Chapter 06 - Political and Trade Forces
6. It seems that free, unrestricted international trade, in which each nation produces and
exports products for which it has a comparative advantage, will enable everyone to have a higher
level of living. Why, then, does every country have import duty restrictions?
Trade restrictions are imposed at the request of special interest groups, not the public. These
groups may include labor unions and local communities fighting to keep a plant open to avoid losing
7. “We certainly need defense industries, and we must protect them from import competition
by placing restrictions on competitive imports.” True or false? Is there an alternative to trade
restrictions that might make more economic sense?
Unfortunately, we live in a world where military preparedness is necessary, but the problem is
8. It seems entirely reasonable for a government to undertake efforts to protect a new or recently
established – often called “infant” – industry. Why, then, might international trade professionals
argue against governmental efforts to protect a new or recently established industry?
It is difficult to identify whether an industry can be economically viable over the long term, even
if protection is offered to it, raising the prospect that many sectors could receive assistance even
9. According to the WTO, what is dumping? Why would a government be opposed to having
their citizens or businesses be able to obtain products at lower costs?
The WTO defines dumping as selling a product abroad for less than (1) the average cost of
production in the exporting nation, (2) the market price in the exporting nation, or (3) the price to third
10. “Workers are paid $20 an hour in the United States but only $4 in Taiwan. Of course we