1. Subsidies are a trade policy instrument.
2. Tariffs are the oldest instrument of trade policy.
3. Tariffs are the most complex instrument of trade policy.
4. In recent decades, a fall in subsidies, quotas, and voluntary export restraints has been
accompanied by a rise in tariff barriers.
5. Specific tariffs are levied as a proportion of the value of the imported good.
6. Ad valorem tariffs are levied as a proportion of the value of the imported good.
7. In most cases, tariffs are placed on imports to protect domestic producers from foreign
competition by raising the price of imported goods.
8. Tariffs are generally pro-producer and anti-consumer.
9. Import tariffs increase the overall efficiency of the world economy.
10. Export tariffs are far more common than import tariffs.
11. The main gains from subsidies accrue to importers, whose international competitiveness
is increased as a result of these subsidies.
12. A voluntary export restraint (VER) is a quota on trade imposed by the exporting country,
typically at the request of the importing country’s government.
13. Under a tariff rate quota, a lower tariff rate is applied to imports within the quota than
those over the quota.
14. Both import quotas and VERs benefit domestic producers by limiting import competition.
15. Quotas benefit consumers the most.
16. The Buy America Act specifies that government agencies must give preference to
American products when putting contracts for equipment out for bid unless the foreign products
have a significant advantage.
17. Administrative trade policies are bureaucratic rules that are designed to make it easy for
imports to enter a country.
18. Dumping is variously defined as selling goods in a foreign market at below their costs of
production, or as selling goods in a foreign market at below their “fair” market value.
19. Dumping is viewed as a method by which firms unload excess production in their
domestic markets.
20. Antidumping policies are designed to punish the firms that engage in dumping industrial
waste into the environment.
21. The ultimate objective of antidumping policies is to protect domestic producers from
unfair foreign competition.
22. A political argument for government intervention in international trade is that it is
necessary to protect certain industries because they are important for national security.
23. D’Amato Act allows Americans to sue foreign firms that use property in Cuba confiscated
from them after the 1959 revolution.
24. The infant industry argument is the oldest economic argument for government
intervention in international trade.
25. The strategic trade policy arguments of the new trade theorists suggest an economic
justification for government intervention in international trade and this justification challenges
the rationale for unrestricted free trade.
26. Paul Krugman argues that although strategic trade policy looks unappealing in theory, in
practice it is most likely to be workable.
27. Free trade as a government policy was first officially embraced by Germany in 1846, when
the Bundestag repealed the Corn Laws.
28. The Smoot-Hawley Act aimed to liberalize trade by eliminating tariffs, subsidies, and
import quotas.
29. Pressures for greater protectionism increased around the world during the 1980s and
early 1990s due to the strain caused by the persistent trade deficit in the world’s largest
economy, Japan.
30. One of the reasons for the trend toward greater protectionism was that many countries
found ways to get around GATT regulations.
31. In the Uruguay Round of the WTO, member countries sought to exempt trade in services
from GATT rules.
32. According to a provision of the Uruguay Round of GATT, agricultural subsidies were to be
increased substantially.
33. Antidumping actions seem to be concentrated in certain sectors of the economy such as
basic metal industries (e.g., aluminum and steel), chemicals, plastics, and machinery and
electrical equipment.
34. The 1995 Uruguay agreement that established the WTO also contained an agreement to
protect intellectual property.
35. Tariff rates on agricultural products are generally much lower than tariff rates on
manufactured products or services.
36. The threat of antidumping action enhances the ability of a firm to use aggressive pricing
to gain market share in a country.
37. Government intervention can be self-defeating because it tends to protect the inefficient
rather than help firms become efficient global competitors.
38. Which of the following is a trade policy instrument that the GATT and WTO have been
most successful in limiting?