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

Ch.6: Political Economy of Trade Flashcards

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
Q

Products on the dual-use lists of most nations include

A

nuclear materials, technological equipment, certain chemicals and toxins, some sensors and lasers, and specific devices related to weapons, navigation, aerospace, and propulsion.

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26
Q

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

A

does not concede on some trade issue that is seen as being unfair.

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27
Q

1962

A

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

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28
Q

The most common economic reasons for nations’ attempts to influence international trade are

A

the protection of young industries from competition and the promotion of a strategic trade policy.

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29
Q

new trade theorists believe

A

government intervention can help companies take advantage of economies of scale and become the first movers in their industries

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30
Q

According to the infant industry argument,

A

a country’s emerging industries need protection from international competition during their development phase until they become sufficiently competitive internationally.

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31
Q

Problems with the “Infant industry argument”

A

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

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32
Q

First-mover advantages arise because

A

economies of scale in production limit the number of companies that an industry can sustain.

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33
Q

Benefits of Strategic Trade Policy

A

supporters argue it results in increased national income.

34
Q

Advocates claim that strategic trade policies helped South Korea

A

-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
Q

Drawbacks of Strategic Trade Policy

A

-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
Q

Nations often restrict trade in goods and services to achieve cultural objectives, the most common being

A

protection of national identity.

37
Q

Why is the US seen by many as a treat to local culture?

A

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
Q

DRAWBACKS OF SUBSIDIES

A

-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
Q

loan guarantee

A

a government to guarantee that it will repay the loan of a company if the company should default on repayment

40
Q

Export-Import Bank of the United States

A

finances the export activities of companies in the United States and offers insurance on foreign accounts receivable.

41
Q

Overseas Private Investment Corporation (OPIC),

A

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
Q

maquiladoras

A

Creation of the zone, in Mexico, caused development of companies

-

43
Q

Government trade-promotion agencies

A

-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
Q

A tariff….

A

increases the price of an imported product directly and, therefore, reduces its appeal to buyers

45
Q

A nontariff barrier…

A

limits the availability of an imported product, which increases its price indirectly and, therefore, reduces its appeal to buyers

46
Q

export tariff

A

-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
Q

transit tariff

A

-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
Q

import tariff

A

-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
Q

3 Subcategories of “Import Tariff”:

A

1- Ad Valorem Tariff
2- Specific Tariff
3-Compound Tariff

50
Q

2 main reasons why countries levy tariffs

A

1- protect domestic producers

2- generate revenue

51
Q

Tariffs are also a source of government revenue, but mostly among

A

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
Q

Suffice it to say that tariffs tend to exact a cost on countries as a whole because

A

they lessen the gains that a nation’s people obtain from trade.

53
Q

After tariffs, _________are the second most common type of trade barrier.

A

quotas

54
Q

A government may impose an import quota to____________.

A

protect its domestic producers by placing a limit on the amount of goods allowed to enter the country.

55
Q

Historically, countries placed import quotas on the textile and apparel products of other countries under the

A

Multi-Fiber Arrangement

56
Q

Under this agreement, wealthy nations guaranteed imports of textiles and garments from poor countries under a quota system.

A

Multi-Fiber Agreement

57
Q

2 reasons a country imposes “Export Quotas” on its domestic producers:

A

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
Q

Organization of Petroleum Exporting Countries (OPEC)

A

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
Q

Countries normally self-impose a voluntary export restraint in response to

A

the threat of an import quota or a total ban on the product by an importing nation.

60
Q

A hybrid form of trade restriction is called

A

a tariff-quota

61
Q

Tariff-quotas are used extensively in the trade of

A

agricultural products

62
Q

It is the most restrictive nontariff trade barrier available, and it is typically applied to accomplish political goals.

A

Embargo

63
Q

Laws stipulating that producers in the domestic market must supply a specified amount of a good or service

A

local content requirements

64
Q

The purpose of local content requirements is to

A

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
Q

Today, many developing countries use _____________ as a strategy to boost industrialization.

A

local content requirements

66
Q

The objective of all such administrative delays for a country is to

A

discriminate against imported products—it is, in a word, protectionism.

67
Q

A country’s government can discourage imports by

A

restricting who is allowed to convert the nation’s currency into the internationally acceptable currency.

68
Q

Smoot–Hawley Act

A

-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
Q

General Agreement on Tariffs and Trade (GATT)

A

-a treaty designed to promote free trade by reducing both tariff and nontariff barriers to international trade.

-formed in 1947 by 23 nations

70
Q

The Uruguay Round of GATT negotiations, begun in

A

1986 in Punta del Este, Uruguay (hence its name), was the largest trade negotiation in history.

-Took more than 7 years to complete

71
Q

The General Agreement on Trade in Services (GATS)

A

-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
Q

Agreement on Trade-Related Aspects of Intellectual Property (TRIPS)

A

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
Q

Agreement on Agriculture

A

-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
Q

Perhaps the greatest achievement of the Uruguay Round was the creation of

A

the World Trade Organization (WTO)

75
Q

the World Trade Organization (WTO)

A

the international organization that regulates trade among nations.

76
Q

The three main goals of the WTO are

A

-to help the free flow of trade
-to help negotiate further opening of markets, and
-to settle trade disputes among its members.

77
Q

One key component of the WTO that was carried over from the GATT is

A

the principle of nondiscrimination called normal trade relations (formerly called “most favored nation status”)

78
Q

The spine of the global trading system is

A

WTO’s dispute settlement system Because of its ability to penalize offending member nations,

79
Q

WTO allows a nation to retaliate against dumping if it can show

A

that dumping is actually occurring, can calculate the damage to its own companies, and can show that the damage is significant.

80
Q

Antidumping duty expire within

A

5 yrs of being initiated unless circumstantial warrant continuation

81
Q

DOHA ROUND OF NEGOTIATIONS

A

-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
Q

The WTO tries to strike a balance between

A

national desires for protection and international desires for free trade.

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

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