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International Business > Chapter 6 > Flashcards

Chapter 6 Flashcards

1
Q

refers to a situation where a government
does not attempt to restrict what its citizens can buy
from, or what they can sell to, another country

A

Free Trade

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2
Q

While many nations are ___________ committed to free
trade, they tend to intervene in international trade to
protect the interests of politically important groups

A

nominally

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3
Q

There are seven main instruments of trade policy, often

referred to as

A

tariff (TBs) and non-tariff barriers (NTBs)

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4
Q

What are the seven TBs and NTBs?

A
  1. Tariffs
  2. Subsidies
  3. Import quotas
  4. Voluntary export restraints
  5. Local content requirements
  6. Antidumping policies
  7. Administrative policies
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5
Q

is a tax levied on imports that effectively raises

the cost of imported products

A

tariff

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6
Q

are levied as a fixed charge for each unit

of a good imported – per ton, per car, per foot, etc.

A

specific tariff

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7
Q

(tariffs) are levied as a proportion of the
value of the imported good (as opposed to its
quantity, weight, etc.) Example might be a $100 on
first $10,000 value, $120 on next $20,000, etc.

A

Ad valorem tariffs

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8
Q

Why do governments impose tariffs?

A

increase government revenues
provide protection to domestic producers against foreign
competitors
force consumers to pay more for certain imports

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9
Q

So, tariffs are unambiguously pro-_______ and anti-__________

A

producer; consumer

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10
Q

and tariffs reduce the overall ________ of the

world economy

A

efficiency

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11
Q

is a government payment to a domestic

producer

A

subsidy

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12
Q

Subsidies help domestic producers

A

compete against low-cost foreign imports

gain access to export markets

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13
Q

typically absorb the costs of subsidies

A

consumers

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14
Q

is a direct restriction on the quantity of

some good that may be imported into a country

A

import quota

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15
Q

a hybrid of a quota and a tariff
where a lower tariff is applied to imports within the
quota than to those over the quota

A

tariff rate quota

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16
Q

are quotas on trade

imposed by the exporting country, typically at the request of the importing country’s government

A

Voluntary export Restrictions

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17
Q

the extra profit that domestic producers

make when supply is artificially limited by an import quota

A

quota rent

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18
Q

Who benefits from import quotas and voluntary export restraints?

A

Import quotas and voluntary export restraints benefit
domestic producers by limiting import competition, but
they raise the prices of imported goods for consumers

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19
Q

demands that some specific fraction of a good be produced domestically

A

local content requirement

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20
Q

are bureaucratic rules that are designed to make it difficult for imports to enter a country

A

Administrative trade polices

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21
Q

How do Administrative trade polices hurt consumers?

A

Deny them access to potentially superior foreign products

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22
Q

selling goods in a foreign market below their cost of production, or selling goods in a foreign market at below their “fair” market value

A

dumping

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23
Q

Why dump?

A
  1. Gets rid of excess production from taking advantage of economies of scale
  2. Predatory pricing to drive off/kill competitors in a market (Walmart)
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24
Q

antidumping duties, also

known as ___________ may be imposed

A

countervailing duties

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25
Q

In 1947 through the mid-1990s, the framework for international trade was known as the

A

GATT (General Agreement on Tariffs and Trade)

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26
Q

Since 1995, the framework for international trade has been known as the

A

World Trade Organization

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27
Q

The WTO has emerged as an effective

A

advocate and

facilitator of future trade deals

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28
Q

The WTO is currently focusing on

A

Anti-dumping policies
Protectionism in agriculture
Protecting intellectual property

29
Q

Why do governments intervene in trade? (Two arguments)

A

Political and Economic

30
Q

concerned with protecting the
interests of certain groups within a nation (normally producers), often at the expense of other groups (normally consumers)

A

Political Arguements

31
Q

concerned with boosting the

overall wealth of a nation (to the benefit of all, both producers and consumers)

A

Economic Arguments

32
Q

Political Arguments:

A

protecting jobs
protecting industries deemed important for national
security
retaliating to unfair foreign competition
protecting consumers from “dangerous” products
furthering foreign policy goals
protecting the human rights of individuals in exporting
countries

33
Q

Support new industries until established

A

The infant industry argument

34
Q

Seek to
establish advantages/dominance in a particular
industry, perhaps an emerging one

A

Strategic Trade Policy Argument

35
Q

Either one usually results in some form of

retaliation by other countries;

A

escalation in responses, and even trade wars

36
Q

International firms have an incentive to lobby for _____________, and keep protectionist pressures from causing them to have to change strategies

A

free trade

37
Q

While there may be __________ benefits to having government protection in some situations, in the _________ these can backfire and other governments can retaliate making it more difficult to construct a globally dispersed production system

A

short-run; long-run

38
Q

Trade barriers impact firm strategy

A

Will you export to a country or manufacture there and

avoid trade issues

39
Q

Firms can play a role in promoting free trade or trade barriers

A

Lobbying, filing trade complaints, etc.

40
Q

the most common

political reason for trade restrictions

A

protecting jobs and industries

41
Q

governments protect certain

industries such as aerospace or advanced electronics because they are important for national security

A

National Security

42
Q

when governments take, or threaten to take,

specific actions, other countries may remove trade barriers

A

Retaliation

43
Q

protecting consumers from

unsafe products is also be an argument for restricting imports

A

Protecting Consumers

44
Q

trade policy can be used to support foreign policy objectives

preferential trade terms can be granted to countries that a government wants to build strong relations with

rogue states that do not abide by international laws or norms can be punished

A

Furthering Foreign Policy Objectives

45
Q

governments can use trade

policy to improve the human rights policies of trading partners

A

Protecting Human Rights

46
Q

Which Economic Argument for government intervention has been accepted as a justification for temporary
trade restrictions under the WTO

A

infant industry argument

47
Q
  • suggests that in cases where there may be important first mover advantages, governments can help firms from their countries attain these advantages and also suggests that governments can help firms
    overcome barriers to entry into industries where foreign firms have an initial advantage
A

Strategic Trade Policy

48
Q

Up to the Great Depression most countries had some level of

A

Protectionism

49
Q

the _________ Act (1930) -

created significant import tariffs on foreign goods

A

Smoot-Hawley

50
Q

GATT’s membership grew from 19 to more than 120 nations

tariff reduction was spread over eight rounds of negotiation

GATT regulations were enforce by a mutual
monitoring system

A

a

51
Q

The world trading system came under strain during the

1980s and early 1990s because

A

Japan’s economic success strained what had been
more equal trading patterns
persistent trade deficits by the U.S caused significant
problems in some industries and political problems for
the government
many countries found that although GATT limited the
use of tariffs, there were many other forms of
intervention that had the same effect that did not
technically violate GATT

52
Q

The Uruguay Round (1986) focused on

A
  1. Services and Intellectual Property

2. The World Trade Organization

53
Q

The WTO was established as a more effective

A

policeman of the global trade rules

54
Q

The WTO encompassed

A

GATT GATS and TRIPS

55
Q

Trade issues related to ___________ were emphasized during the Uruguay Round

A

services and intellectual

property and agriculture

56
Q

trade theorists believe government intervention in

international trade is justified

A

New

57
Q

Some new trade theorists believe that while strategic

trade theory is appealing in theory,

A

it may not be workable in practice

58
Q

Two situations where restrictions on trade may be

inappropriate

A

Retaliation

Domestic Policies

59
Q

strategic trade policies aimed at establishing
domestic firms in a dominant position in a global industry
are beggar-thy-neighbor policies that boost national
income at the expense of other countries

A

krugman

60
Q

A country that attempts to use such policies will probably

provoke

A

trade war

61
Q

Governments can be influenced by special interest

groups

A

a government’s decision to intervene in a market may
appease a certain group, but not necessarily the
support the interests of the country as a whole

62
Q

a government’s decision to intervene in a market may appease a certain group, but not necessarily the support the interests

A

of the country as a whole

63
Q

trade barriers may limit a firm’s ability to

A 
dispersing production 
activities globally (Which is beneficial to the company)
64
Q

trade barriers raise the cost

A

of exporting

65
Q

quotas limit

A

exports

66
Q

firms may have to locate production activities within a country to meet

A

local content requirements

67
Q

the threat of future trade barriers can influence

A

firm strategy

68
Q

TRIPS obliges WTO members to grant and enforce patents lasting at least _______ and copyrights lasting _________

A

20 years; 50 years

69
Q

The Doha talks are focused on what?

A

cutting tariffs on industrial goods and services

phasing out subsidies to agricultural producers

reducing barriers to cross-border investment
limiting the use of anti-dumping laws

International Business (6 decks)

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