its productive activities to foreign countries, as it reduces trade barriers and increases economic interdependence between countries. The other options - A, B, C, and E - all represent different types of trade barriers or protectionist policies that can limit a firm's ability to move its operations overseas.

Question 9

Which of the following indicates the difference between GATT and WTO?

Accepted Answer

WTO has strict time limits for resolving disputes, unlike GATT, which did not have such stringent timelines.

Question 10

The United States accused Libya and Iran of supporting terrorist action and building weapons of mass destruction.The U.S.government,therefore,imposed trade sanctions against the two countries.Which of the following political arguments does this exemplify?

Accepted Answer

The imposition of trade sanctions against Libya and Iran exemplifies furthering foreign policy objectives, which is when a government imposes trade policies to achieve its foreign policy goals. In this case, the U.S. government's objective was to limit the support of terrorist action and building of weapons of mass destruction by these two countries.

Question 11

According to Paul Krugman,a country that attempts to use strategic trade policy to establish a domestic firm in a dominant position in a global industry,is most likely to

Accepted Answer

According to Paul Krugman, attempting to use strategic trade policy to establish a domestic firm in a dominant position in a global industry is likely to provoke retaliation from other countries. This retaliation could take the form of trade barriers or other protectionist measures, ultimately harming the economy as a whole.

Question 12

The Smoot-Hawley Act had a damaging effect on

Accepted Answer

The Smoot-Hawley Act raised tariffs on many imported goods, leading to retaliation from other countries and a decrease in international trade. This had a damaging effect on employment abroad as many countries reduced their purchases of American goods, resulting in lower demand for American products and a decrease in jobs related to exporting.

Question 13

Which of the following is a provision of the Uruguay Round Agreement?

Accepted Answer

The provision of the Uruguay Round Agreement mentioned in option D is correct. It specifies that barriers on trade in textiles were to be significantly reduced over a period of 10 years. Therefore, option D is the best choice.

Option A is incorrect because the Agreement aimed to include more services in the GATT fair trade rules, not exclude them. Option B is also incorrect because the Agreement aimed to reduce tariffs on industrial goods, not raise them. Option C is incorrect because the IMF already existed before the Uruguay Round Agreement. Option E is also incorrect because the Agreement aimed to lower tariff rates, not increase them.

Question 14

Why did telecommunications companies welcome the telecommunication deal brokered by WTO in 1997?

Accepted Answer

The telecommunication deal brokered by WTO in 1997 allowed for greater liberalization of trade policies specifically in the realm of telecommunications. This resulted in greater ability for companies to offer a global, seamless service for all their corporate needs.

Question 15

According to Krugman,the ideal way for a country to respond,when the foreign competitors of its companies are already being supported by government subsidies,is probably not to engage in retaliatory action,but to

Accepted Answer

Krugman suggests that the ideal response to foreign competitors being supported by government subsidies is not to engage in retaliatory action, but to work towards establishing rules that minimize the use of trade-distorting subsidies. This approach would promote fair competition while avoiding the potential risks and negative consequences of retaliatory actions. Therefore, option A would be the best choice based on Krugman's perspective.

Question 16

The economically damaging effects of the Great Depression were worsened in 1929 by the

Accepted Answer

The U.S. stock market collapse in 1929, also known as Black Tuesday, is widely considered to be the triggering event of the Great Depression. The collapse led to a widespread loss of confidence in the U.S. economy, causing consumers to stop spending and businesses to stop investing. This had a ripple effect across the world, worsening the economic situation in other countries and leading to a global economic downturn. The other options listed (A, C, D, E) are not directly related to the Great Depression or did not occur until years after it had already begun.

Question 17

Which of the following is true regarding the difference between GATT and WTO?

Accepted Answer

The WTO was established to cover not only trade in goods (as GATT did) but also trade in services and intellectual property, and it has a broader scope including regulations governing foreign direct investment.

Question 18

Bilateral voluntary export restraints,or VERs,circumvented GATT agreements,because

Accepted Answer

The answer of Bilateral voluntary export restraints,or VERs,circumvented GATT agreements,because
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Question 19

One of the reasons why protectionist pressures arose around the world during the 1980s was

Accepted Answer

The different ways many countries found to get around GATT regulations, such as the use of non-tariff barriers and subsidies, led to frustration and protectionist pressures in other countries. This was particularly evident in the 1980s, when globalization was advancing rapidly and more countries were competing for access to each other's markets.

Question 20

Which of the following is an argument against embracing strategic trade policy?

Accepted Answer

Strategic trade policy is prone to being captured by special-interest groups within the economy, who are likely to distort the policy to their own ends. This creates the possibility of rent-seeking behavior and ultimately results in a net loss for the country as a whole. This argument holds that an open, competitive market is the best policy for a country's economy, and government intervention must be minimal. The other options, such as increasing prices for domestic consumers or hampering the chances of a country's firms, may not be true in all cases and depend on the specific nature of the trade policy being implemented.

Quiz 7: Government Policy and International Trade