Chapter 6 Trade Regulations and Industrial Policies

Question 1

What was the purpose of the early U.S. tariffs (1789-1812)?

Answer 1

Primarily to raise government revenue

Question 2

When did protectionist motives first emerge in U.S. tariff policy?

Answer 2

In the 1790s, with Hamiltons infant-industry argument

Question 3

What was the ‘Tariff of Abominations’ (1828)?

Answer 3

A dramatic rise in tariffs to protect domestic industry

Question 4

What was the impact of the Smoot-Hawley Act (1930)?

Answer 4

It raised tariffs to a peak level, caused global retaliation, and worsened the Great Depression

Question 5

What did the Reciprocal Trade Agreements Act (1934) do?

Answer 5

Gave the president power to set tariffs and promoted bilateral tariff reductions

Question 6

What principle did the Reciprocal Trade Agreements Act (1934) introduce?

Answer 6

Most favored nation (MFN) - nondiscriminatory tariff reductions

Question 7

What was General Agreement on Tariffs and Trade (GATT’s) goal when it was created in 1947?

Answer 7

To reduce tariffs multilaterally and stabilize trade relations

Question 8

What did General Agreement on Tariffs and Trade (GATT’s) evolve into in 1995?

Answer 8

The World Trade Organization (WTO)

Question 9

What is the most favored nation (MFN) principle?

Answer 9

All World Trade Organization (WTO) must treat each other equally in trade

Question 10

What is National Treatment?

Answer 10

Imported goods must be treated the same as domestic goods

Question 11

What are binding commitments?

Answer 11

Countries commit to maximum tariff levels to ensure predictability

Question 12

What is the transparency principle in GATT/WTO?

Answer 12

Countries must disclose trade policies and regulations publicly

Question 13

What was the focus of the Kennedy Round (1960s)?

Answer 13

Across-the-board tariff cuts

Question 14

What did the Tokyo Round (1970s) address?

Answer 14

Both tariff and non-tariff barriers

Question 15

What areas did the Uruguay Round (1980s-1990s) expand into?

Answer 15

Services, intellectual property, and agriculture

Question 16

What stalled the Doha Round (2000s)?

Answer 16

Disagreements over developing country priorities

Question 17

What does the World Trade Organization (WTO) oversee?

Answer 17

All trade agreements among its 164 member countries

Question 18

Are WTO agreements optional?

Answer 18

No, adherence is mandatory for all members

Question 19

What are the steps in WTO dispute resolution?

Answer 19

Consultations –> panels –> appellate body –> possible retaliation

Question 20

What happens if a country doesn’t comply with a ruling of the WTO?

Answer 20

Retaliatory tariffs may be imposed

Question 21

What do critics say about the World Trade Organization (WTO) and domestic law?

Answer 21

WTO rulings can override national regulations

Question 22

What is the counterargument about WTO’s power?

Answer 22

WTO respects domestic regulatory autonomy

Question 23

How does trade liberalization affect the environment?

Answer 23

There ongoing debate-some argue that it weakens standards, others say it encourages efficiency

Question 24

What trade strategy do the Brazil, Russia, India, China (BRIC) countries favor?

Answer 24

Protective measures to support domestic industries

Question 25

What are U.S. trade priorities?

Answer 25

Strong labor, environmental, and intellectual property protections

Question 26

What is China's trade approach?

Answer 26

Gradiual liberalization with limited regulatory commitments

Question 27

What does Fast-Track Authority (TPA) allow the president to do?

Answer 27

Negotiate trade deals subject only to an up-or-down vote in Congress

Question 28

Why is Fast-Track Authority (TPA) controversial?

Answer 28

It reduces congressional oversight in trade negotiations

Question 29

What is one benefit of Fast-Track Authority (TPA)?

Answer 29

increases U.S. negotiating credibitliy

Question 30

What is the escape clause in the U.S. trade law?

Answer 30

allows temporary trade restrictions if a domestic industry is seriously harmed

Question 31

What are safeguards and presidential authority used for?

Answer 31

To protect industries and allow time for adjustment

Question 32

Who investigates trade injury claims?

Answer 32

The U.S. international Trade Commission (USITC)

Question 33

Why are export subsidies problematic in trade?

Answer 33

They distort competition and are banned by the WTO.

Question 34

What are countervailing duties (CVDs)?

Answer 34

Tariffs that offset the effects of foreign subsidies.

Question 35

How are CVDs calculated?

Answer 35

They match the level of the subsidy.

Question 36

What is considered dumping in trade?

Answer 36

Selling a product abroad below its cost or home-market price.

Question 37

What must be proven in a U.S. antidumping case?

Answer 37

Evidence of dumping, injury to the domestic industry, and a causal link.

Question 38

What are recent U.S. antidumping cases?

Answer 38

Chinese battery materials and Southeast Asian solar panels.

Question 39

How does dumping affect Canadian steel?

Answer 39

It lowers prices, harming domestic steel and iron ore producers.

Question 40

Who benefits from dumped steel in Canada?

Answer 40

The auto industry, due to cheaper input costs.

Question 41

What is the policy dilemma in Canada's case?

Answer 41

Helping upstream producers hurts downstream consumer

Question 42

What’s an example of strategic trade policy?

Answer 42

Airbus vs. Boeing — European subsidies gave Airbus an edge.

Question 43

How do strategic subsidies affect markets?

Answer 43

They can shift profits and push foreign competitors out.

Question 44

What are the risks of using strategic subsidies?

Answer 44

Trade disputes, retaliation, and global inefficiencies.

Question 45

What are economic sanctions?/ Effects

Answer 45

Trade and financial restrictions to pressure target countries. Reduced GDP and distorted production in the target country

Question 46

What determines sanction effectiveness?

Answer 46

Multilateral support, trade ties, and the target’s domestic politics.

Question 47

What is Trade Adjustment Assistance (TAA)?

Answer 47

U.S. support for workers and firms harmed by trade.

Question 48

What does Trade Adjustment Assistance (TAA) provide?

Answer 48

Retraining, cash support, and programs for competitiveness.

Question 49

Why is Trade Adjustment Assistance (TAA) important?

Answer 49

It helps balance the benefits of free trade with equity and transition support.