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MGT 301--Intro. to International Bus. > Ch.6: Political Economy of Trade > Flashcards

Ch.6: Political Economy of Trade Flashcards

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1
Q

Regulatory controls or bureaucratic rules designed to impair the flow of imports into a country

A

Administrative delays

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2
Q

Tariff levied as a percentage of the stated price of an imported product

A

Ad valorem tariff

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3
Q

Additional tariff placed on an imported product that a nation believes is being dumped on its market

A

Antidumping duty

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4
Q

Tariff levied on an imported product and calculated partly as a percentage of its stated price and partly as a specific fee for each unit

A

Compound tariff

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5
Q

Additional tariff placed on an imported product that a nation believes is receiving an unfair subsidy

A

Countervailing duty

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6
Q

Restrictions on the convertibility of a currency into other currencies

A

Currency controls

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7
Q

Exporting a product at a price either lower than the price that the product normally commands in its domestic market or lower than the cost of production

A

Dumping

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8
Q

Complete ban on trade (imports and exports) in one or more products with a particular country

A

Embargo

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9
Q

Designated geographic region through which merchandise is allowed to pass with lower customs duties (taxes) and/or fewer customs procedures

A

Foreign trade zone (FTZ)

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10
Q

Pattern of imports and exports that occurs in the absence of trade barriers

A

Free Trade

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11
Q

Requirement that WTO members extend the same favorable terms of trade to all members that they extend to any single member

A

Normal Trade Relations: (formerly “most favored nation status”)

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12
Q

Restriction on the amount (measured in units or weight) of a good that can enter or leave a country during a certain period of time

A

Quota

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13
Q

Tariff levied as a specific fee for each unit (measured by number, weight, etc.) of an imported product

A

Specific tariff

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14
Q

: Financial assistance to domestic producers in the form of cash payments, low-interest loans, tax breaks, product price supports, or other forms

A

Subsidy

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15
Q

Government tax levied on a product as it enters or leaves a country

A

Tariff

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16
Q

Lower tariff rate for a certain quantity of imports and a higher rate for quantities that exceed the quota

A

Tariff-quota

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17
Q

Unique version of export quota that a nation imposes on its exports, usually at the request of an importing nation

A

Voluntary Export Restraint (VER)

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18
Q

Governments impose restrictions on free trade for

A

political, economic, or cultural reasons

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19
Q

The main political motives behind government intervention in trade include

A

protecting jobs, preserving national security, responding to other nations’ unfair trade practices, and gaining influence over other nations

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20
Q

Human, economic, and environmental security are closely related to

A

national security

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21
Q

Certain imports can be restricted in the name of

A

preserving national security

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22
Q

Protection from import competition main drawback

A

-the added cost of continuing to produce a good or provide a service domestically that could be supplied more efficiently from abroad

-a policy of protection may remain in place much longer than necessary once it is adopted

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23
Q

“dual uses”

A

-Most industrialized nations have agencies that review requests to export technologies or products that have dual uses

*–meaning they have both industrial and military applications

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24
Q

Products designated as dual use are classified as such and require

A

special governmental approval before export can take place.

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25
Products on the dual-use lists of most nations include
nuclear materials, technological equipment, certain chemicals and toxins, some sensors and lasers, and specific devices related to weapons, navigation, aerospace, and propulsion.
26
Governments often threaten to close their ports to another nation’s ships or to impose extremely high tariffs on its goods if the other nation
does not concede on some trade issue that is seen as being unfair.
27
1962
United States banned all trade and investment with Cuba in the hope of exerting political influence against its communist leaders. Designed to pressure Cuba’s government to change
28
The most common economic reasons for nations’ attempts to influence international trade are
the protection of young industries from competition and the promotion of a strategic trade policy.
29
new trade theorists believe
government intervention can help companies take advantage of economies of scale and become the first movers in their industries
30
According to the infant industry argument,
a country’s emerging industries need protection from international competition during their development phase until they become sufficiently competitive internationally.
31
Problems with the "Infant industry argument"
1- it requires governments to distinguish between industries that are worth protecting and those that are not 2- protection from international competition can cause domestic companies to become complacent toward innovation. 3- protection can do more economic harm than good (companies become less competitive and more reliant on protection) 4-argument also says that it is not always possible for small, promising companies to obtain funding in capital markets, and thus they need financial support from their government
32
First-mover advantages arise because
economies of scale in production limit the number of companies that an industry can sustain.
33
Benefits of Strategic Trade Policy
supporters argue it results in increased national income.
34
Advocates claim that strategic trade policies helped South Korea
-build global conglomerates (called chaebol) that dwarf competitors. -For years they received a variety of government subsidies, including low-cost financing. * (local suppliers to the chaebol are now thriving)
35
Drawbacks of Strategic Trade Policy
-Lavish government assistance to domestic companies in the past caused inefficiency and high costs -when governments decide to support specific industries, their choice is often subject to political lobbying by the groups seeking government assistance. -It is possible that special interest groups could capture all the gains from assistance with no benefit for consumers. (& they could end up paying more for lower quality goods)
36
Nations often restrict trade in goods and services to achieve cultural objectives, the most common being
protection of national identity.
37
Why is the US seen by many as a treat to local culture?
The reason is the global strength of the United States in entertainment and media (such as movies, magazines, and music) and consumer goods. -highly visible products can cause groups to lobby government officials for protection from their cultural influence
38
DRAWBACKS OF SUBSIDIES
-Critics say that subsidies encourage inefficiency and complacency by covering costs that truly competitive industries should be able to absorb on their own -Subsidies can lead to an overuse of resources, negative environmental effects, and higher costs for commodities. (tends to drive fuel prices higher & eliminates incentives to conserve fuel.)
39
loan guarantee
a government to guarantee that it will repay the loan of a company if the company should default on repayment
40
Export-Import Bank of the United States
finances the export activities of companies in the United States and offers insurance on foreign accounts receivable.
41
Overseas Private Investment Corporation (OPIC),
provides insurance services but for investors **companies that invest abroad can insure against losses due to (1) expropriation, (2) currency inconvertibility, and (3) war, revolution, and insurrection**
42
maquiladoras
Creation of the zone, in Mexico, caused development of companies -
43
Government trade-promotion agencies
-often organize trips for trade officials and businesspeople to visit other countries in order to meet potential business partners and generate contacts for new business. -open trade offices in other countries; (These offices are designed to promote the home country’s exports and introduce businesses to potential partners in the host nation) -Governments not only promote trade by encouraging exports but also encourage imports that the nation does not or cannot produce
44
A tariff....
increases the price of an imported product directly and, therefore, reduces its appeal to buyers
45
A nontariff barrier...
limits the availability of an imported product, which increases its price indirectly and, therefore, reduces its appeal to buyers
46
export tariff
-is levied by the government of a country that is exporting a product. -Countries can use export tariffs when they believe an export’s price is lower than it should be. -Developing nations whose exports consist mostly of low-priced natural resources often levy export tariffs.
47
transit tariff
-is levied by the government of a country that a product is passing through on its way to its final destination. -Transit tariffs have been almost entirely eliminated worldwide through international trade agreements
48
import tariff
-is levied by the government of a country that is importing a product. -The import tariff is by far the most common tariff used by governments today.
49
3 Subcategories of "Import Tariff":
1- Ad Valorem Tariff 2- Specific Tariff 3-Compound Tariff
50
2 main reasons why countries levy tariffs
1- protect domestic producers 2- generate revenue
51
Tariffs are also a source of government revenue, but mostly among
developing nations. *The main reason is that less-developed nations tend to have less-formal domestic economies that lack the capability to record domestic transactions accurately*
52
Suffice it to say that tariffs tend to exact a cost on countries as a whole because
they lessen the gains that a nation’s people obtain from trade.
53
After tariffs, _________are the second most common type of trade barrier.
quotas
54
A government may impose an import quota to____________.
protect its domestic producers by placing a limit on the amount of goods allowed to enter the country.
55
Historically, countries placed import quotas on the textile and apparel products of other countries under the
Multi-Fiber Arrangement
56
Under this agreement, wealthy nations guaranteed imports of textiles and garments from poor countries under a quota system.
Multi-Fiber Agreement
57
2 reasons a country imposes "Export Quotas" on its domestic producers:
1- to maintain adequate supplies of a product in the home market (ex: natural resources) 2-in order to restrict its supply on world markets, thereby increasing the international price of the good. (ex. OPEC)
58
Organization of Petroleum Exporting Countries (OPEC)
group of nations from the Middle East and Latin America attempts to restrict the world’s supply of crude oil in order to earn greater profits.
59
Countries normally self-impose a voluntary export restraint in response to
the threat of an import quota or a total ban on the product by an importing nation.
60
A hybrid form of trade restriction is called
a tariff-quota
61
Tariff-quotas are used extensively in the trade of
agricultural products
62
It is the most restrictive nontariff trade barrier available, and it is typically applied to accomplish political goals.
Embargo
63
Laws stipulating that producers in the domestic market must supply a specified amount of a good or service
local content requirements
64
The purpose of local content requirements is to
force companies from other nations to use local resources in their production processes—particularly labor. * such requirements help protect domestic producers from the price advantage of companies based in other, low-wage countries
65
Today, many developing countries use _____________ as a strategy to boost industrialization.
local content requirements
66
The objective of all such administrative delays for a country is to
discriminate against imported products—it is, in a word, protectionism.
67
A country’s government can discourage imports by
restricting who is allowed to convert the nation’s currency into the internationally acceptable currency.
68
Smoot–Hawley Act
-US passed in 1930 -major shift in US trade policy from one of free trade to one of protectionism -US restricted imports -The Smoot–Hawley Act, and the global trade wars that it helped to usher in, crippled the economies of the industrialized nations and helped spark the Great Depression. -
69
General Agreement on Tariffs and Trade (GATT)
-a treaty designed to promote free trade by reducing both tariff and nontariff barriers to international trade. -formed in 1947 by 23 nations
70
The Uruguay Round of GATT negotiations, begun in
1986 in Punta del Este, Uruguay (hence its name), was the largest trade negotiation in history. -Took more than 7 years to complete
71
The General Agreement on Trade in Services (GATS)
-extended the principle of nondiscrimination to cover international trade in all services, although talks regarding some sectors were more successful than were others -created during the Uruguay Round
72
Agreement on Trade-Related Aspects of Intellectual Property (TRIPS)
Created to help standardize intellectual property rules around the world (acknowledges that protection of intellectual property rights benefits society because it encourages the development of new technologies and other creations) *Supports Paris Convention and the Berne Convention
73
Agreement on Agriculture
-The agreement forces countries to convert all nontariff barriers to tariffs—a process called “tariffication.” ....... It then calls on developed and developing nations to cut agricultural tariffs significantly -Uruguay Round addressed the main issues of agricultural tariffs and nontariff barriers
74
Perhaps the greatest achievement of the Uruguay Round was the creation of
the World Trade Organization (WTO)
75
the World Trade Organization (WTO)
the international organization that regulates trade among nations.
76
The three main goals of the WTO are
-to help the free flow of trade -to help negotiate further opening of markets, and -to settle trade disputes among its members.
77
One key component of the WTO that was carried over from the GATT is
the principle of nondiscrimination called normal trade relations (formerly called “most favored nation status”)
78
The spine of the global trading system is
WTO’s dispute settlement system Because of its ability to penalize offending member nations,
79
WTO allows a nation to retaliate against dumping if it can show
that dumping is actually occurring, can calculate the damage to its own companies, and can show that the damage is significant.
80
Antidumping duty expire within
5 yrs of being initiated unless circumstantial warrant continuation
81
DOHA ROUND OF NEGOTIATIONS
-Launched by WTO 2001 - The renewed negotiations were designed to lower trade barriers further and to help poor nations in particular. -Although the agreement marked the first significant achievement for the Doha round, no agreement was reached on agricultural trade issues, tariffs, or quotas
82
The WTO tries to strike a balance between
national desires for protection and international desires for free trade.

MGT 301--Intro. to International Bus. (12 decks)

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