Chapter 9: Global Integration and Multilateral Organizations
TRUE/FALSE
1. ‘Launch aid’ is a common but controversial forms of government support in industries with high R&D
costs, such as aircraft manufacturing.
2. Airbus is benefitting from launch aid, while Boeing is not.
3. Boeing is benefitting from government research contracts, while Airbus is not.
4. The World Trade Organization was created after World War II as a multilateral trading system.
5. General Agreement on Tariffs and Trade (GATT) expanded considerably into WTO.
6. Global economic integration does not have political benefits.
7. The multilateral trading system resolves disputes between two countries involved in global trade.
8. The crucial principle of GATT/WTO is nondiscrimination, ensuring that countries do not discriminate
among its trading partners.
9. Upon establishment of GATT, there were many loopholes in the Multifibre Arrangement (MFA),
designed to limit free trade in textiles.
10. With tariffs being restricted by international agreements, many governments use NTFs (nontariff
barriers) to protect their domestic market.
11. WTO has six main areas including trade of goods, services, intellectual property, and banning
governments from protecting their agricultural industry.
12. The negotiations sponsored by WTO in Doha, Qatar, were aimed directly at the economic
development of developing countries.
13. The “stumbling block” of the Doha round turned out to be intellectual property.
14. The original objective of the IMF was to help countries maintaining fixed exchange rates.
15. The objective of the IMF is to help countries experiencing severe balance of payments problems.
16. The IMF is helping developing countries, but is not involved with West European countries.
17. IMF conditionality often involves severe cuts in government budgets with the aim to enable countries
to service their external debt.
18. The IMF is often unpopular in the countries that it tries to help.
19. The IMF is responsible for stability of the global banking system.
20. The IMF acts as global financial sector supervisory agency.
21. The IMF provided loans and loan guarantees for more than 10% of Hungarian GDP to Hungary during
the financial of 2008/09.
22. In the Irish and Greek financial crises in 2010, the IMF and the EU jointly designed a rescue package.
23. UNASUR is an initiative to advance regional integration and a free trade zone in Africa.
24. In ASEAN, the richest country has a per capita GDP that is more than 40 times as high as the poorest
country.
25. A monetary union is a group of countries that use a common currency.
26. ASEAN is an important trading partner of the EU: More than 10 per cent of EU exports go to ASEAN
countries.
27. India is the largest member of ACFTA.
28. SAFTA covers countries of South Asia.
29. NAFTA, a free trade agreement between Canada, Mexico, and the United States, secured Mexico a
preferential treatment for 80% of its exports.
30. Mercosur is relatively more protectionist and suspicious of the US, whereas the Andean Community is
more pro-free trade.
31. Latin American countries launched negotiations with Canada and the US for a possible Free Trade
Area of the Americas.
32. The ANZCERTA or CER, launched in 1983, turned historical rivalry between Australia and New
Zealand into a partnership.
33. Ever since the establishment of the ASEAN, in 1992, intra-ASEAN trade has grown by 12% annually.
34. The Basle Committee is advising governments on exchange rate policies.
35. Regional economic integration in Africa is strong and effective.
MULTIPLE CHOICE
1. Which of the following statements regarding the Airbus-Boing subsidy conflict is correct?
a.
Airbus made a formal complaint about Boeing in the WTO.
b.
Boeing made a formal complaint about Airbus in the WTO.
c.
The USA made a formal complaint about the EU in the WTO.
d.
All of these statements are correct.
2. In response to the EU‘s complaint that preferential military R&D contracts unduly benefit Boeing, the
USA argued that:
a.
R&D contracts are regulated by a separate agreement under the WTO
b.
R&D contracts are not an issue of concern to the WTO
c.
R&D contracts to the military arm do create not benefits for Boeings civil aircraft
manufacturing
d.
Full transparency in military R&D contracts, as requested by the EU, would endanger US
national security
3. Which of the following institutions was established following World War II to regulate global trade
between countries?
a.
GATT, General Agreement on Tariffs and Trade
b.
UN, United Nations
c.
WTO, World Trade Organization
d.
EU, European Union
4. Which of the following is an economic benefit of global economic integration?
a.
Free trade and investment raise incomes and stimulate economic growth.
b.
Rules make life easier and discrimination impossible for all participating countries.
c.
Disputes are handled constructively.
d.
All of these answers
5. The primary purpose of the International Monetary Fund is:
a.
To coordinate international regulation of the financial service industry
b.
To negotiate and implement stable exchange rates
c.
To monitor and enforce government budget constraint of member countries
d.
To promote monetary cooperation and provide temporary financial assistance to countries
with balance of payment problems
6. A crucial principle in the multilateral trading system is:
a.
Reciprocation
c.
No trade barrier
b.
Low tariff
d.
Non-discrimination
7. The most (in)famous loophole in merchandise trade created through GATT was:
a.
Technical approval procedures
c.
MFA
b.
NTB
d.
TRIPS
8. Which one of the following is NOT a NTB (nontariff barrier)?
a.
Customs
c.
The WTO
b.
Local content requirements
d.
Subsidies
9. Which one of the following is NOT a function of WTO?
a.
Regulation of subsidies on agricultural products
b.
Trade policy reviews
c.
Regulation of trade of goods, services, and intellectual property
d.
Dispute settlement
10. Which of the following is an agreement regulating intellectual property?
a.
GATS
c.
IPA
b.
GATT
d.
TRIPS
11. Which one of the following was NOT part of the agenda of the Doha round?
a.
Strengthening intellectual property protection
b.
Reducing agricultural subsidies in developing countries
c.
Slashing tariffs in the industries that developing countries might benefit from
d.
Freeing up trade in services
12. Which of the following is NOT a benefit of regional economic integration?
a.
Promoting peace by fostering closer economic ties
b.
Increasing sovereignty of integrated countries
c.
Setting consistent rules to make discriminatory regulations impossible
d.
Allowing free trade to raise incomes and create new jobs
13. NAFTA is an example of:
a.
Economic union
c.
Common market
b.
Free trade area
d.
Customs union
14. Former Soviet Union is an example of:
a.
Common market
c.
Customs union
b.
Political union
d.
Free trade area
15. Which statement about the WTO dispute settlement mechanism is correct?
a.
The WTO ruling may include permission for countries to impose punitive tariffs on the
offending country.
b.
The WTO can impose financial penalties on countries found guilty.
c.
The WTO can impose financial penalties on companies found guilty.
d.
Losing a case in the WTO automatically triggers punitive tariffs for the offending country.
16. The IMF was created:
a.
In the Copenhagen Accord of 1960
b.
In the Bretton Woods agreement of 1944
c.
In the charter of the United Nations in 1949
d.
In the Plaza Accord of 1985, when managed floats were established as main principle for
global exchange rates
17. IMF loans are normally:
a.
Short-term to finance economic reform projects
b.
Long-term to finance persistent balance of payment imbalances
c.
Long-term to finance economic development projects
d.
Short-term to finance severe balance of payment imbalances
18. The largest IMF bailouts in recent years benefitted Iceland and Hungary, who received loans and loan
guarantees worth how much relative to the country’s GDP?
a.
About 28 percent
c.
About 5.5 percent
b.
About 1.5 percent
d.
About 11 percent
19. IMF conditionality always:
a.
Is negotiated on a case-by-case basis between the IMF and the government of the country
b.
Is requiring recipient countries to raise income taxes
c.
Is requiring recipient countries to postpone their infrastructure investments
d.
Is requiring recipient countries to cut their expenditures on social welfare
20. Simon Johnson argued that the “IMF specializes in telling its clients what they don’t want to hear.”
What was he referring to?
a.
Business leaders don’t like to hear that their business practices are not socially responsible.
b.
Academic economists don’t like to hear that the real world is more complex than their
formal economic models.
c.
Bankers don’t like to hear that they ought to give more loans to developing countries.
d.
Political leaders of countries don’t like to hear that their economic policies are not
economically sustainable.
21. Which of the following regional integration agreements is NOT in Asia?
a.
SAFTA
c.
ASEAN
b.
GCC
d.
MERCOSUR
22. Which regional integration agreement includes Singapore, Malaysia and Indonesia, among other
members?
a.
ANZCERTA
c.
FTAA
b.
SAFTA
d.
ASEAN
23. The GCC includes, among other countries, the following members:
a.
Australia and New Zealand
c.
Turkey, Cyprus and Greece
b.
Saudi Arabia, Kuwait and Oman
d.
India, Pakistan and Sri Lanka
24. The economic benefits of regional integration in Africa are limited because:
a.
The comparative advantages of African countries in the world economy are fairly similar
b.
Many African countries have comparative advantages in extractive industries such as
mining
c.
A large share of exports of African countries goes to countries outside Africa
d.
All of these statements are correct.
25. Which statement about FTAs signed by the USA is correct?
a.
The only bilateral FTAs of the USA are with five countries in the Caribbean region.
b.
The USA has no bilateral FTAs at all.
c.
The USA only has multi-lateral FTAs.
d.
The USA had 17 bilateral FTAs with countries all over the world by 2009.
26. The negative effect for countries left out of a system free trade agreements is called:
a.
Trade diversion
c.
Trade enhancement
b.
Trade liberalization
d.
Trade creation
27. Which of the NAFTA members benefited the most from this free trade agreement by securing
preferential treatment for 80% of its exports?
a.
Canada
c.
US
b.
Mexico
d.
All the countries benefited equally
28. NAFTA includes:
a.
Brazil and Japan
b.
Canada and the United States
c.
Canada, Mexico, and the United States
d.
Mexico, Brazil, and Argentina
29. Which of the following regional integrations is more pro-free trade oriented than others?
a.
Latin American Union
c.
Mercosur
b.
Andean Community
d.
CAFTA
30. Which of the following regional integration is yet to be established?
a.
CAFTA
c.
Andean Community
b.
FTAA
d.
Mercosur
31. Which of the following is the economic trade agreement between Australia and New Zealand?
a.
ASEAN
c.
ANZCERTA
b.
ANZU
d.
APEC
32. Which of the following institutions has a similar role as the World Bank, but limited to a particular
part of the world?
a.
EBRD, London
b.
European Central Bank, Frankfurt
c.
Copenhagen Institute
d.
Bank of International Settlements, Basle
33. The primary purpose of the World Bank is to finance which sort of projects?
a.
Privatization projects in transition economies
b.
Emergency relief projects after natural disasters
c.
Balance of payment restoration projects in countries with a volatile macro-economy
d.
Economic development projects in less developed countries
34. What did the Copenhagen Accord of 2009 establish?
a.
Environmental performance standards for EU member countries
b.
Firm commitments by countries around the world to reduce their greenhouse gas
emissions to specified target levels
c.
Criteria for candidates countries wishing to join the EU
d.
A general statement without firm commitments to greenhouse gas emission targets
35. Which of the following areas has the most ineffective regional economic integration?
a.
Eastern Europe
c.
Africa
b.
North America
d.
South America
ESSAY
1. Explain possible economic benefits and/or obstacles of global economic integration.
2. Discuss the formation of GATT and the issues that precipitated the formation of the WTO (Post
GATT).
3. Identify how the WTO addressed the former problems of the old GATT and how WTO executes their
decisions.
4. Why is the help provided by the IMF to countries facing a budget crisis often controversial in the
country being helped?
5. Why is a system of bilateral free trade arrangements creating fewer economic benefits than global
trade liberalization?
6. Discuss the future of FTAA and CAFTA.
7. Discuss how the institution-based perspective accounts for the success of MNEs by focusing on
regional opportunities.
8. Why is it so difficult for the European Union to agree with other countries on a policy regarding global
warming?
9. Discuss the changing balance of power between government and global business in facing up to
climate change?