Chapter 19 – NAFTA, CAFTA, GATT, WTO: Are Trade Agreements Good for Us?
Chapter 19 NAFTA, CAFTA, GATT, WTO: Are Trade Agreements
Good for Us?
Multiple Choice
1. Which of the following purports to be a “free-trade” agreement?
A) NAFTA
B) GATT
C) WTO
D) USSR
2. Which of the following purports to be a “free-trade” agreement?
A) CAFTA
B) GATT
C) WTO
D) USSR
3. Which of the following is a set of rules outlining when tariffs are appropriate and when they
are not?
A) NAFTA
B) GATT
C) WTO
D) USSR
4. Which of the following is a organization designed to settle trade disputes?
A) NAFTA
B) GATT
C) WTO
D) USSR
5. CAFTA governs
A) agricultural trade only.
B) trade between the U.S., Canada, and Central America.
C) trade between California and the rest of the U.S.
D) health food products.
Chapter 19 – NAFTA, CAFTA, GATT, WTO: Are Trade Agreements Good for Us?
6. Which of the following trade agreements includes Mexico?
A) NAFTA
B) CAFTA
C) GATT
D) All of these include Mexico
7. Which of the following trade agreements includes the United States?
A) NAFTA
B) CAFTA
C) GATT
D) All of these include the United States
8. Which of the following trade agreements includes Costa Rica?
A) NAFTA
B) CAFTA
C) AFL-CIO
D) All of these include Costa Rica.
9. Limiting trade can be accomplished with
A) tariffs.
B) quotas.
C) non-tariff regulatory barriers.
D) all of the options are correct.
10. If the United States forbids the importation of more than a fixed amount of cane sugar, it is
engaging in which of the following policies?
A) Tariffs
B) Quotas
C) Non-tariff regulatory barriers
D) Subsidies
11.
Chapter 19 – NAFTA, CAFTA, GATT, WTO: Are Trade Agreements Good for Us?
If all leather handbags imported into the United States must pay a 10% tax, the United States
is engaging in which of the following policies?
A) Tariffs
B) Quotas
C) Non-tariff regulatory barriers
D) Subsidies
12. Suppose a Japanese politician, wishing to protect Japanese farmers, insists that food safety
inspections look at each grain of rice under a microscope to ensure that it is safe to eat. This
politician is engaging in which of the following policies?
A) Tariffs
B) Quotas
C) Non-tariff regulatory barriers
D) Subsidies
13. If the United States attempts to make corn-based ethanol more competitive relative to other
forms by paying producers of it 50 cents per gallon which is on top of the $3 they can sell it
for on the open market, it is engaging in which of the following policies?
A) Tariffs
B) Quotas
C) Non-tariff regulatory barriers
D) Subsidies
14. If the United States attempts to make corn-based ethanol more competitive relative to other
forms by paying producers of it 50 cents per gallon (which is on top of the $3 they can sell it
for on the open market) and by limiting the amount of sugar-based ethanol that can be
imported, it is engaging in which of the following policies?
A) Tariffs and quotas
B) Quotas and subsidies
C) non-tariff regulatory barriers
D) Subsidies and tariffs
15. Which of the following works to limit trade by explicitly raising prices (i.e. as a tax)?
A) Tariffs
B) Quotas
C) Non-tariff regulatory barriers
D) Subsidies
Chapter 19 – NAFTA, CAFTA, GATT, WTO: Are Trade Agreements Good for Us?
16. A country that limits imports by requiring a lengthy inspection process is using
A) tariffs.
B) quotas.
C) non-tariff regulatory barriers.
D) subsidies.
17. A country that limits imports of a good by restricting the number that be imported is using
A) tariffs.
B) quotas.
C) non-tariff regulatory barriers.
D) subsidies.
18. A trade policy that is designed to allow one country to capture more of the benefits of trade is
called a
A) strategic trade policy
B) fiscal policy
C) monetary policy
D) conglomerate policy
19. Strategic trade policies are designed to increase the benefits of trade to
A) everyone.
B) a single country.
C) the two countries entering an agreement.
D) the world.
20. Theoretically, strategic trade policies are ones that allow for countries that utilize them to
A) gain more from trade than they would if trade were free.
B) have cheaper imports.
C) get more money for each unit of export.
D) help increase all trade around the world.
Chapter 19 – NAFTA, CAFTA, GATT, WTO: Are Trade Agreements Good for Us?
21. Trade agreements are designed to limit the ability of a country to put on
A) tariffs only.
B) quotas only.
C) tariffs and quotas.
D) neither tariffs or quotas.
22. Violent protests against the WTO meeting in Seattle reflected popular concerns over
A) the lack of exports.
B) high tariffs.
C) the consequences of globalization.
D) the 2000 Presidential election outcome.
23. International protesters have expressed concerns that
A) international trade decentralizes control of economic issues
B) international finance centralizes control of economic issues in the hands of a relative few.
C) international trade makes unionizing efforts easier
D) poor nations are over-represented at trade talks.
24. In terms of jobs gained and lost, economists believe that NAFTA has
A) failed unambiguously in that millions of jobs have fled to Mexico.
B) succeeded unambiguously in that millions of jobs have been created by free trade.
C) had little effect on job gains or losses as trade patterns are not easily identifiable with
NAFTA.
D) helped Canada much more than either Mexico or the United States.
25. Ultimately, trade agreements are necessary because
A) tariff reduction can be politically popular within many countries.
B) tariff reduction can be politically unpopular within many countries.
C) farmers need to be assured of access to foreign markets.
D) exports make everyone worse off.
Chapter 19 – NAFTA, CAFTA, GATT, WTO: Are Trade Agreements Good for Us?
26. The notion people need to lose their jobs involuntarily to seize better opportunities is labeled
A) creative destruction.
B) economic Darwinism.
C) socialism.
D) national socialism.
27. Suppose you are a worker being told that your plant is closing and that your job will be lost.
Amid the worried conversations of your colleagues, several of them agree that they will all
enter a community college in the coming month. One even says, “this might be a blessing in
disguise.” Such a statement would be consistent with the notion of
A) creative destruction.
B) economic Darwinism.
C) socialism.
D) national socialism.
28. Suppose you are a worker for a company that has seen sales of its signature product decline
over the years and that the current recession has forced them to discontinue its production.
You overhear one of the bosses say “it took the recession for them to do what they should
have done ten years ago.” Such a statement would be consistent with the notion of
A) creative destruction.
B) economic Darwinism.
C) socialism.
D) national socialism.
29. The notion of creative destruction suggests that
A) people need to lose their jobs involuntarily to seize better opportunities.
B) people are generally lazy and that losing a job shakes them out of that.
C) people are not well-trained enough to keep the jobs they have.
D) it is always easier to scramble an egg than to unscramble one.
30. Proposals for bilateral reduction of tariffs in the U.S. and Canada have been developed
through
A) GATT.
B) NAFTA.
C) UNESCO.
D) SDR.
Chapter 19 – NAFTA, CAFTA, GATT, WTO: Are Trade Agreements Good for Us?
31. Proposals for bilateral reduction of tariffs in the U.S. and France have been developed
through
A) GATT.
B) NAFTA.
C) UNESCO.
D) CAFTA.
32. A strategic trade policy of questionable success was
A) Japan’s elimination of tariffs on rice imports.
B) U.S. consideration of legalizing marijuana.
C) Britain and France subsidizing AIRBUS.
D) Iraq withholding oil from the world market.
33. Trade disputes between the U.S. and Japan could be mediated by
A) the WTO.
B) NAFTA.
C) UNESCO.
D) U.S. courts.
34. One important issue in the Uruguay round of GATT was the
A) treatment of copyrighted material.
B) use of trade as a diplomatic weapon.
C) question of the Euro’s convertibility.
D) placement of the WTO offices in Uruguay.
35. One of the major issues in the Uruguay round of GATT was
A) domestic content provisions for movies and television.
B) the use of trade as a diplomatic weapon.
C) the question of the Euro’s convertibility.
D) the placement of the WTO offices in Uruguay.
Chapter 19 – NAFTA, CAFTA, GATT, WTO: Are Trade Agreements Good for Us?
36. If one nation retaliates against another’s tariffs with tariffs of their own the GATT stipulates
that the retaliatory tariff must
A) be on the same good.
B) end within a year.
C) be on a good whose sales are roughly similar.
D) be submitted to the WTO for prior approval.
37. Between 1995 and 1998, soon after NAFTA took effect,
A) U.S. imports from Mexico fell, but U.S. exports to Mexico fell even more.
B) U.S. imports from Mexico increased, but U.S. exports to Mexico increased even more.
C) total U.S. exports fell, but total U.S. imports fell even more.
D) total U.S. imports increased, but total U.S. exports increased even more.
38. Between 1999 and 2007, after NAFTA had been in operation for some time,
A) U.S. imports from Mexico fell, but U.S. exports to Mexico fell even more.
B) U.S. exports to Mexico increased, but U.S. imports from Mexico increased even more.
C) total U.S. exports fell, but total U.S. imports fell even more.
D) total U.S. imports increased, but total U.S. exports increased even more.
39. The number of U.S. job losses certified by the U.S. Department of Labor as NAFTA-related
was
A) 100,000.
B) 500,000.
C) 1,500,000.
D) 145 million.
40. Between 1990 and 2007,
A) U.S. exports to Canada increased rather steadily.
B) U.S. imports from Mexico decreased precipitously.
C) U.S. exports to Mexico decreased rather steadily.
D) all of the options are correct.
Chapter 19 – NAFTA, CAFTA, GATT, WTO: Are Trade Agreements Good for Us?
41. Between 1990 and 2007,
A) U.S. exports to Canada increased rather steadily.
B) U.S. imports from Mexico decreased precipitously.
C) U.S. exports to Mexico increased rather steadily.
D) U.S exports to Canada and Mexico increased rather steadily.
42. Many individuals around the world oppose the WTO because they believe it
A) unfairly favors the interests of developing countries at the expense of developed
countries.
B) unfairly favors the interests of large corporations at the expense of workers.
C) encourages imposition of unnecessarily restrictive environmental protection regulations.
D) prevents young people around the world from entering the workforce as early in life as
they choose.
43. NAFTA has greatly improved cooperation between the U.S. and Mexico in the regulation of
A) undocumented Mexican immigrant workers in the U.S.
B) Mexican banks operating the U.S.
C) pollution created by maquiladoras operating in Mexico along the U.S. border.
D) travel by U.S. tourists to Mexican beaches during Spring Break.
44. Production of a catheter in the U.S. requires either one skilled worker-day or two unskilled
worker-days, while production of the same device in Guatemala, because of its relative lack
of transportation and communications infrastructure, requires either three skilled worker-days
or four unskilled worker-days. Production of a hammock in the U.S. requires one-fourth
skilled worker-day or one-third unskilled worker-day, while production of a hammock in
Guatemala requires one-third skilled worker-day or one unskilled worker day. If one
hundred unskilled worker-days are moved from producing hammocks to producing catheters
in the U.S., while one hundred twenty skilled worker-days are moved from producing
catheters to producing hammocks in Guatemala, combined production of the two goods in
the two countries will change by
A) five additional catheters and thirty fewer hammocks.
B) thirty additional catheters and five additional hammocks.
C) ten additional catheters and sixty additional hammocks.
D) no net change in production of the two goods would occur.
Chapter 19 – NAFTA, CAFTA, GATT, WTO: Are Trade Agreements Good for Us?
45. Production of a catheter in the U.S. requires either one skilled worker-day or two unskilled
worker-days, while production of the same device in Guatemala, because of its relative lack
of transportation and communications infrastructure, requires either three skilled worker-days
or four unskilled worker-days. Production of a hammock in the U.S. requires one-fourth
skilled worker-day or one-third unskilled worker-day, while production of a hammock in
Guatemala requires one-third skilled worker-day or one unskilled worker day. If eighty
unskilled worker-days are moved from producing hammocks to producing catheters in the
U.S., while ninety skilled worker-days are moved from producing catheters to producing
hammocks in Guatemala, combined production of the two goods in the two countries will
change by
A) ten additional catheters and thirty additional hammocks.
B) thirty additional catheters and five additional hammocks.
C) ten additional catheters and sixty fewer hammocks.
D) no net change in production of the two goods would occur.
46. Production of a catheter in the U.S. requires either one skilled worker-day or two unskilled
worker-days, while production of the same device in Guatemala, because of its relative lack
of transportation and communications infrastructure, requires either three skilled worker-days
or four unskilled worker-days. Production of a hammock in the U.S. requires one-fourth
skilled worker-day or one-third unskilled worker-day, while production of a hammock in
Guatemala requires one-third skilled worker-day or one unskilled worker day. If two
hundred unskilled worker-days are moved from producing hammocks to producing catheters
in the U.S., while three hundred skilled worker-days are moved from producing catheters to
producing hammocks in Guatemala, combined production of the two goods in the two
countries will change by
A) five hundred additional catheters and one hundred fewer hammocks.
B) three hundred additional catheters and three hundred additional hammocks.
C) one hundred additional catheters and five hundred additional hammocks.
D) no net change in production of the two goods would occur.
47. From 1999 to 2007, U.S. imports from Mexico grew each year by approximately
A) 5%.
B) 15%.
C) 22%.
D) 75%.
Chapter 19 – NAFTA, CAFTA, GATT, WTO: Are Trade Agreements Good for Us?
48. From 1999 to 2007, U.S exports to Mexico grew each year by approximately
A) 0.5%.
B) 2.7%.
C) 8.1%.
D) 12.7%.
49. In the 2008 presidential election campaign, then candidate Obama proposed renegotiating
NAFTA to provide greater protections for
A) drug traffickers.
B) Canadian corporations.
C) U.S. corporations.
D) workers.
50. In late 2008, President Bush proposed that a trade pact with Chile be tied to
A) a rescue package for the U.S. auto industry.
B) an overhaul of the U.S. Postal Service.
C) negotiations with Colombian drug lords.
D) a bailout of the U.S. tobacco industry.
51. In late 2008, Congress rejected a proposed trade pact with Chile tied to
A) negotiations with Colombian drug lords
B) an overhaul of the U.S. Postal Service
C) a rescue package for the U.S. auto industry
D) a bailout of the U.S. tobacco industry
52. Suppose there is a trade dispute between two countries who are GATT signatories. Suppose
Country A places a tariff on the import of Good 1 from Country B. GATT allows Country B
to
A) do nothing.
B) place a tariff on Country A’s exports of Good 1 into Country B but does not allow the
tariffs to extend to other goods.
C) place a tariff on Country A’s exports of any particular good into Country B as long as
that good is roughly similar in trade volume.
D) completely shut out Country A’s exports into Country B.
Chapter 19 – NAFTA, CAFTA, GATT, WTO: Are Trade Agreements Good for Us?
53. Suppose there is a trade dispute between Canada and the United States. Which provisions
govern?
A) The laws of the United States.
B) The laws of Canada.
C) The provisions of CAFTA.
D) The provisions of NAFTA.
54. Suppose there is a trade dispute between Mexico and the United States. Which provisions
govern?
A) The laws of the United States.
B) The laws of Mexico.
C) The provisions of CAFTA.
D) The provisions of NAFTA.
55. Suppose there is a trade dispute between Mexico and the Canada. Which provisions govern?
A) The laws of the Canada.
B) The laws of Mexico.
C) The provisions of CAFTA.
D) The provisions of NAFTA.
56. Suppose there is a belief in the United States that a subsidy paid to Canadian loggers
artificially lowers Canadian lumber prices and U.S. loggers seek a remedy. Which provisions
would they appeal to?
A) The laws of the United States.
B) The laws of Canada.
C) The provisions of CAFTA.
D) The provisions of NAFTA.
57. Suppose there is a belief in the United States that a subsidy paid to Canadian loggers
artificially lowers Canadian lumber prices and U.S. loggers seek a remedy. What options
would the U.S. have under NAFTA?
A) They would have none. NAFTA does not allow for a remedy.
B) They could ban the import of wood from Canada but they could not ban anything else.
C) They could place a tariff on the import of wood from Canada.
D) They could ban all trade with Canada.
Chapter 19 – NAFTA, CAFTA, GATT, WTO: Are Trade Agreements Good for Us?
58. The last remaining implementation of NAFTA occurred in 2011 with the provision in
A) U.S. law allowing Mexican trucks (certified as meeting U.S. truck safety standards)
driven by Mexican drivers to transport goods throughout the United States.
B) U.S. law allowing Canadian trucks (certified as meeting U.S. truck safety standards)
driven by Canadian drivers to transport goods throughout the United States.
C) U.S. law allowing free immigration between Mexico and the United States.
D) U.S., Canadian, and Mexican law to allow workers from any of the three countries to
work in any of the three countries.
59. President Obama, between 2009 and 2011 signed
A) more new free trade agreements than any other president before him.
B) more new free trade agreements than all previous presidents combined.
C) about the average number of new free trade agreements as previous presidents.
D) no new free trade agreements.
60. Since the 1980s, free trade agreements have been the ideas of
A) Republicans far more than Democrats.
B) Democrats far more than Republicans.
C) Republicans and Democrats is roughly equal numbers.
D) Unions.