Exam 6: Trade Regulations and Industrial Policies

According to the normal-trade-relations (most-favored-nation)principle,if the United States extends MFN treatment to China and then grants a low tariff on imports of shirts from South Korea,the United States is obligated to provide the identical low-tariff on imports of shirts from China.

An antidumping duty levied on imports of foreign-produced steel leads to an increase in consumer surplus in the home country.

The Export-Import Bank provides export-credit subsidies to U.S.producers of agricultural goods.

What is the essential idea behind strategic trade policy?

Assume that Russia has a comparative advantage in vodka.If the United States extends Russia the benefits of the normal-trade-relations (most favored nation)principle,U.S.consumer surplus decreases in the vodka market.

The purpose of "countervailing duties," as levied by the domestic government,is to neutralize import tariffs imposed by foreign governments.

The World Trade Organization provides for all of the following except:

Under the original provisions of the Reciprocal Trade Agreements Act,the president of the United States was authorized to cut tariffs up to:

Figure 6.2.Effects of an Export Subsidy -Consider Figure 6.2.As a result of the South Korean subsidy,Mexicans find their consumer surplus:

In 1995 the General Agreement on Tariffs and Trade was replaced by the ____.

Economic sanctions are most effective in pressuring the target country to modify its behavior when the sanctions are imposed by a small number of countries and when the target country had weak economic ties to the imposing countries before the sanctions were initiated.

The U.S.trade-remedy laws attempt to redress hardships for U.S.firms resulting from actions and policies of foreign firms and governments.

According to the fast-track provision of U.S.trade law,once the President has completed trade negotiations,their outcome is subject to a vote (without amendment)in Congress within 90 legislative days of submission.

The strategic-trade-policy hypothesis assumes that domestic firms operate under increasing cost conditions as well as in perfectly competitive markets.

Among the codes of conduct addressed at the Tokyo Round of multilateral trade negotiations were customs valuation,product standards,subsidies and countervailing duties,government procurement policies,and import licensing procedures.

Figure 6.5 Japanese Market for Jetliners -Consider the Japanese market for jetliners as depicted in Figure 6.5.Suppose lone producer of jetliners in the world is Boeing and Boeing faces a constant marginal cost of $20 million per jetliner but now a European manufacturer,Airbus,begins production.Airbus faces the same marginal cost as Boeing but the European government provides Airbus with a subsidy of $8 million per jetliner produced.As a result of the competition,Boeing leaves the Japanese market leaving Airbus as a monopoly.As a result of the entery of the subsidized producer what will happen to the consumer surplus gained by Japanese airlines from buying jetliners?

Economic sanctions are most effective in causing the target nation to modify its behavior when the:

Industrial policies of the U.S.government have included subsidizing particular firms to promote national champions,nationalizing basic industries,and encouraging cartelization of industries.

Economic theory suggests that if France is a net importer of automobiles,whose production is subsidized by the Korean government,the overall welfare of France decreases because of the Korean subsidy.

The only members of the General Agreement on Tariffs and Trade and its successor,the World Trade Organization,are developing countries rather than developed countries.