LEcture 12 Flashcards- International Trade II: Domestic and International Institutions

Comprehensive vocabulary flashcards reviewing the concepts of domestic institutions, lobbying dynamics, trade legislation, and multilateral and regional trade agreements covered in Lecture 12.

What economic principle states that global output increases and costs fall when countries specialize in producing what they make most efficiently?

Comparative advantage, which demonstrates that mutual gains arise when nations focus on goods with the lowest opportunity cost.

Why do domestic industries operating outside a country's comparative advantage actively lobby for protectionism?

They face intense competitive pressure from cheaper foreign imports and seek trade barriers to shield their market share and profits.

Why was the International Emergency Economic Powers Act of 1977 ruled unlawful by the Supreme Court when used for broad tariffs?

The statute does not confer presidential authority to unilaterally enact sweeping across-the-board tariffs on imports from more than $100$ nations.

What specific trade power does Section 122 of the Trade Act of 1974 delegate to the executive branch?

The authority to impose tariffs of up to $15\,\%$ for up to $150\,\text{days}$ (unless extended by Congress) to address severe U.S. balance-of-payments deficits.

Under what condition does Section 232 of the Trade Expansion Act of 1962 permit presidential tariff or quota adjustments?

When an official investigation conducted by the Department of Commerce concludes that specific imports pose a threat to national security.

What statutory authority does Section 301 of the Trade Act of 1974 provide to the United States Trade Representative (USTR)?

The mandate, under presidential direction, to investigate and enact retaliatory trade sanctions against foreign countries engaging in unfair or discriminatory trade practices.

What executive trade power is established under Section 338 of the Tariff Act of 1930 (Smoot-Hawley Tariff)?

The power to raise tariffs by up to $50\,\%$ on products from countries found by the U.S. International Trade Commission to discriminate against U.S. commerce.

What two domestic institutional factors determine whether interest groups successfully secure trade protection?

Organization (the capacity to overcome collective action hurdles) and Representation (how political institutions channel constituent demands).

How does the collective action problem manifest among domestic industries seeking trade barriers?

Tariff protection functions as a collective public good for an entire domestic industry, incentivizing individual firms to free-ride on the lobbying investments of others.

Why do small, concentrated producer groups possess an organizational advantage over diffuse consumers in trade policy?

Producers capture concentrated, substantial economic gains and face low coordination hurdles, whereas consumers experience diffuse, negligible individual costs, discouraging mobilization.

How does U.S. sugar policy illustrate producer bias and collective action in trade politics?

A small cartel of domestic sugar growers successfully lobbies for quotas and price supports, keeping U.S. prices well above world levels at a cost of only pennies per consumer.

How does regime type generally influence a country's propensity to implement trade protectionism?

Democracies are less inclined toward protectionism because elected leaders answer to broad voter bases, whereas non-democracies more readily protect narrow patron industries.

How do proportional representation and majoritarian electoral systems differ in their trade policy outcomes?

Proportional systems empower broad national party coalitions that favor free trade, while majoritarian systems incentivize politicians to protect concentrated local district industries.

Why is the U.S. Congress historically more inclined toward protectionism than the U.S. President?

Members of Congress represent narrow geographic constituencies dependent on local industries, whereas the President is held accountable by a nationwide electorate benefiting from open markets.

What is the primary policy purpose of government compensation programs, such as Trade Adjustment Assistance?

To mitigate domestic opposition to trade liberalization by providing retraining, tax credits, and financial grants to workers displaced by foreign competition.

What major political barrier limits the effectiveness and implementation of trade compensation policies?

Direct economic redistribution and expanded welfare budgets frequently encounter strong public and legislative opposition.

What empirical relationship between trade openness and public spending did economist Dani Rodrik identify?

More open economies consistently maintain larger public sectors and higher government expenditures to buffer domestic citizens against global market volatility.

What constitutes a trade war, and what is its primary macroeconomic consequence?

An escalating conflict where State A raises tariffs on State B, prompting retaliatory counter-tariffs by State B, which contracts trade volume and destroys mutual economic gains.

How did China strategically design its retaliatory tariffs against the United States during the 2018–2019 trade war?

China targeted agricultural exports such as soybeans with tariffs up to $15\,\%$ to inflict economic pain directly on rural constituencies critical to the administration's electoral base.

What was the direct impact of Chinese retaliatory tariffs on American soybean exports between 2018 and 2019?

U.S. soybean exports to China collapsed by roughly $80\,\%$ below their prior three-year average, causing China to shift its agricultural supply chains to Brazil.

How did the U.S. executive branch financially offset domestic agricultural losses caused by Chinese retaliatory tariffs?

By authorizing emergency farm bailout programs totaling $\$12\,\text{billion}$ and $\$16\,\text{billion}$, issuing direct payments between $\$15$ and $\$150$ per acre across $29$ commodity crops.

What strategic rationale argues that unilateral tariffs are not purely protectionist measures?

The view that tariffs serve as aggressive bargaining leverage to compel foreign trading partners to eliminate existing trade barriers and commit to reciprocal free trade.

What was the General Agreement on Tariffs and Trade (GATT), and when was it founded?

A provisional multilateral trade agreement established in $1947$ through which signatory nations pledged to negotiate reciprocal tariff reductions on physical goods.

When was the World Trade Organization (WTO) established, and what institutional entity did it replace?

The WTO was established on January 1, $1995$, replacing GATT with a permanent institutional structure and broader jurisdictional purview over services and intellectual property.

What is the foundational Most Favored Nation (MFN) principle under WTO law?

The mandate requiring that any tariff reduction or commercial advantage granted to one member must be immediately and unconditionally extended to all other WTO members.

What core authority is held by the WTO Dispute Settlement Body (DSB)?

The judicial authority to establish dispute panels, adjudicate alleged trade violations, issue binding rulings, and authorize retaliatory countermeasures against non-compliant states.

What unresolved division led to the collapse and indefinite stalling of the WTO Doha Development Round launched in 2001?

Deep disagreements over agricultural subsidies and tariffs, with developing nations demanding reductions in Western farm subsidies before opening their manufacturing markets.

What institutional factor has paralyzed the WTO's dispute adjudication mechanism in recent years?

The United States blocking all judicial appointments to the seven-member Appellate Body, preventing it from attaining the quorum needed to hear appeals.

What are Regional Trade Agreements (RTAs), and why have states increasingly turned to them?

Pacts between smaller subsets of states that achieve deeper economic integration and lower tariffs faster than the gridlocked, consensus-based WTO.

What four cooperation-enhancing factors derived from international relations theory do RTAs leverage?

Information sharing, small numbers of participating states, repeated interaction, and issue linkage.

How does information sharing facilitate sustained cooperation in international trade pacts?

It reduces uncertainty and monitoring costs by exposing hidden non-tariff barriers, dumping, and domestic subsidies, preventing unwarranted retaliatory defection.

Why does a smaller number of member states enhance the stability of a regional trade bloc?

Smaller coalitions reduce bargaining complexity, prevent free-riding, and make detecting and punishing violations far more effective than in global forums.

How does repeated interaction encourage state compliance with trade commitments?

It lengthens the shadow of the future, ensuring that the anticipated long-term gains from sustained trade cooperation outweigh the one-time payoff of unilateral protectionism.

What is linkage politics in the context of international trade negotiations?

The practice of pairing concessions across different policy areas—such as swapping agricultural market access for intellectual property protections, or trade access for defense pacts.

When did the United States-Mexico-Canada Agreement (USMCA) take effect, and what prior agreement did it supersede?

It entered into force on July 1, $2020$, replacing NAFTA while instituting stricter rules of origin, enhanced environmental standards, and modern labor regulations.

What is the Southern African Customs Union (SACU), and what is its historical distinction?

Established on December 11, $1969$, among $5$ Southern African nations, SACU represents the world's oldest continuously functioning customs union.

What is the Regional Comprehensive Economic Partnership (RCEP)?

An Asia-Pacific regional free trade agreement signed by $15$ nations, forming the largest trading bloc in world history by collective economic output and population.

What share of global population, economic output, and trade is encompassed by the RCEP agreement?

It encompasses $2.2\,\text{billion}$ people, $\$26.2\,\text{trillion}$ in combined GDP ($30\,\%$ of global output), and accounts for $28\,\%$ of total global trade.

What was the Trans-Pacific Partnership (TPP), and what major shift occurred in U.S. policy regarding it?

A 12-nation Pacific Rim trade pact negotiated under President Obama that excluded China; President Trump withdrew the United States from the agreement upon taking office in $2017$.

What overarching trend characterized the evolution of Regional Trade Agreements between 1948 and 2024?

A rapid proliferation from fewer than $10$ operational agreements in the mid-twentieth century to over $350$ active agreements notification-tracked by $2024$.

How does the geographic concentration of import-exposed industries influence congressional trade voting?

Because trade shocks concentrate heavily in regional manufacturing or agricultural hubs, affected district representatives face intense constituent pressure to back protectionist bills.

What constitutes commercial dumping in international trade, and how do states counter it?

Exporting goods below production cost or home market price to undermine competitors, which importing states counter by imposing targeted anti-dumping duties.

Why are non-tariff barriers (NTBs) more difficult for international trade institutions to regulate than tariffs?

NTBs—such as import quotas, licensing rules, and sanitary restrictions—are often disguised as legitimate public health, safety, or environmental protections.

What institutional reform did the WTO Dispute Settlement Body introduce to eliminate the GATT dispute veto?

It instituted the reverse consensus rule, meaning a dispute panel report is automatically adopted unless every single member country unanimously votes against it.

What systemic trade-off exists between universal WTO multilateralism and Regional Trade Agreements?

The WTO offers non-discriminatory universal access but suffers from consensus gridlock, whereas RTAs allow rapid, deep integration but risk fragmenting global commerce into regional blocs.