Trade Policy and Chip Technology 2024

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Questions and Answers

What is the primary goal of the U.S. Department of Commerce's rules regarding chip technology exports to China?

To support global trade in technology

To promote U.S. semiconductor exports

To collaborate with China on technology development

To restrict China's advancements in artificial intelligence and supercomputers (correct)

Which company is noted as the only manufacturer of a specific machine essential for producing the most advanced chips?

Micron

Intel

ASML (correct)

Samsung

What was a significant announcement made by China regarding its lithography scanner in September 2024?

It can now produce chips with resolutions below 10 nanometers.

It has partnered with U.S. companies for advanced technology.

It was discontinued due to economic challenges.

It is capable of supporting a resolution of 65 nanometers or better. (correct)

Why has China found it challenging to support its ambitions for self-reliance in chip technology?

Economic slowdown impacting local governments Signup and view all the answers

Which of the following groups did the U.S. need to collaborate with to ensure the effectiveness of its restrictions on chip technology exports?

Countries like Korea, the Netherlands, and Japan Signup and view all the answers

What is the primary focus of trade policy?

To shape trade flows, including imports and exports Signup and view all the answers

What is the highest level of protectionism known as?

Autarky Signup and view all the answers

How does a tariff affect the price of imported goods?

Makes them more expensive relative to domestic goods Signup and view all the answers

Which tool restricts the total quantity of a specific import?

Quantitative restrictions Signup and view all the answers

What can be a consequence of countries adopting preferential trade policies?

Distorted trade flows favoring certain countries Signup and view all the answers

What does free trade allow countries to do?

Trade without any restrictions on imports and exports Signup and view all the answers

Why might a country impose tariffs on imported goods?

To enhance the competitiveness of domestic products Signup and view all the answers

If a country has a significant demand for foreign products, what does this indicate?

Purchasers prefer foreign products over domestic ones Signup and view all the answers

What is one disadvantage of relying solely on bilateral trade agreements compared to a WTO multilateral agreement?

They often create trade diversion. Signup and view all the answers

Which of the following best describes a value chain?

The full range of activities from conception to final customer support. Signup and view all the answers

What role does Apple primarily play in the iPhone's global value chain?

Setting product standards and outsourcing manufacturing. Signup and view all the answers

Which factor significantly increases the complexity of a network of free trade agreements?

Diverse rules and requirements in each agreement. Signup and view all the answers

In the context of bilateral negotiations, what is the significance of unilateral bargaining power?

It can lead to power-based trade dynamics. Signup and view all the answers

Which of the following is an example of a company involved in the manufacture of iPhone components?

Toshiba. Signup and view all the answers

Where is the final assembly of iPhones primarily conducted?

In Shenzhen, China. Signup and view all the answers

What is a potential outcome of not synchronizing bilateral trade agreements?

Market share losses for exporters whose countries are excluded. Signup and view all the answers

What is the amount of the anti-dumping tariff charged by the EU when the export price from China to the EU is $50 and the price in China is $80?

$30 Signup and view all the answers

Which scenario allows the EU to charge a countervailing duty?

When the price in China is influenced by public subsidies Signup and view all the answers

What type of duties does a WTO member country impose to counteract alleged dumping?

Anti-Dumping Duties Signup and view all the answers

In the case of subsidized imports, what should the level of an anti-subsidy duty correspond to?

The difference between subsidized and non-subsidized export prices Signup and view all the answers

Which of the following is NOT classified as a visible illegal subsidy?

Standard sales discounts Signup and view all the answers

What was the key complaint lodged by the European Confederation of the Footwear Industry?

Alleged dumping of leather footwear from China and Vietnam Signup and view all the answers

What is the basis for calculating the amount of anti-dumping duties?

The difference between normal value and export price Signup and view all the answers

Which type of footwear is excluded from the complaint regarding dumping?

Sports footwear Signup and view all the answers

What is the impact of the EU importing goods from Argentina instead of New Zealand?

Loss of efficiency due to trade diversion Signup and view all the answers

What is the role of rules of origin in free trade agreements?

To verify the nationality of goods traded Signup and view all the answers

What percentage of an electric vehicle must come from the UK or EU to avoid tariffs as of January 2024?

45% Signup and view all the answers

What consequence do UK businesses face under new Brexit arrangements regarding inspections?

They risk paying duties if they cannot prove sufficient content origin Signup and view all the answers

What has been the challenge for businesses regarding the new arrangements post-Brexit?

Understanding the complex rules or providing sufficient evidence Signup and view all the answers

What is a key requirement for a battery pack to qualify as 'local' under new trade regulations?

60% of the battery pack must originate from Europe or the UK Signup and view all the answers

What does trade creation refer to in the context of free trade agreements?

The increase of imports from more efficient producers due to removed trade barriers Signup and view all the answers

Why is there no need for rules of origin in customs unions?

Member countries adopt the same tariff structure Signup and view all the answers

What do preferential trade agreements (PTAs) typically involve in terms of tariffs?

Tariffs that are negotiated to be lower than the MFN tariff Signup and view all the answers

Which of the following is a characteristic of the Generalized Scheme of Preferences (GSP) offered by the EU?

It offers unilateral reduced MFN tariffs to selected developing countries. Signup and view all the answers

Which of the following countries is eligible for the ‘Everything but Arms’ initiative?

Gambia Signup and view all the answers

What is the purpose of the Combined Nomenclature (CN) when declared to customs in the EU?

To classify goods and set the applicable customs duty Signup and view all the answers

What distinguishes the GSP+ from the standard GSP program of the EU?

It provides deeper tariff cuts or complete removal for compliant countries. Signup and view all the answers

Which statement about WTO's Most-Favored-Nation (MFN) rule is correct?

It permits exceptions for special treatment of developing nations. Signup and view all the answers

Which type of agreement involves comprehensive negotiations beyond tariffs in the EU?

Free Trade Agreements (FTAs) Signup and view all the answers

Which of the following countries does NOT benefit from a reduced MFN tariff under the EU's GSP?

Sweden Signup and view all the answers

Study Notes

EU Industrial Policy

Industrial policy is selective government intervention to alter production, encompassing various instruments like intellectual property design, public procurement, and skills provision.
Two main categories exist: horizontal policies support broad economic activities (e.g., R&D, transportation infrastructure) and vertical policies focus on specific sectors (e.g., aerospace, shipbuilding).
Industrial policies might employ instruments like subsidies, tax incentives, infrastructure development, regulations, and tariffs.
Aims of industrial policy are diverse, including national security (e.g., during import disruptions), promoting well-being of society (e.g., promoting education, health), boosting competitiveness, and increasing regional cohesion.

The Aims of Industrial Policy

National Security: Crucial goods production is strategically supported to guarantee public safety (e.g. medicine, food).
Well-being of Society: Promoting goods and services (e.g., education, or health care), that are often under-provided by the market.
Competitiveness: Supporting strategic sectors to ensure economic superiority in the global market.
Cohesion: Supporting specific geographical areas or sectors (e.g., through job creation, or capital increases) to reduce disparities.

The Rationale of Industrial Policy

Competitiveness: Industrial policies aim to boost economic growth via scale advantages, leading to enhanced market competitiveness (infant industries).
Learning externalities: Proactive government intervention can create positive externalities by encouraging innovation and potentially discovering profitable new sectors.
Coordination failures: Sometimes, specific industries need collective action to reach a critical scale, e.g. hotels or charging stations working together.

Examples of Industrial Policy

Infant Industries: Countries can temporarily protect young industries against global competition.
Coordination Actions: Industries that need coordinated operations (e.g., new communication technologies).
Targeted Industries: Government supports a set of specified sectors to foster growth and competitiveness.
Successful Implementation: Government-funded initiatives like DARPA have driven technological advancement and significant industrial progress.

Problems with the Industrial Policy:

Clash with competition: Large, state-aided firms can dominate markets, reducing competition and potentially hindering innovation.
Conflicts with trade policies: Selective government intervention may contradict existing global trade rules.
Difficulties during implementation: Challenges in establishing and enacting industrial policies to ensure the desired results.

Trade Policy, Tools, and Effects

Trade statistics are typically collected at the country level, and measure exports and imports in different sectors.
Demands for foreign products are a driving force for trade, with countries seeking to provide preferred trade terms.
Key elements of trade policy: trade barriers (tariffs and quotas), industrial policies, and trade agreements.

Key Trade Tools

Tariffs/Customs Duties: Taxes imposed on imported goods.
Quantitative Restrictions/Quotas: Limits on the quantity of imported goods.
Regulations/Standards: Specific technical or safety requirements that products need to meet to be allowed in the country.

The Effects of Protectionism

Upward sloping domestic supply, downward sloping domestic demand
Domestic welfare gains (producers), losses (consumers), and government revenue are impacted in the case of tariffs.
Trade creation and trade diversion: Shifts in imports and exports may be beneficial or detrimental to certain economies.
Free trade agreements and economic welfare gains: Preferential terms established for favored countries via trade agreements.

Trade Barriers

Non-tariff barriers (NTBs): Restricting imports through methods other than tariffs (e.g., sanitary/phytosanitary restrictions, technical barriers) to protect industries and consumer health.
Export subsidies: Grants or other funding mechanisms that provide incentives to export-oriented firms and potentially create a price advantage, potentially affecting global trade fairness.
Export restrictions: Measures to limit exports, (e.g., China limits the export of rare earth metals), for national security or competitiveness.

Trade Agreements

Free trade areas (FTAs): Countries eliminate tariffs and barriers for trade among themselves while maintaining their original tariffs on the rest of the world (a customs union has a common tariff for third parties.)
Customs Unions: Agreements where a group of countries adopt a common external tariff on goods from third parties and free movement between the member nations.
Trade policy's global importance: The WTO oversees international trade rules and dispute resolution mechanisms, influencing the policy decisions of countries.

Modern Industrial Policies

The EU Chips Act: European investment for the creation of chip production facilities.
The US CHIPS and Science Act: US measures to protect its global competitiveness and technological leadership in semiconductor production.

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Description

This quiz explores the U.S. Department of Commerce's regulations surrounding chip technology exports to China, focusing on issues of trade policy and international collaboration. Delve into key aspects of protectionism, tariffs, and the implications for global chip manufacturing. Test your understanding of the interplay between trade policy and technological advancements.