Government Intervention in Trade Policies
35 Questions
2 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to Lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is at odds with free trade, the unrestricted flow of products, services, and capital across national borders?

  • Factors of production
  • FDI
  • Trade openness (correct)
  • Lower-cost import

What are checkpoints at the ports of entry in each country where government officials inspect imported products and levy tariffs?

  • Nontariff trade barriers
  • Quotas
  • Customs (correct)
  • Subsidies

Which of the following may be a result of protectionist policies?

  • high incentive to improve quality
  • price inflation (correct)
  • increased choices for buyers
  • easy availability of products

What is the primary motive behind governments imposing offensive barriers?

<p>increase employment (A)</p> Signup and view all the answers

Which of the following statements is true regarding protectionism?

<p>It can trigger retaliation from foreign governments, which reduces sales prospects for exports. (C)</p> Signup and view all the answers

Which of the following statements is true about the protection of an infant industry?

<p>Governments can impose temporary trade barriers on foreign imports to ensure that young firms gain a large share of the domestic market. (C)</p> Signup and view all the answers

What refers to a government measure intended to manage or prevent the export of certain products or trade with certain countries?

<p>Export control (C)</p> Signup and view all the answers

A nontariff trade barrier is a government policy, regulation, or procedure that impedes trade through means other than explicit tariffs.

<p>True (A)</p> Signup and view all the answers

Governments impose offensive barriers to safeguard industries, workers, and special interest groups and to promote national security.

<p>False (B)</p> Signup and view all the answers

Why have nontariff trade barriers increased in popularity?

<p>are easier to conceal from the WTO (A)</p> Signup and view all the answers

Subsidies may allow a manufacturer to practice dumping – that is, to charge an unusually low price for exported products.

<p>True (A)</p> Signup and view all the answers

Dumping violates WTO rules because it amounts to unfair competition.

<p>True (A)</p> Signup and view all the answers

Which of the following was the first major effort to systematically reduce trade barriers worldwide?

<p>GATT (A)</p> Signup and view all the answers

The GATT created a forum for resolving trade disputes.

<p>True (A)</p> Signup and view all the answers

If high tariffs are present, managers may consider other strategies, such as FDI, licensing, and joint ventures that allow the firm to operate directly in the target market, avoiding import barriers.

<p>True (A)</p> Signup and view all the answers

A formal arrangement between two or more countries to reduce or eliminate tariffs is known as a(n)

<p>free trade agreement (D)</p> Signup and view all the answers

NAFTA is an example of which of the following levels of regional integration?

<p>free trade area (C)</p> Signup and view all the answers

Regional integration greatly increases the scale of the marketplace for firms inside the economic bloc.

<p>True (A)</p> Signup and view all the answers

When was the WTO established (round, city, date)?

<p>Uruguay Round, Marrakech, Morocco, 1994 (It started on January 1, 1995)</p> Signup and view all the answers

In a few sentences, explain what the WTO is and its main objectives.

<p>The World Trade Organization (WTO) is a global organization that regulates international trade. It aims to ensure that trade flows smoothly and predictably, encouraging free trade, and settling trade disputes between member countries.</p> Signup and view all the answers

What are the two main methods of government intervention in trade?

<p>Tariffs and Nontariff barriers</p> Signup and view all the answers

List the four main defensive motives for government intervention in trade.

<p>Protection of the national economy, protection of an infant industry, national security, and protection of national culture and identity.</p> Signup and view all the answers

Explain the main argument for protection of the national economy.

<p>Proponents argue that firms in advanced economies cannot compete with firms in developing countries that employ low-cost labor, and therefore need protection from imports.</p> Signup and view all the answers

Explain the main argument for protection of an infant industry.

<p>Young industries, which may be inexperienced and need time to develop technology and scale, require protection from foreign competition.</p> Signup and view all the answers

Explain why governments might impose trade restrictions on products related to national security.

<p>Countries may restrict imports of products considered critical to national security, such as military technology or sensitive software, to protect domestic industries and prevent potential adversaries from gaining access to strategic technologies.</p> Signup and view all the answers

Explain why governments might restrict imports of cultural products to protect national identity.

<p>Governments may impose trade barriers on cultural products to ensure that domestic culture is preserved and not overly influenced by foreign media, entertainment, or other aspects of culture.</p> Signup and view all the answers

What are the main negative effects of government intervention in international trade?

<p>Trade barriers can lead to higher prices for consumers, reduced consumer choice, decreased efficiency, and potential retaliation from other countries.</p> Signup and view all the answers

Match the following types of tariffs with their definitions:

<p>Ad valorem tariff = A tax levied as a percentage of the value of the imported product. Specific tariff = A flat fee or fixed amount per unit of the imported product, based on weight, volume, or surface area. Revenue tariff = A tariff intended to raise money for the government. Protective tariff = A tariff designed to protect domestic industries from foreign competition. Prohibitive tariff = A tariff so high that no one can import any of the items.</p> Signup and view all the answers

What is the main goal of the GATT and, subsequently, the WTO?

<p>To reduce trade barriers and promote free trade among member countries.</p> Signup and view all the answers

What are the five levels of economic integration, from least to most integrated?

<p>Free trade area, customs union, common market, economic union, and political union.</p> Signup and view all the answers

What are the four main advantages of regional integration?

<p>Expansion of market size, achievement of scale economies and enhanced productivity, attraction of direct investment, and acquisition of greater political power.</p> Signup and view all the answers

Give an example of how regional integration can lead to an expansion of market size.

<p>A Belgian firm can benefit from access to the entire European market of 500 million people, even though Belgium itself has a much smaller population.</p> Signup and view all the answers

Give an example of how regional integration can lead to greater efficiency and productivity.

<p>A German firm producing 10,000 units for the domestic market may not be very efficient, but by producing 50,000 units for the entire EU market, it can achieve greater scale economies and improve efficiency.</p> Signup and view all the answers

Give an example of how regional integration can attract direct investment from outside the bloc.

<p>Foreign firms, such as General Mills or Samsung, are more likely to invest in countries that are part of a large economic bloc, like the EU, because they can benefit from preferential treatment and easier access to a larger market.</p> Signup and view all the answers

Give an example of how regional integration can lead to greater political influence.

<p>The EU is a powerful economic bloc with significant political influence in global trade negotiations and international affairs.</p> Signup and view all the answers

Flashcards

Protectionism

Government policies intended to restrict international trade and shield domestic industries from foreign competitors.

Import Tariff

A tax levied on imported products, effectively increasing the cost for buyers.

Specific Tariff

A flat fee or fixed amount per unit of imported goods, regardless of their value.

Revenue Tariff

An import tariff intended to generate revenue for the government.

Signup and view all the flashcards

Protective Tariff

An import tariff aimed at protecting domestic industries from foreign competition.

Signup and view all the flashcards

Prohibitive Tariff

An import tariff so high that it effectively prevents the import of goods.

Signup and view all the flashcards

Nontariff Trade Barriers

Government policies, regulations, or procedures that restrict trade using methods other than explicit tariffs, such as quotas, regulations, and administrative hurdles.

Signup and view all the flashcards

Quota

A limit on the quantity of imported goods allowed into a country.

Signup and view all the flashcards

Subsidies

Government financial assistance to domestic industries to lower production costs, making them more competitive.

Signup and view all the flashcards

Dumping

The practice of selling goods at a lower price in foreign markets than in the domestic market, often made possible by government subsidies.

Signup and view all the flashcards

Export Control

Government measures to control or prevent the export of specific goods or trade with certain countries, often to manage national security or protect domestic resources.

Signup and view all the flashcards

Free Trade Agreement

A formal arrangement between two or more countries to reduce or eliminate tariffs and other trade barriers within the bloc.

Signup and view all the flashcards

GATT (General Agreement on Tariffs and Trade)

The first major global effort to systematically reduce trade barriers, paving the way for increased international trade.

Signup and view all the flashcards

Most Favored Nation (MFN) Principle

A principle that requires countries to extend the same tariff concessions granted to one trading partner to all other trading partners, fostering fair and equitable trade.

Signup and view all the flashcards

Free Trade Area

A trade bloc where member countries eliminate trade barriers among themselves but maintain independent external trade policies with non-member countries.

Signup and view all the flashcards

Customs Union

A trade bloc where member countries eliminate trade barriers among themselves and adopt a unified external trade policy with a common set of tariffs and trade barriers for countries outside the bloc.

Signup and view all the flashcards

Common Market

A trade bloc allowing free movement of goods, services, and factors of production (labor, capital) among member countries while maintaining a common external trade policy with countries outside the bloc.

Signup and view all the flashcards

Economic Union

A trade bloc that goes beyond a common market, integrating fiscal and monetary policies, with the aim of standardizing exchange rates and creating a single currency.

Signup and view all the flashcards

Political Union

The ultimate stage of regional integration, where member countries merge into a single political entity with a unified government, laws, and policies.

Signup and view all the flashcards

WTO (World Trade Organization)

The World Trade Organization, the only global international organization that governs rules of trade between nations.

Signup and view all the flashcards

Uruguay Round

The largest round of trade negotiations in WTO history, leading to the establishment of the WTO.

Signup and view all the flashcards

Comparative Advantage

A concept in international trade theory suggesting that nations should specialize in producing goods and services that they can produce most efficiently, and then trade for other goods and services that they need.

Signup and view all the flashcards

Normal Trade Relations (NTR)

The principle of treating all trading partners equally, offering the same trade concessions and tariffs to all members.

Signup and view all the flashcards

Economies of Scale

The benefit of producing goods and services in large quantities, resulting in lower per-unit costs and increased efficiency.

Signup and view all the flashcards

Expanded Market Size

Access to a larger market due to regional integration, expanding opportunities for businesses.

Signup and view all the flashcards

Enhanced Productivity

The ability to produce goods and services more efficiently by specializing in specific activities and increasing the scale of production.

Signup and view all the flashcards

Direct Investment

The inflow of investments from foreign firms into a country or region, often attracted by favorable business conditions and market access.

Signup and view all the flashcards

Regional Integration

The process of reducing or eliminating trade barriers between nations, typically within a region or trade bloc.

Signup and view all the flashcards

Stronger Defensive and Political Posture

The ability to negotiate as a collective group, gaining greater bargaining power in international affairs.

Signup and view all the flashcards

Study Notes

Government Intervention and Regional Economic Integration

  • Trade openness is contrasted with free trade, which involves the unrestricted flow of goods, services, and capital across borders.
  • Customs are checkpoints at national borders where officials inspect imported goods and assess tariffs.
  • Protectionist policies can lead to price inflation, as opposed to increased choices for buyers, easy availability of products, or high incentive for quality improvement.
  • Offensive barriers are imposed by governments to protect domestic industries and enhance national security.
  • Defensive barriers are implemented to safeguard national interests, such as generating tax revenue or promotion of strategic policy objectives.
  • Protectionism can lead to retaliation from other countries, potentially reducing export prospects.
  • Infant industry protection involves governments imposing temporary barriers to help young firms compete with established foreign competitors.
  • Export controls are government measures to restrict the export of certain products or trade with specified countries.
  • Nontariff barriers impede trade through regulations or procedures other than tariffs.
  • Dumping involves charging an unusually low price for exported products, violating WTO rules because it's considered unfair competition.
  • GATT (General Agreement on Tariffs and Trade) was a global initiative to reduce international trade barriers.
  • WTO (World Trade Organization) was created in 1995 to govern trade agreements and disputes, succeeding the GATT.
  • Economic integration involves a gradual reduction of trade barriers through different levels culminating in a political union.
  • Regional integration, a significant component of global economics, enhances market size for member firms, leads to greater efficiency, attract foreign investment, and creates greater bargaining power for bloc nations.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Quiz Team

Related Documents

Chapter 7 GI, GATT and WTO Q and Answers PDF

Description

This quiz explores the concepts of government intervention in trade and its impacts on regional economic integration. It covers topics such as trade openness, customs regulations, and various protectionist policies. Test your understanding of how these factors influence both domestic industries and international relations.

More Like This

Economic Policies in 1664
12 questions

Economic Policies in 1664

NiftyOxygen avatar
NiftyOxygen
Union Budget 2024-25: Trade Policies and Apps
40 questions

Union Budget 2024-25: Trade Policies and Apps

ComfyPeninsula6461 avatar
ComfyPeninsula6461
Government Intervention in Trade
40 questions

Government Intervention in Trade

AdventuresomeLimit avatar
AdventuresomeLimit
Government Intervention in Trade
26 questions

Government Intervention in Trade

TerrificKhaki7925 avatar
TerrificKhaki7925
Use Quizgecko on...
Browser
Open
Browser
Browser