21.3 How Governments Enact Trade Policy and The Tradeoffs of Trade Policy

Common markets are regional trading blocs in which __________.

Select all that apply:

monetary and fiscal policies are coordinated

participants enjoy free trade with each other

participants have a common external trade policy

participants have a common currency

participants enjoy free trade with each other

participants have a common external trade policy

There are different types of economic integration across the globe, ranging from free trade agreements, in which participants allow each other’s imports without tariffs or quotas, to common markets, in which participants have a common external trade policy as well as free trade within the group, to full economic unions, in which, in addition to a common market, monetary and fiscal policies are coordinated. 

In trade policy a balance must be stricken between __________.

Select all that apply:

importers and exporters

domestic business special interests and domestic consumer interests

national laws that increase protectionism and international agreements that try to reduce protectionism

dumping and comparative advantage

domestic business special interests and domestic consumer interests

national laws that increase protectionism and international agreements that try to reduce protectionism

In the arena of trade policy, the battle often seems to be between national laws that increase protectionism and international agreements that try to reduce protectionism, like the WTO.

Most economists ____________ international trade because _________________.

Select the correct answer below:

oppose; it hurts domestic producers and special interest groups

oppose; they believe that other countries engage in unfair competition through dumping and other predatory pricing

support; the gains from trade exceed the costs and can be redistributed to make everyone better off

support; it lowers prices for consumers and that is more significant than the cost of lost jobs in domestic production

support; the gains from trade exceed the costs and can be redistributed to make everyone better off

The common belief among economists is that it is better to embrace the gains from trade, and then deal with the costs and tradeoffs with other policy tools, than it is to cut off trade to avoid the costs and tradeoffs.

Among the goals of the The World Trade Organization is to __________.

Select the correct answer below:

ensure the stability of the international monetary system

increase global economic growth

enhance world trade by promoting a reduction in trade restrictions

fight poverty in poor countries

enhance world trade by promoting a reduction in trade restrictions

The World Trade Organization (WTO) is committed to lowering barriers to trade. The world’s nations meet through the WTO to negotiate how they can reduce barriers to trade, such as tariffs.

The trend in international trade over the past century have been towards __________.

Select all that apply:

a surge in protectionism, including tariffs, quotas, and nontariff barriers

a reduction in government-created barriers to trade

advances in transportation, communication, and information management which have made trade easier

an increase in using protectionism for political reasons

a reduction in government-created barriers to trade

advances in transportation, communication, and information management which have made trade easier

The last half-century has seen both a dramatic reduction in government-created barriers to trade, such as tariffs, import quotas, and nontariff barriers, and also a number of technological developments that have made international trade easier, like advances in transportation, communication, and information management. The result has been the powerful surge of international trade.

True of False?

Most economists support protectionism against international trade in cases where domestic businesses are negatively impacted

False

The common belief among economists is that it is better to embrace the gains from trade, and then deal with the costs and tradeoffs with other policy tools, than it is to cut off trade to avoid the costs and tradeoffs.