WTO and Trading blocs

Question 1

Retaliation

Answer 1

Where a country being hit by illegal tariffs or quotas is allowed to impose its own protectionist measures, up to an equivalent value, against the offending country.

Question 2

Cross- retaliation

Answer 2

Where a small country, which is being hit by illegal tariffs or quotas from a large country, is allowed to suspend its obligations under more than one WTO agreement.

Question 3

Free trade areas

Answer 3

Removal of tariffs and quotas on trade between member states but each member state retains its own commercial policy towards non-members of the FTA.

Question 4

Customs unions

Answer 4

Removal of tariffs and quotas on trade between between member states and member states agree to a common external tariff on trade with non-members.

Question 5

Common Market

Answer 5

Customs unions but with free flows of factors of production.

Question 6

Monetary union

Answer 6

Customs union with a common currency

Question 7

Trade creation

Answer 7

The replacement of high-cost domestic production with imports from a more efficient source.

Question 8

Trade diversion

Answer 8

A shift in domestic consumer spending from a lower cost world source to a higher cost to a higher cost partner source as a result of the elimination of tariffs on imports from the partner.