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36. Which of the following statements is untrue regarding trade between the U.S., Canada, and Mexico?
a. Canada and the United States are each other's largest trading partners.
b. Mexico underwent a serious financial crisis in 1994.
c. Some key industries in Mexico are government-owned monopolies.
d. Mexico has had a traditionally open market that encourages foreign investment.
e. All of the above statements are correct.
37. A customs union is:
a. A group of customs laws intended to reduce tariffs and stimulate trade.
b. A free trade area with a common external tariff.
c. A free trade area with no tariffs between the member nations.
d. A union of nations that promotes lower tariffs for international trade.
e. None of the above.
38. NAFTA:
a. Lowers tariffs.
b. Liberalizes trade in goods.
c. Addresses many regional issues that are of concern to the three countries.
d. Liberalizes trade in services.
e. All of the above.
39. An argument that was used in support of NAFTA's passage in the U.S. was that:
a. U.S. shipments to Mexico faced tariffs two-and-a-half times the average U.S. rates.
b. Tougher environmental laws in Mexico would eventually be applied to all three countries.
c. Lower wages in Mexico would lead to more jobs being created in Mexico.
d. The cultures of all three countries would not be affected by NAFTA.
40. Which of the following arguments was not raised in opposition to NAFTA?
a. By creating a regional trading block, NAFTA would strengthen GATT's global trade liberalization
achievements.
b. NAFTA would permit firms to take advantage of weaker environmental laws and low cost labor by locating
plants in Mexico.
c. NAFTA would allow U.S. products and advertising to weaken the distinctive cultures and traditions of
Canada and Mexico.
d. NAFTA would cause Mexican companies to suffer in competition against larger and better capitalized U.S.
and Canadian firms.
e. None of the above.
41. NAFTA's national treatment principle states:
a. All goods claiming to be from a country must be produced in that country.
b. All products from a country must have the same amount of tariffs placed on them.
c. All imports from a NAFTA country must be treated like similar domestically produced goods.
d. All exports from a NAFTA country must meet certain quality standards.
42. Which of the following statements is untrue regarding NAFTA and nontariff barriers?
a. Most nontariff barriers were to be eliminated within five years under NAFTA.
b. NAFTA prohibits new export taxes on goods under any circumstances.
c. Special rules allow each country to impose import restrictions to protect human, animal or plant life, or the
environment.
d. Customer user fees were to be eliminated by 1999.
43. Goods that may not contain any non-North American parts or materials in order to obtain NAFTA tariff rates
include:
a. Minerals mined in North America.
b. Vegetables grown in North America.
c. Live animals born and raised in North America.
d. Scrap derived from production in North America.
e. All of the above.
44. For most products undergoing a transformation in North America, the rule of origin will be based on:
a. Its tariff classification.
b. The source of the raw material used in the production of the product.
c. Its point of origin.
d. The product's label.
45. Regarding marking and labeling rules in Mexico:
a. The cost of complying with the rules is so costly that many small companies cannot afford to sell their
products in Mexico.
b. Product warranties must be clearly stated.
c. Exporters to Mexico need to seek good advice in labeling and marking products to avoid long delays in getting
their goods to markets in Mexico.
d. There are specific labeling requirements for certain products.
e. All of the above are true.
46. An example of a sectoral issue is:
a. A dispute regarding the tariffs on a product.
b. An issue concerning a particular area of the economy.
c. An issue concerning the environmental effects of a product.
d. A dispute regarding quotas.
47. Regarding sectoral issues and NAFTA:
a. Mexico has long had an open automobile market, which has encouraged trade.
b. NAFTA contains specific rules of origin for determining when a textile product has originated in North
America.
c. No other trade sector is as complex or highly regulated as agricultural trade.
d. NAFTA has no rules regarding government procurement.
48. Which of the following statements is untrue regarding emergency safeguard actions under NAFTA?
a. Special safeguards for textiles may be applied where increased imports cause "serious damage" to the
domestic industry.
b. Safeguards are available for ten years for certain agricultural products.
c. The country using them must offer the exporting country trade compensation.
d. Safeguards can take the form of both tariffs and quotas.
e. All of the above.
49. Regarding trade in services under NAFTA:
a. No NAFTA country can require a North American service provider to have a residence or office within its
border.
b. The most important impact of NAFTA's financial services provisions is that they open Mexican financial
service industries to investment by Canada and the United States.
c. NAFTA does not affect regulations applied to purely domestic truck or bus transportation.
d. NAFTA eliminated all tariffs on telephones, cellular phones, and trade in communications equipment in 2004.
e. All of the above are correct.
50. Regarding NAFTA's investment provisions:
a. Domestically owned companies are given priority over foreign-owned firms.
b. Mexico has stricter environmental laws than the United States.
c. Firms operating in any NAFTA country can convert foreign exchange at local banks.
d. Local firms owned by investors from other NAFTA countries must fill senior management positions with local
citizens.
51. Which of the following statements is untrue regarding intellectual property rights as covered under NAFTA:
a. NAFTA's provisions protect the intellectual property rights of North American firms.
b. NAFTA requires that each country enforce its intellectual property rights to prevent smuggling of counterfeit
items.
c. Specific provisions prohibit the use of geographic regions (e.g. Kentucky bourbon) unless the products are
actually derived from that area.
d. Copyrights will be protected equally in all three countries.
e. All of the above statements are true.
52. Regarding environmental issues and NAFTA:
a. NAFTA sets strict environmental and ecological standards for all three countries.
b. NAFTA calls for the three countries to work together to develop common environmental standards.
c. NAFTA countries can continue to ban pesticides without informing each other.
d. NAFTA created the NAFTA Commission for Environmental Cooperation, which acts in a purely advisory
role in regard to environmental issues.
53. The North American Agreement on Labor Cooperation promotes:
a. Freedom of association.
b. Restrictions on child labor.
c. Equal pay for men and women.
d. Prohibition of forced labor.
e. All of the above.
54. The Fair Trade Commission:
a. Attempts to settle disputes that arise over NAFTA.
b. Is a law-making body that was formed by NAFTA.
c. Was created by NAFTA to help promote fair trade.
d. Will be phased out over the next ten years.
55. Appeals of a binational panel decision may be taken to:
a. The World Trade Organization.
b. The court of law in the country in which the dispute took place.
c. The Extraordinary Challenge Committee.
d. The NAFTA Fair Trade Commission.
e. None of the above.
Subjective Short Answer
56. Compare and contrast the operations of and standards of review employed by a NAFTA and Binational panel.
57. Compare and contrast the major rules on trade in textiles, automobiles, and agriculture.
58. What are the arguments for and against granting reciprocity of professional licenses where domestic rules regarding
the initial grant of those licenses differ (for example, the rules for becoming a doctor or lawyer and being admitted to
the practice are different in each country)?
59. How are the IPR provisions of NAFTA similar or dissimilar to those of TRIPS? Of the U.S.?
60. Compare and contrast the NAFTA dispute resolution procedures with those of U.S. courts and the EU.
61. Compare and contrast the structure and purpose of a free trade area and a customs union or common market.
(Compare and contrast NAFTA with the EU.)
62. The maquiladora industry has had both a positive and a negative social and economic impact on the people of
Mexico. Assess the relative merits of legislating corporate social responsibility to the residents and towns in which
they operate.
63. Draft a new NAFTA clause regarding an environmental or labor protection issue (you may also wish to consider
environmental measures applicable to investment).
64. Create a regulation regarding reciprocity of professional licenses.
65. Presume that the Caribbean countries have been granted NAFTA membership. Design a plan for phasing them into
membership.
66. Write an outline describing a new, improved NAFTA dispute resolution process (you may wish to address only one
aspect of the present process).
