59.
Local content regulations:
A.
protect domestic producers by limiting foreign competition.
B.
lower the prices of imported components.
C.
tend to benefit consumers and not producers.
D.
encourage outsourcing of production units.
Local content regulations provide protection for a domestic producer of
parts in the same way an import quota does: by limiting foreign competition.
The aggregate economic effects are also the same; domestic producers
benefit, but the restrictions on imports raise the prices of imported
components.
60.
Administrative trade policies are:
A.
requirements that some specific fraction of a good be produced
domestically.
B.
quotas on trade imposed by the exporting country.
C.
bureaucratic rules designed to make it difficult for imports to enter a
country.
D.
designed to punish foreign firms that engage in dumping.
Administrative trade policies are bureaucratic rules designed to make it
difficult for imports to enter a country. It has been argued that the Japanese
are the masters of this trade barrier.
61.
The Netherlands exported tulip bulbs to almost every country in the world
except Japan. This was because in Japan, customs inspectors insisted on
checking every tulip bulb by cutting it vertically down the middle. This is an
example of which of the following trade barriers?
A.
Export restraint
B.
Administrative trade policies
C.
Local content requirement
D.
Ad valorem
Administrative trade policies are bureaucratic rules designed to make it
difficult for imports to enter a country. It has been argued that the Japanese
are the masters of this trade barrier.
62.
_____ 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.
A.
Export restraint
B.
Dumping
C.
Local content requirement
D.
Ad valorem
In the context of international trade, 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.
63.
In 1997, two South Korean manufacturers of semiconductors, LG Semicon
and Hyundai Electronics, were accused of selling dynamic random access
memory chips (DRAMs) in the U.S. market at below their costs of
production. It was alleged that the firms were trying to unload their excess
production in the United States. This is an example of:
A.
ad valorem tariff.
B.
subsidy.
C.
dumping.
D.
import quota.
In the context of international trade, 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.
64.
The U.S. government has used the threat of punitive trade sanctions to try
to get the Chinese government to enforce its intellectual property laws. This
is an example of government intervention based on:
A.
human rights protection.
B.
national security.
C.
consumer protection.
D.
retaliation.
Some argue that governments should use the threat to intervene in trade
policy as a bargaining tool to help open foreign markets and force trading
partners to “play by the rules of the game.” The U.S. government has used
the threat of punitive trade sanctions to try to get the Chinese government
to enforce its intellectual property laws.
65.
Which of the following acts allows Americans to sue foreign firms that use
property in Cuba confiscated from them after the 1959 revolution?
A.
D’Amato Act
B.
Smoot-Hawley Act
C.
Helms-Burton Act
D.
Antidumping Act
In 1996 the U.S. Congress passed the Helms-Burton Act. This act allows
Americans to sue foreign firms that use property in Cuba confiscated from
them after the 1959 revolution. Later in 1996, Congress passed a similar
law, the D’Amato Act, aimed at Libya and Iran.
66.
According to the _____ argument, governments should temporarily support
new industries until they have grown strong enough to meet international
competition.
A.
retaliatory action
B.
human rights
C.
infant industry
D.
antidumping
The infant industry argument is by far the oldest economic argument for
government intervention. According to this argument, many developing
countries have a potential comparative advantage in manufacturing, but
new manufacturing industries cannot initially compete with established
industries in developed countries.
67.
The infant industry argument is criticized because it relies on an
assumption that:
A.
new manufacturing industries in developing nations can initially compete
with established industries in developed countries.
B.
selling goods in a foreign market at below their “fair” market value is
legally and ethically justified.
C.
the domestic industry in a developing nation lacks the capacity to meet
demand.
D.
firms are unable to make efficient long-term investments by borrowing
money from the domestic or international capital market.
The infant industry argument relies on an assumption that firms are unable
to make efficient long-term investments by borrowing money from the
domestic or international capital market. Consequently, governments have
been required to subsidize long-term investments.
68.
According to the strategic trade policy argument:
A.
government intervention is not required because firms can borrow money
from the capital markets to finance the required investments.
B.
selling goods in a foreign market at below their “fair” market value is
legally and ethically justified.
C.
government support can help domestic firms overcome the first-mover
advantages enjoyed by foreign competitors.
D.
a government should use subsidies to support promising firms that are
active in old, established industries.
According to the strategic trade policy argument, a government can help
raise national income if it can somehow ensure that the firm or firms that
gain first-mover advantages in an industry are domestic rather than foreign
enterprises. The second component of the strategic trade policy argument
is that it might pay a government to intervene in an industry by helping
domestic firms overcome the barriers to entry created by foreign firms that
have already reaped first-mover advantages.
69.
Economic problems during the Great Depression were compounded in 1930
when the U.S. Congress passed the _____, aimed at avoiding rising
unemployment by protecting domestic industries and diverting consumer
demand away from foreign products.
A.
Smoot-Hawley Act
B.
Antidumping Act
C.
Helms-Burton Act
D.
D’Amato Act
Economic problems were compounded in 1930 when the U.S. Congress
passed the Smoot-Hawley tariff. Aimed at avoiding rising unemployment by
protecting domestic industries and diverting consumer demand away from
foreign products, the Smoot-Hawley Act erected an enormous wall of tariff
barriers.
70.
The Smoot-Hawley Act aimed at:
A.
diverting consumer demand toward foreign products.
B.
promoting unrestricted free trade.
C.
limiting global warming.
D.
avoiding rising unemployment.
Aimed at avoiding rising unemployment by protecting domestic industries
and diverting consumer demand away from foreign products, the Smoot-
Hawley Act erected an enormous wall of tariff barriers. Almost every
industry was rewarded with its “made-to-order” tariff.
71.
Which of the following is a reason for the pressure for greater protectionism
that occurred during the 1980s and early 1990s?
A.
The U.S. Congress erected an enormous wall of tariff barriers.
B.
Japanese economic failure strained the world trading system.
C.
The persistent trade surplus in the United States strained the world
trading system.
D.
Many countries found ways to get around GATT regulations.
The world trading system was strained by the persistent trade deficit in the
world’s largest economy, the United States. From a political perspective, the
matter was worsened in 1992 by the $45 billion U.S. trade deficit with
Japan, a country perceived as not playing by the rules.
72.
Until 1995, GATT rules applied to all of the following EXCEPT:
A.
manufactured goods.
B.
services.
C.
textiles.
D.
agricultural products.
Until 1995, GATT rules applied only to industrial goods (i.e., manufactured
goods and commodities). Until the Uruguay Round, GATT rules had applied
only to trade in manufactured goods and commodities. In the Uruguay
Round, member countries sought to extend GATT rules to cover trade in
services.
73.
According to the 1986 Uruguay Round, the _____ was to be created to
implement the GATT agreement.
A.
World Trade Organization
B.
International Monetary Fund
C.
United Nations
D.
World Bank
The Uruguay Round contained the following provision: The World Trade
Organization was to be created to implement the GATT agreement.
74.
After the Uruguay Round of GATT extended global trading rules to cover
trade in services, the first two industries targeted for reform by the WTO
were:
A.
textiles and technology.
B.
telecommunications and financial services.
C.
automotives and aerospace.
D.
agriculture and consulting services.
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 reform were the global
telecommunication and financial services industries.
75.
The “millennium round” ended in 1999 with:
A.
a successful record on agricultural products.
B.
a new agenda for the next round focusing on financial services.
C.
no agreement on the reduction of barriers to cross-border trade and
investment.
D.
a decision to avoid FDI.
At the end of November 1999, representatives from the WTO’s member
states met in Seattle, Washington. The goal of the meeting was to launch a
new round of talks—dubbed “the millennium round”—aimed at further
reducing barriers to cross-border trade and investment. The talks ended
December 3, 1999, without reaching any agreement.
76.
The WTO argues that removing tariff barriers and subsidies in the
agricultural sector could:
A.
protect domestic agriculture in developed nations.
B.
lower the overall level of agricultural trade.
C.
restrict global economic growth.
D.
lower prices to consumers.
The WTO argues that removing tariff barriers and subsidies could
significantly boost the overall level of trade, lower prices to consumers, and
raise global economic growth by freeing consumption and investment
resources for more productive uses.
77.
The TRIPS regulations established at the 1995 Uruguay Round:
A.
established regulations on patents and copyrights.
B.
set a new level of agriculture subsidies.
C.
organized OECD countries to eliminate tariffs on textiles.
D.
established new tariff levels on technology.
The 1995 Uruguay agreement that established the WTO also contained an
agreement to protect intellectual property (the Trade-Related Aspects of
Intellectual Property Rights, or TRIPS, agreement). The TRIPS regulations
oblige WTO members to grant and enforce patents lasting at least 20 years
and copyrights lasting 50 years.
78.
TRIPS regulations oblige WTO members to all of the following EXCEPT:
A.
grant and enforce patents lasting at least 20 years.
B.
grant and enforce copyrights lasting 50 years.
C.
comply with the rules within five years in the case of rich countries.
D.
comply with the rules within 10 years in the case of the poorest
countries.
The 1995 Uruguay agreement that established the WTO also contained an
agreement to protect intellectual property (the Trade-Related Aspects of
Intellectual Property Rights, or TRIPS, agreement). The TRIPS regulations
oblige WTO members to grant and enforce patents lasting at least 20 years
and copyrights lasting 50 years. The very poorest countries had 10 years to
comply with the rules.