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Questions and Answers
What is a characteristic of an import tariff?
What is a characteristic of an import tariff?
Which type of quota places a strict limit on the volume of imports?
Which type of quota places a strict limit on the volume of imports?
What type of tariff is calculated as a percentage of the product's market value?
What type of tariff is calculated as a percentage of the product's market value?
What is the primary purpose of protectionist measures such as tariffs and quotas?
What is the primary purpose of protectionist measures such as tariffs and quotas?
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Which argument in favor of protectionism suggests that new firms need help to compete with established players?
Which argument in favor of protectionism suggests that new firms need help to compete with established players?
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What is a potential consequence of a lack of intellectual property protection?
What is a potential consequence of a lack of intellectual property protection?
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Which of the following is NOT considered a protectionist measure?
Which of the following is NOT considered a protectionist measure?
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Which of the following accurately describes voluntary export restraints (VERs)?
Which of the following accurately describes voluntary export restraints (VERs)?
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What does a customs union primarily aim to achieve?
What does a customs union primarily aim to achieve?
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What is a characteristic feature of an economic union?
What is a characteristic feature of an economic union?
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Which of the following best defines embargoes and sanctions?
Which of the following best defines embargoes and sanctions?
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What best describes export control systems?
What best describes export control systems?
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Engel's law suggests that as income increases, what happens to the percentage spent on food?
Engel's law suggests that as income increases, what happens to the percentage spent on food?
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What is a major consequence of the financial crisis mentioned?
What is a major consequence of the financial crisis mentioned?
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What is the primary motivation behind economic integration?
What is the primary motivation behind economic integration?
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A significant factor contributing to inflation is which of the following?
A significant factor contributing to inflation is which of the following?
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What is one of the specific provisions of the USMCA regarding dairy products?
What is one of the specific provisions of the USMCA regarding dairy products?
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What is the requirement for cars and trucks under the USMCA to avoid tariffs?
What is the requirement for cars and trucks under the USMCA to avoid tariffs?
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Which of the following best describes the Thucydides Trap?
Which of the following best describes the Thucydides Trap?
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What responsibility do national governments have in international trade?
What responsibility do national governments have in international trade?
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What is a non-market economy clause in the context of USMCA?
What is a non-market economy clause in the context of USMCA?
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Which of these strategies is generally seen as a protectionist measure?
Which of these strategies is generally seen as a protectionist measure?
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Which scenario best illustrates the concept of tariffs?
Which scenario best illustrates the concept of tariffs?
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What effect does the Thucydides Trap suggest regarding rising powers?
What effect does the Thucydides Trap suggest regarding rising powers?
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Study Notes
Protectionism
- Measures taken by national governments to limit international trade and foreign investment.
- Protectionist measures include tariffs, quotas, voluntary export restrictions, quality standards, intellectual property protection, and investment restrictions.
Tariffs
- Taxes imposed on internationally traded products.
- Export tariffs are levied on goods exported from a country.
- Transit tariffs are imposed on goods shipped through a country.
- Import tariffs are placed on goods imported into a country.
Tariff Types
- Ad valorem tariffs: Calculated as a percentage of the imported product's market value.
- Specific tariffs: A fixed dollar amount per unit of the imported product.
- Compound tariffs: Combine ad valorem and specific components.
Quotas
- Quantitative limits placed on the volume of imported goods over a specific period.
- A form of non-tariff barrier.
Quota Types
- Absolute quotas: Strict limits on import volume.
- Voluntary Export Restraints (VERs): Agreements where exporting countries voluntarily restrict exports of a product.
Exchange Controls
- Restrictions on the amount of foreign currency importers can purchase, hindering transactions with foreign exporters.
Keiretsu System
- A network of close relationships between Japanese manufacturers, wholesalers, and retailers.
Product Standards
- National governments can impose quality or testing standards on imported products.
Intellectual Property Protection
- Lack of IP protection can discourage imports and protect local industries by limiting access to foreign technology.
Investment Barriers
- Governments can restrict foreign ownership in specific sectors to protect domestic businesses.
Arguments for Protectionism
- Infant industry argument: Protecting new industries from foreign competition allows them to grow and develop.
- Employment argument: Protecting domestic industries is seen as a way to maintain employment levels in key sectors.
Inflation
- Occurs when the money supply exceeds the availability of goods and services.
- Measured by CPI (consumer price index) and PPI (producer price index).
Bottom of the Pyramid (BOP)
- A term referring to the poorest segment of the global population.
Engels Law
- States that as income rises, the percentage of income spent on food decreases, even though the total food expenditure increases.
The Great Recession
- A severe global economic downturn that began in 2008, stemming from a banking crisis.
COVID-19
- A public health crisis that evolved into an economic crisis with significant global impact.
The Financial Crisis
- Characterized by widespread job losses, low savings rates, job insecurity, low consumer confidence, and increased pressure on governments.
Causes of the Financial Crisis
- Financial innovation in developed countries, including securitization and lax regulations.
- Huge trade surplus and high savings rates in China and the Middle East, contrasting with deficits in the US and developed countries.
- Expansive monetary policies.
Economic Integration
- Cooperation between countries to use resources efficiently and create larger, more attractive markets.
### Forms of Economic Integration
- Free Trade Area: Eliminates tariffs and quotas between member countries while allowing each country to set its own trade policies with non-member countries.
- Customs Union: Removes trade barriers between members and adopts a common external tariff and quota policy.
- Common Market: Includes characteristics of a customs union with the addition of free movement of labor and capital within the union.
- Economic Union: Combines features of a common market with harmonized economic policies, including a single currency and central bank.
Home Country
- Need to consider factors that affect international trade and firm behavior.
Embargoes and Sanctions
- Governmental actions that restrict trade in goods, services, or ideas for political reasons.
Export Controls
- Systems designed to prevent or slow the acquisition of strategically important goods by adversaries.
### Import Controls
- Government policies that regulate goods entering a country.
Boycotts
- Coordinated efforts to refrain from buying certain products or services.
Regulation of Firms' International Behavior
- Government measures to influence how firms operate in international markets.
Sanctions
- Actions taken by the UN Security Council under Chapter 7 to punish a state for violating international law.
Hofstede Framework
- Classifies cultures into four dimensions: power distance, individualism vs collectivism, masculinity vs femininity, and uncertainty avoidance.
Measuring Cultural Distance
- Using Hofstede's dimensions and the method developed by Kogut and Singh (1988).
Kluckhohn-Strodtbeck Framework
- Compares cultures across six dimensions:
- Relationship to the environment
- Time orientation
- Human nature orientation
- Activity orientation
- Relational orientation
- The nature of people
Gannon's Metaphors
- Uses descriptive metaphors to characterize different cultures, helping managers anticipate reactions in diverse situations.
### Exports
- Goods produced in the home country and sold in a foreign country.
Imports
- Goods produced in a foreign country and sold in the home country.
USMCA
- The United States-Mexico-Canada Agreement, replacing NAFTA, signed in 2018 and enacted in 2020.
USMCA Provisions
- Grants US access to Canada’s dairy market.
- Allows cars and trucks with 75% of their parts made in the US, Canada, or Mexico to be sold tariff-free.
- Includes a non-market economy clause requiring member countries to inform each other about negotiations with non-market economies.
Thucydides Trap
- A concept describing a potential conflict between a rising power and an established power, most often ending in military conflict.
National Governments
- Responsible for setting domestic and international trade policies and monitoring imports and exports.
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