DISCUSSION QUESTIONS
3-1. Explain the role of the World Trade Organization. Why has the Doha Round of trade talks
stalled?
The World Trade Organization (WTO) is the successor to GATT. Based in Geneva, the
WTO has a dispute-settlement body (DSB), representing all member countries, that
The DSB is empowered to act on the panel’s recommendations. The losing party to a
dispute can turn to the seven-member appellate body. If a country’s trade policies are
3-2. Describe the similarities and differences between a free trade area, a customs union, a
common market, and an economic union. Give an example of each.
All four forms of economic integration eliminate tariffs and quotas among member
nations. At the next level, customs unions, common markets, and economic unions all
3-3. What are the criteria for joining the euro zone?
The objective of the EU is to harmonize national laws and regulations so that goods,
services, people, and eventually money can flow freely across national borders.
3-4. Identify a regional economic organization or agreement in each of the following areas: Latin
America, Asia/Pacific, Western Europe, Central Europe, The Middle East, and Africa.
Three important trade agreements in Latin America are the Central American Integration
System (SICA), Andean Group, and Southern Cone Common Market (Mercosur). The
3-5. Several key dates mentioned in the chapter are listed here. Can you identify the event
associated with each?
CASES
Case 3-1: Will New Trade Partnerships Fuel East-West Growth?
Global trade talks have been taking on a distinctly bicoastal character lately. Looking east and
west across the Pacific Ocean, the United States and several Asian countries are hammering out
the details of a trade framework known as the Trans-Pacific Partnership (TPP).
The goal is an ambitious one: to create a free trade area that will lead to long-term economic
growth.
Discussion Questions
3-6. What critical thinking issues are raised by this case?
The issue of product labeling and how different countries define cheese is the
just the beginning of how cultures around the world view food. A cultural issue is
3-7. Are you in favor of dropping U.S. tariffs on footwear, even if it means some New Balance
employees will lose their jobs?
3-8. Do you think Americans and Europeans can overcome deeply entrenched disagreements and
reach an accord?
3-9. Japanese rice farmers are opposed to Japan joining the TPP. Why?
Japanese rice farmers don’t want the government to treat food as a commercial
Case 3-2: Will the Euro Survive? The Euro Zone Fights for Its Life
Faced with huge budget deficits, Europe’s leaders have been forced to introduce sweeping
economic reforms. They have instituted unprecedented austerity measures in order rein in
runaway government budgets. Desperate to prop up economies teetering on the brink of collapse,
EU’s leadership devised a 750 billion rescue package.
Discussion Questions
3-10. Why did the European Commission bail out banks in Ireland and Greece? Why not let
them default?
drag down the more stable economies of Europe like Germany and France.
3-11. Investors demand that Portugal’s José Sócrates and other leaders make big spending cuts.
However, Sócrates and other socialist prime ministers would prefer to generate economic growth
via government spending. Which approach is likely to be most effective?
Student answers will vary but all should make the case for either the Keynesian theory of
3-12. Why do citizens in France, Great Britain, and elsewhere stage protests when the
government imposes austerity measures?
An opinion question but most students should note that people do not like to have
3-13. As this edition went to press in mid-2015, concern was mounting that Greece would drop
the Euro. What has happened since then? Is Greek still using the Euro.
As I update this Instructors Manual (Nov. 2015), they are still using the Euro in Greece.