Chapter 3: International Trade: Institutional Barriers and Facilitators
TRUE/FALSE
1. Arguments invoking employment protection are used to ensure that competing multinationals do not
import products manufactured elsewhere that might drive local manufacturers out of business and
create local unemployment.
2. The “national defense” argument is not a legitimate argument for protectionism.
3. The natural resources conservation argument for protectionism is not considered to be valid in
international trade organization forums, especially in light of worldwide shortages of raw materials.
4. Because of high levels of underemployment, Eastern European countries are lobbying against granting
import licenses while actively supporting foreign direct investment.
5. Tariffs are any type of tax imposed on goods entering a particular country.
6. In general, tariffs that are assessed by the United States are relatively high, over ten percent.
7. Because of the General Agreement on Tariffs and Trade (GATT), governments have created new
nontariff barriers.
8. Nontariff barriers lower prices of both imports and import-competing goods.
9. Boycotts, embargoes and sanctions are the most severe barriers to trade that are imposed usually to
punish a company or a national government.
10. Quotas specify a minimum quantity or a value of a product that must be imported during a specified
period.
11. An orderly market arrangement is a protectionist measure for establishing quotas in the textile and
apparel industries.
12. Nonautomatic import licenses are issued on a discretionary basis and are used to restrict imports of a
given product.
13. Voluntary export quotas are no longer used since they were banned by the International Monetary
Fund.
14. Voluntary import expansions are not voluntary at all.
15. Paratariff measures are not a means for controlling prices.
16. Paratariff measures decrease the costs of imports.
17. Excessive standards could and often do help local and international industry alike.
18. Local content requirements can often be met by manipulating and/or assembling the product on the
territory of the exporting country.
19. Embargoes and sanctions are imposed by a company against a foreign country.
20. Governments use currency flow restrictions primarily to get around WTO tariff policies.
21. New international firms can no longer enter a country when the country implements a
blocked-currency strategy.
22. A higher black market exchange rate, compared to the market exchange rate, can signal a likely
appreciation of the local currency.
23. The premise for the comparative advantage argument is that companies benefit from specialization in
an industry in which they have comparative advantage and from trading with one another.
24. Russia is a member of the G8.
25. The World Trade Organization (WTO) was created in 1989 to help Eastern Europe in its process of
transition to a market economy.
26. Membership in the World Bank requires membership in the International Monetary Fund.
27. The International Monetary Fund’s voting policy is “one country, one vote.”
28. The International Monetary Fund plays the role of lender of last resort.
29. The current focus of the World Bank is in the area of industrial and infrastructure development.
30. The International Monetary Fund (IMF) has been criticized for imposing unduly rapid or overly
detailed structural adjustment programs.
31. The Asian Development Bank, headquartered in Abidjan, Ivory Coast, has a primary goal of poverty
reduction.
32. The Food and Agriculture Organization (FAO), headquartered in Rome, Italy, is a United Nations
Organization.
33. A foreign trade zone is a tax-free area in a particular country that is not considered part of the
respective country in terms of import regulations and restrictions.
34. Because foreign trade zones have easy access, they are less secure causing an increased insurance cost
for companies using them.
35. Products that are manipulated in a foreign trade zone may be labeled as manufactured in the FTZ host
country.
36. Special economic zones are customs-privileged facilities that typically exist in countries with low-cost
labor.
37. China has 25 free trade zones and 15 export processing zones.
38. The free trade zones in China attracted $60 billion in investments, employ 2 million people, and
contribute a fourth to the nation’s exports.
39. In China, there are currently 25 export-processing zones (EPZs).
40. In China, export processing zones can only be established within existing economic and technological
development zones.
41. Granting of the Permanent-Normal-Trade-Relations (PNTR) Status is seldom linked to U.S. foreign
policy.
42. Vietnam received the Permanent-Normal-Trade-Relations (PNTR) Status, which means it will be
subject to the same customs and tariffs as other PNTR countries.
43. The African Growth and Opportunity Act (AGOA) focuses on sub-Saharan Africa. AGOA was signed
into law in 2001, and it offers incentives for African countries to open their economies and build free
markets.
44. The African Growth and Opportunity Act (AGOA) allows countries in sub-Saharan Africa to use
third-country fabrics and export them duty-free to the United States.
MULTIPLE CHOICE
1. Which of the following is not an argument for protectionism?
a.
The market has excess productive capacity.
b.
The industry is an “infant” industry.
c.
Natural resources need to be conserved.
d.
Foreign trade zones exist in the market.
2. Markets with excess productive capacity:
a.
frequently use protectionistic measures to keep the factories running.
b.
commonly seek foreign direct investment.
c.
encourage imports of competing products to stimulate demand.
d.
decrease marketing expenditures.
3. Some countries restrict imports claiming the “national defense” argument. Which product is the most
likely to be restricted under such an argument?
a.
Luxury automobiles
c.
Athletic shoes
b.
Satellite dishes
d.
Rice
4. Tariffs are imposed to
a.
discourage imports of particular goods.
b.
penalize countries that are not politically aligned with the importing country.
c.
generate revenues for the importing country.
d.
All of the above are reasons for tariffs.
5. Which of the of the following is not an example of a nontariff barrier?
a.
A tax on imported automobiles
c.
A voluntary export restraint
b.
A voluntary import expansion
d.
A sugar quota
6. The most severe nontariff barriers to trade include:
a.
Embargoes
c.
Currency Controls
b.
Quotas
d.
Suing the manufacturer
7. The Multifiber Arrangement is an example of
a.
a nonautomatic import license.
c.
a price control.
b.
a voluntary import expansion.
d.
an orderly market arrangement.
8. Which of the following is an example of a voluntary import expansion?
a.
McDonald’s using its Moscow franchise profits to purchase vodka from Russia.
b.
Japan importing U.S. semiconductors.
c.
The U.S. limiting Japanese steel imports.
d.
Wal-Mart raising its prices in the European Union so local consumers won’t discriminate
in favor of U.S. firms.
9. Nonautomatic import licenses are used to:
a.
allow imports of a given product
c.
tax imports
b.
restrict imports of a given product
d.
none of the above
10. Which of the following is an example of a price control?
a.
increasing the prices of imports to match minimum prices of domestic imports
b.
antidumping and countervailing duty actions designed to counter unfair competition
c.
paratariff measures
d.
all of the above are examples of price controls
11. Which protection mechanism has been used since 1969 to protect the U.S. steel industry?
a.
Voluntary import expansion
c.
Price controls
b.
Voluntary export restraints
d.
Nonautomatic import licenses
12. Wal–Mart and other discounters and category specialists in the European Union are constantly
scrutinized and often pressured by local authorities to raise prices. This is an example of
a.
price controls
c.
a tariff
b.
countervailing duty actions
d.
differential exchange rates
13. Which of the following is frequently used to get around local content requirements.
a.
Voluntary import expansion
c.
Paratariff measures
b.
Voluntary export restraints
d.
Foreign trade zones
14. With regard to price controls, the term dumping refers to:
a.
undermining competition
c.
discarding of excess inventory
b.
selling products below fair value
d.
all of the above
15. Countervailing duty actions
a.
give a rebate to the exporter.
b.
impose punitive damages on importers.
c.
are used in Communist countries that oppose Capitalism.
d.
impose duties to offset dumping.
16. Standards as barriers to trade are frequently used as barriers to:
a.
imports
c.
exports
b.
barter
d.
all of the above
17. A(n) ____ is usually initiated as the result of an action group calling for a ban on consumption of all
goods associated with a particular company and/or country.
a.
boycott
c.
embargo
b.
sanction
d.
voluntary export restraint
18. Embargoes and sanctions are imposed by a ____ against (a) ____:
a.
company; another company
c.
company; country
b.
country; company
d.
country; another country
19. Which country is currently experiencing an arms embargo imposed by the United Nations Security
Council as a punishment for its support of Sierra Leone’s Revolutionary United Front?
a.
Libya
c.
Egypt
b.
Liberia
d.
South Africa
20. Which of the following is not a form of currency control used by governments?
a.
Embargoes
c.
Differential exchange rates
b.
Blocked currency
d.
Foreign exchange permits
21. Which strategy is most likely to be used by a firm trying to bypass a blocked currency?
a.
Voluntary import expansion
c.
Countertrade agreement
b.
Voluntary export restraints
d.
Use of a foreign trade zone