The Dynamic Environment of International Trade Flashcards
What is the balance of payments?
The system of accounts that records a nation’s international financial transactions
It records international transactions usually over one year and is maintained on a double-entry bookkeeping system.
What is protectionism?
The use of various measures to restrict entry of unwanted goods into a country
This includes tariffs, quotas, and nontariff barriers.
What are the three accounts included in the balance of payments?
- Current account
- Capital account
- Reserves account
What is a trade surplus?
When international receipts are greater than payments
What is a trade deficit?
When international payments are greater than receipts
What does the General Agreement on Tariffs and Trade (GATT) aim to do?
Help reduce tariffs and other trade barriers
What was the primary purpose of the Marshall Plan?
To promote capitalism and assist in rebuilding Europe and Japan
What significant change occurred in the U.S. share of world GNP from 1950 to 2017?
Dropped from 39 percent to less than 25 percent
What is the difference between tariffs and quotas?
Tariffs are taxes on imports, while quotas are specific limits on the amount of goods that can be imported
Fill in the blank: A _______ is an agreement between the importing country and the exporting country for a restriction on the volume of exports.
Voluntary Export Restraint (VER)
What are antidumping laws designed to prevent?
Predatory pricing by foreign producers
What is the purpose of a subsidy?
A benefit given to an individual, business, or institution, usually by the government
What is the role of the World Trade Organization (WTO)?
Sets rules governing trade between members and provides a panel for trade dispute resolution
True or False: The WTO allows member countries to have equal representation in discussing trade issues.
True
What are some arguments for protectionism?
- Protection of an infant industry
- Maintenance of employment
- National defense
What happens during a global trade collapse?
World trade decreases significantly, often due to retaliatory tariffs
What is a quota?
A specific unit or dollar limit applied to a particular type of good
What is the main argument against protectionism?
It can cost consumers and does not lead to renewed growth in declining industries
What are nontariff barriers?
- Quotas
- Boycotts
- Monetary barriers
- Market barriers
What is a boycott?
An absolute restriction against the purchase and importation of certain goods and/or services from other countries
What is the significance of the Uruguay Round?
It established rules for trade-related investment measures and intellectual property rights
Fill in the blank: The _______ is the first multilateral legally enforceable agreement covering trade and investment in the services sector.
General Agreement on Trade in Services (GATS)
What is predatory pricing?
Selling products below cost to undermine competition
What is the effect of blocked currency?
Cuts off all importing or limits importing above a certain level
What are the basic elements of the GATT?
- Trade shall be conducted on a nondiscriminatory basis
- Protection through customs tariffs
- Consultation to solve global trade problems
When was the WTO founded?
1994
What does the WTO provide for trade disputes?
A panel of experts to hear and rule on trade disputes
What type of decisions does the WTO issue?
Binding decisions
How does the WTO ensure member representation?
Equal representation in discussing trade issues
What are loopholes in the context of GATT and WTO?
Ways to circumvent the rules of GATT and WTO
What action did China take regarding tariffs and technical standards?
Reduced tariffs while increasing technical standards and inspection requirements
What may negotiating bilateral trade agreements lead to?
Multinational concessions not necessarily inconsistent with WTO goals
What was the primary purpose of creating the IMF?
To assist nations in becoming and remaining economically viable
What are two key objectives of the IMF?
- Stabilization of foreign exchange rates
- Establishment of freely convertible currencies
What do Special Drawing Rights (SDRs) represent?
An average base of value derived from a group of major currencies
What is a clean float in currency terms?
Currencies float without manipulation
What is a dirty float in currency terms?
Currencies’ values are manipulated
What are the goals of the World Bank Group?
- Reduction of poverty
- Improvement of living standards
How many institutions are in the World Bank Group?
Five institutions
What service does the World Bank Group provide to developing countries?
Lending money to governments
What type of projects does the World Bank Group assist with?
Developmental projects for the poorest developing countries
What guarantees does the World Bank Group provide to investors?
Guarantees against noncommercial risk
What are some unintended consequences of globalization?
- Environmental concerns
- Worker exploitation
- Domestic job losses
- Cultural extinction
- Higher oil prices
- Diminished sovereignty of nations
What significant protest occurred in London in 2005?
Terrorism protests
What type of campaigns have influenced policy against globalization?
Anti-sweatshop campaigns
