Instructor Resource
Baack et al., International Marketing, 2e
SAGE Publishing, 2019
Review and Discussion Questions
Chapter 3: Global Trade and Integration
Review questions
1. Define exporting and importing.
a. Exporting is the transfer or shipping of goods to a foreign country. Goods are
exported out of a country.
2. What does the theory of absolute advantage explain?
Absolute advantage is a theory that states that a country has the ability to produce more
of a good or service using the same amount of resources than another country would. It is
country – giving them an advantage and they should produce this for trade.
3. What does the theory of comparative advantage explain?
The theory of comparative advantage posits that a country has an ability to produce a
4. What are the potential benefits of free trade?
Free trade may restrain the power of the state and empower individuals, bring people
together across distance and cultures leading to peace, make everyone wealthier and
Instructor Resource
Baack et al., International Marketing, 2e
SAGE Publishing, 2019
5. In global trade, what is meant by the term integration?
Integration allows governments to facilitate trade. Integration refers to the process of
using agreements between countries to lower limits on the movements of products,
6. Briefly describe free trade zones, custom unions, common markets, economic unions, and
political unions.
a. Free trade zones are specially designated areas within a country that have separate
laws designed to encourage trade
b. Custom unions are a group of countries that have entered into an agreement to
remove barriers to the movement of goods and services and to have a uniform tariff
policy towards non-member countries.
7. Briefly describe offshoring and outsourcing.
a. Offshoring refers to the movement of a business activity to another country.
Offshoring often involves the use of a third party when entering a foreign country.
Instructor Resource
Baack et al., International Marketing, 2e
SAGE Publishing, 2019
8. What are the primary activities of the World Trade Organization?
a. The WTO primarily focuses on opening member countries to trade. Member
countries utilize the WTO as a forum for the negotiation of trade agreements and as
the arbitrating party for settling trade disputes. While the WTO is often associated
9. Outline the primary activities of the European Union.
The European Union is headed by the European Council. The Council of the European
Union is the main decision-making body of the EU. There is a single currency in the EU,
the Euro. The EU agrees on the four freedoms – the free movement of goods, services,
10. What are the three members of the North American Free Trade Association?
The United States, Canada, and Mexico.
Instructor Resource
Baack et al., International Marketing, 2e
SAGE Publishing, 2019
11. On what continent is the Southern Cone Common Market or Mercado Comun del Sur
located?
South America
12. What are the names of the Asian trade-related agreements?
a. Association of Southeast Asian Nations Free Trade Area
13. What is protectionism?
Protectionism refers to the desire to protect domestic businesses from the exports of
14. What methods can governments use to limit trade?
Government policies limiting trade: tariffs, embargoes, quotas, subsidies, import,
15. What arguments are made in favor or protectionism practices?
In general, the arguments for protectionism focus on protecting a country’s well-being.
Arguments for protectionism:
i. Protect local industry, especially infant industry
ii. Respond to local pressure
Instructor Resource
Baack et al., International Marketing, 2e
SAGE Publishing, 2019
Discussion questions
1. Write an argument for free trade and a counterargument for protectionism. Regardless of
your initial perspective on the topic, try equally hard for both arguments. Can you build a
legitimate case for both approaches?
Free trade – I am Country A, I would argue for free trade in my country because it
empowers individuals and allows for the most individual freedoms. People are
exposed to more goods from all over the world. Free trade should benefit the
country when we get goods from elsewhere, when the other countries can produce
them at a more efficient rate, leaving my country to produce the goods we
produce the best and most efficiently.
2. Trace the history of the European Union, highlighting how each step increased the level
of integration. Then, consider the organizational structure of the European Union. How
does the structure reflect the history?
History of the European Union
1950 European Coal and Steel Community founded by Belgium, France, Germany, Italy,
Luxembourg, and the Netherlands
This was the first step of integration. These countries agreed to run all coal and steel industries
under common management.
Instructor Resource
Baack et al., International Marketing, 2e
SAGE Publishing, 2019
1962 A common agricultural policy introduced
In 1962, a common agricultural policy was established, which set a standard food price and
policy across member countries. This was a smaller step in integration, but it still tied the
countries closer together.
1968 All custom duties removed
In 1968, the members removed all custom duties or tariffs between each other and set a common
tariff for imports from non-member countries. In effect, the European Economic Community
became a customs union. This was a really big step in integration. This allowed for free trade
among nations and reduced the barriers between countries.
Instructor Resource
Baack et al., International Marketing, 2e
SAGE Publishing, 2019
To increase the flow of trade, the Single European Act, passed in 1986, started a program to
normalize trade regulations across members. This increased the integration of the countries.
1992 Treaty on European Union passed
The treaty set the ground work for a single currency and increased ties regarding foreign defense
policy. This increased the integration of the countries and started the process of creating the
Euro. With a single currency the countries would be significantly tied together and travel
between the countries would be the easiest it had ever been.
1993 The European Union agrees on the four freedoms – the free movement of goods, services,
people, and capital
By agreeing upon these four freedoms the countries had free trade of goods and people for jobs.
Instructor Resource
Baack et al., International Marketing, 2e
SAGE Publishing, 2019
2007 Bulgaria and Romania join
2007 Croatia and the Former Yugoslav Republic of Macedonia become Candidate Countries
2007 Treaty of Lisbon passed
With 27 members, the Treaty of Lisbon was passed in 2007 with the goal of streamlining
operations and to increase integration.
3. Consider the history of integration is the Americas. How do MERCOSUR, the Andean
Community compare to NAFTA? How are all three similar and what do all three mean
regarding integration in the region?
The Southern Cone Common Market, or Mercado Comun del Sur in Spanish, was
founded in 1991 by the Treaty of Asuncion. The organization seeks the eventual
elimination of barriers to trade, development of joint policies toward non-members,
and a common currency. The Andean Community introduced a free trade area and
actions were taken to facilitate trade between members. The North American Free
Instructor Resource
Baack et al., International Marketing, 2e
SAGE Publishing, 2019
4. Examine the list of African Economic Agreements in Figure 3.18. What do you learn
from looking at this list? What does the list say about what steps governments need to
actually begin to integrate?
There are many different attempts at integration in Africa. Many of these integrations
are based upon location or proximity to the other countries. A few countries have
entered into agreements with multiple groups. There is not a single, overall agreed
5. The Federal Corrupt Practices Act outlaws bribery. Does this give American businesses
an unfair advantage or create a disadvantage when working with foreign governments
and businesses?
I feel that this act offers both advantages and disadvantages to American businesses.
The disadvantages would be that American businesses may not be able to gain