Ch 7: Governments and Trade

Free Trade

Pattern of imports and exports that occurs in the absence of trade barriers

Dual-Use Products

Goods, software, or technologies that have both civilian uses and military applications

Political Motives for Trade Intervention

Protect jobs, preserve national security, respond to "unfair" trade, and gain influence among nations

Infant Industry Argument

Young industries need protection from international competition during their development until they grow sufficiently competitive

Strategic Trade Policy

Attempts to affect the outcomes of strategic competition among companies in an international oligopoly in favor of domestic firms

Chaebol

Large family-owned conglomerates in South Korea

Jítuán

Large family-owned conglomerates in China

Cultural Motives for Trade Intervention

Prevent unwanted cultural influence and preserve national identity

Managed Trade

Government efforts to achieve trade objectives pertaining to market shares or quantities of specific products

Subsidy

Financial assistance to domestic producers to help fend off international competitors in the form of cash payments, low-interest loans, tax breaks, product price supports, or other forms

Loan Guaranteе

Government guarantees to repay a loan for a company if it should default on repayment

Foreign Trade Zone (FTZ)

Designated geographic region through which merchandise is allowed to pass with lower customs duties (taxes) and/or fewer customs procedures

Trade Promotion Agency

Special government body responsible for advocating a nation's exports

Tariff

Government tax levied on a product as it enters or leaves a country

Ad Valorem Tariff

Tariff levied as a percentage of the stated price of an imported product

Specific Tariff

Tariff levied as a specific fee for each unit (measured by number, weight, etc.) of an imported product

Compound Tariff

Tariff levied on an imported product and calculated partly as a percentage of its stated price and partly as a specific fee for each unit

Quota

Restriction on the amount (measured in units or weight) of a good that can enter or leave a country during a certain period of time

Voluntary Export Restraint (VER)

Unique version of export quota that a nation imposes on its exports, usually at the request of an importing nation

Tariff Quota (Tariff-Rate Quota)

Lower tariff rate for a certain quantity of imports and a higher rate for quantities that exceed the quota

Embargo

Complete ban on trade (imports and exports) in one or more products with a particular country

Administrative Delays

Regulatory controls or bureaucratic rules designed to impair the flow of imports into a country

Currency Controls

Restrictions on the convertibility of a currency into other currencies

General Agreement on Tariffs and Trade

Treaty designed to promote freе trade by reducing both tariffs and nontariff barriers to international trade

World Trade Organization

International organization that regulates trade among nations

Normal Trade Relations

Requirement that WTO members extend the same favorable terms of trade to all members that they extend to any single member

Dumping

Exporting a product at a price either lower than the price that the product normally commands in its domestic market or lower than the cost of production

Antidumping Duty

Additional tariff placed on an imported product that a nation believes is being dumped on its market

Countervailing Duty

Additional tariff placed on an imported product that a nation believes is receiving an unfair subsidy

complacency

A criticism leveled at subsidies is that they may encourage

export assistance.

Loan guarantees and low-interest-rate loans fall under the category of

To avoid a total ban on the export by the importing nation's government

Why would an exporting nation agree to a voluntary export restraint?

nontariff barriers

Local content requirements and administrative delays are forms of

one of free trade to one of protectionism.

Passage of the Smoot-Hawley Act in 1930 marked a shift in US trade policy from

services, intellectual property, and agriculture.

The Uruguay Round of GATT negotiations reached agreement in several key areas, including on

the World Trade Organization.

One of the greatest achievements of the Uruguay Round of GATT negotiations was creation of

national desires for protection.

The World Trade Organization tries to strike a balance between international desires for free trade and

exporting.

The issue of whether or not a country allows trade in a product considered to have dual uses arises in the context of

foreign entertainment and media

What are some imports a country might restrict due to cultural motives?

Export-Import Bank of the United States.

A well-known institution that offers financing and insurance to US exporters is the

Increased employment

What is often an intended purpose of foreign trade zones?

Lower-than-normal tariffs charged on merchandise

What is an advantage of a foreign trade zone?

Ad valorem, specific, and compound

What are the different types of tariffs?

Ad valorem tariff

What kind of tax is levied as a percentage of the stated price of an imported product?

Developing nation

What kind of nation is more likely to use tariffs as a source of revenue?

Export quota

What might a nation impose on a product if it wishes to maintain an adequate supply in the home market?

Tariff quota

What kind of tariff charges a lower tariff rate for a certain quantity of imports and a higher rate for quantities that exceed a quota?

Understaffing customs offices and requiring special import licenses

What are some examples of administrative delays?

Trade restriction

Currency controls are an instrument of what?

The General Agreement on Tariffs and Trade

What did the World Trade Organization develop from?

standardize intellectual property rules worldwide.

The World Trade Organization's TRIPS Agreement helps

The WTO regulates the actions of countries, not companies.

What is the reason why the WTO can regulate only the actions of a country that retaliates against a company that is dumping?

Environment

What is an area in which the WTO has no separate agreement?