Chapter 5: Political Forces that Affect Global Trade Flashcards
the taking of private property/companies by a government to make it public.
nationalism
What is motivated by the belief that the government can manage a public good or necessity better than the private, profit-driven sector?
nationalism
T or F: Usually, the private sector is better at running things.
True
T or F: Nationalism is motivated with the concern of hiring people/keeping people employed, and the government is not as concerned with profits as a private enterprise.
True
T or F: Nationalism takes place today in places like the U.S. and Western Europe.
False; we don’t see nationalism taking place in these places (happened years ago)
In what type of countries are you likely to find nationalization? Give 3 examples.
Poor countries; Southeast Asia, Africa, Latin America
the selling of government owned property to the private sector to gain more efficiency in business operations, to raise money or to change in political climate/philosophy.
privatization
What is the incentive of the government for privatization?
Money (when they sell a business, they immediately get money)
T or F: Privatization is beneficial for the government due to the fact that the private sector is better equipped at running a business, so the business makes more money, and the business people pay taxes to the government.
True
The question “what’s the point in making money if your currency devalues” exemplifies the importance of what two things in international business?
Predictability and stability
A stable government maintains itself in ______ and whose fiscal, monetary, and political policies are ________ and not subject to sudden, radical changes.
power; predictable
T or F: For a very long time, the US has enjoyed a lot of stability.
True (constitution, 3 equal branches of government)
Why do many people look to the U.S. for investments?
Our stability
Why is the U.S.’s stability in danger for the future? (2 reasons)
- People not accepting election results
- Not having trust in the system
The protection from unfair competition protects the _________ activities of citizens.
economic
unlawful acts of violence committed for a wide variety of reasons.
terrorism
What provides a source of operating funds for terrorists?
Kidnapping
Kidnapping can be _________ or ________.
political (when individuals are kidnapped bc of citizenship/political beliefs); economical (asking for ransom)
What two places experienced a lot of kidnapping in the 1970’s?
Latin and South America
hijacking and kidnapping on the saas.
Where has this become a big problem?
piracy; East Africa
any illegal internet-mediated activity that takes place in electronic networks.
cybercrime
T or F: Cybercrime is limited to private actors (criminals).
False; in some cases, governments actively sponsor cybercrime
What are 3 governments that actively sponsor cybercrime?
- North Korea
- China
- Ukraine
T or F: All countries participate in cybercrime to some extent, but the magnitude of the cybercrime differs from country to country.
True
The number of piracy incidents in Asia have (increased/decreased).
decreased
Country Risk Assessment (CRA) is an assessment of a country’s ________ situation and ________ to determine how much risk to employees, property, and investment exists for the firm doing business there.
economic; politics
T or F: CRA’s are very useful when deciding if you want to do business in a foreign country.
True
T or F: If a country’s risk assessment is high, this means that you should not, by any means, invest in the country.
False; (ex: In Iraq, when it was very risky and volatile, some people made a lot of money because no one else was willing to invest/work in Iraq)
What are 3 of the riskiest countries in the world?
- Somalia
- Venezuela
- Yemen
What are 2 of the least risky countries in the world?
- U.S.
- Singapore
What are 3 types of countermeasures to high risk countries?
- Know the country and region so risk-assessment is realistic.
- Insurance and outsourced skills (ex: hostage negotiations) as needed to cope with crises.
- Train for daily living skills (vary driving routes, be aware of surroundings, antiterrorism training)
What are the 6 reasons for restricting trade?
- Provide for National Defense
- Impose Sanctions
- Protect an Infant/Dying Industry
- Protect Domestic Jobs
- Ensure Fair Competition
- Retaliate
What argument for restricting trade do economists say is a weak argument and used to gain emotional advantage?
Provide for National Defense
T or F: You don’t want to trade your national security with someone else. Even if the sale is good from a financial perspective, if it compromises national security, it ought to be off limits.
True
Certain industries need protection from _______ because they are vital to security.
imports
What argument for restricting trade does this describe:
- can be used to punish a country or pressure them into doing what we want them to do.
- Inflict economic damage, punish, or encourage change of behavior.
Impose Sanctions
T or F: Sanctions are a trade restriction that is effective in forcing change.
False; sanctions don’t really work because countries find ways around them (like trading with other countries)
Sanctions produce _______ ________ damage.
collateral economic
What is the issue with restricting trade to protect an infant/dying industrty?
Businesses will extend government help over and over again
Restricting trade gives infant industries a chance to grow and build __________ advantage and slow down impact of a dying industry by moving _________ into other sectors.
comparative; capital
Without protecting an infant or dying industry, lower-cost _______ will underprice in local market.
imports
What is the problem with restricting trade to protect domestic jobs?
- If you’re forced to do things you aren’t as efficient in, you are draining some of your resources.
- In the process of displacing jobs, you are creating others (BMW production in Germany creates jobs in America)
To ensure fair competition, there is an import duty to bring costs of imports (up/down) to cost of _________ goods.
up; domestic
T or F: To ensure fair competition, we should ban imports.
False; don’t ban, equalize
What is the consumer impact of import duty?
It increases the price they pay.
T or F: In relation to fair competition, an issue is that not everyone abides by the same rules.
True (ex: minimum wage and child labor laws differ in countries)
What argument that supports restricting trade does this describe?
- If we decide not to trade with a country, they will decide not to trade with us. Even though we’re highly dependent on some countries for some products/industries, the opposite is also true.
Retaliate
selling below costs for the purpose of driving your competitors out of business
dumping
T or F: Dumping is illegal.
True
Dumping is defined in 3 ways:
1. Selling product abroad for less than _______ of ______.
2. Selling product abroad for less than _______ in _____ ______.
3. Selling product abroad for less than ______ to ________-________ countries.
- cost; production
- price; home market
- price; third-party
What are the 3 types of dumping?
- Predatory dumping
- Social dumping
- Environmental dumping
financial contributions, provided directly or indirectly by a government, that confer a benefit, including grants, preferential tax treatment, and government assumption of normal business expenses.
subsidies
Subsidies are when the government _________ and distorts _______.
intervenes; trade
T or F: Subsidies are fair.
False; UNFAIR
additional import taxes levied on imports that have benefited from export subsidies.
Countervailing duties
What two things can the government do to limit the amount of trade that takes place?
- Tariffs
- Ad Valorem Duty
taxes on imported goods for the purpose of raising their price to reduce competition for local producers or stimulate local production.
tariffs
an import duty levied as a percentage of the invoice value of imported goods.
ad valorem duty (ex: the car costs $50,000. I pay a 5% tax to import the car)
What are 3 types of tariff barriers?
- Specific duty
- Compound duty
- Variable levy
a fixed sum levied on a physical unit of an imported good.
specific duty
a combination of specific and ad valorem duties.
compound duty
an import duty set at the difference between world market prices and local government-supported prices.
variable levy
all forms of discrimination against imports other than import duties.
non-tariff barriers (NTB)
What is the goal of non-tariff barriers?
to limit/restrict trade, but not through imposing taxes on imported goods.
numerical limits for specific goods imported during a specific period. (quota)
quantitative barriers (type of NTB) (ex: we could tell the Japanese you can’t sell more than 100,000 cars in the US)
export quotas imposed by the exporting nation. Orderly marketing arrangements are formal agreements.
Voluntary Export Restraints (VERs) (type of NTB)
T or F: VERs are really just a face saving measure to not embarrass the exporting nation.
True
What are 3 types of non-quantitative NTB’s?
- Direct government participation in trade.
- Customs and other administrative procedures.
- Government and private standards.
(ex: selling American cars in Japan is very difficult because the car must meet their specifications. They have specifications that end up costing 2,3 or $4,000. So, they aren’t imposing a tax, but they’re forcing you to spend money on your product so that it meets their specifications)
T or F: Recently, many governments, including the U.S. government, have contracted out certain services to private companies.
True
T or F: The British prime minister, David Cameron, led the privatization movement.
False
T or F: Terrorists avoid kidnapping because the repercussions can be harmful to their movement.
False
T or F: The national defense argument for trade restrictions is based on the development level of the country.
False
T or F: Subsidies are implemented by the government to a domestic firm as a way to encourage exports or protect the firm from imports.
True
T or F: Voluntary export restraints are imposed by the importing nation to avoid violating WTO rules.
False
This country engaged in many privatizations in the aftermath of the 2008-2009 financial crisis.
a. Germany
b. Greece
c. The United Kingdom
d. Portugal
b. Greece
When a government transfers the assets of a company from the public sector to the private sector, it is an example of:
a. Isolationism
b. Expansionism
c. Nationalism
d. Privatization
d. Privatization
Government protection of economic activities is:
a. A historical function of government
b. A recent responsibility of government
c. A social characteristic
d. Stronger in democracies
a. A historical function of government
