International Business Law A Transactional Approach 2nd Edition By Larry A. – Test Bank

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CHAPTER 5

INTERNATIONAL TRADE REGULATION

 

TRUE/FALSE

 

  1. GATT has led to the lowering of average tariff rates in industrial countries to less than 10%.

ANS: True

 

  1. Most economists believe that the high tariff rates enacted under the Smoot-Hawley Act of 1930 contributed to the Great Depression.

ANS: True

 

  1. Under GATT, when countries agree to open their markets, they are required to place ceilings on tariff rates.

ANS: True

 

  1. The WTO was established as a permanent body in 1947 to oversee the implementation of GATT principles and agreements.

ANS: False

 

  1. The WTO agreements on trade in services is known as TRIPS.

ANS: False

 

  1. In general, the national treatment principle of GATT requires member states of the WTO to offer their most favorable tariff rates to all other WTO members.

ANS: False

 

  1. Dumping is when a government grants a domestic industry some benefit in violation of the national treatment principle.

ANS: False

 

  1. Countries within a free trade area such as NAFTA or the EU are provided an exception to the most favored nation principle and may reduce barriers among themselves without having to grant lower barriers to other WTO members.

ANS: True

 

  1. A country that enacts punitive barriers to the importation of goods from countries that have violated GATT principles must seek the permission of the WTO before acting.

ANS: True

 

  1. Charging import duties is a violation of the national treatment principle of GATT.

ANS: False

 

  1. If a country challenges an importer’s valuation of goods, the burden of proof falls on the country to provide additional evidence of valuation.

ANS: False

 

  1. The GATT Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) was designed to reduce tariffs on agricultural products from countries that used pesticides.

ANS: False

 

  1. Before taking any formal action with the Dispute Settlement Body, countries involved in a trade dispute must first consult with each other in an attempt to settle the dispute.

ANS: True

 

  1. Under the WTO dispute settlement procedures, countries that are not direct parties to a case, but have a substantial interest in the case, may make written and oral arguments.

ANS: TRUE

 

  1. The WTO Dispute Settlement Understanding (DSU) provides for the resolution of all trade disputes within 3 months.

ANS: False

 

  1. The WTO Dispute Settlement Panel found that the U.S. tax treatment of Foreign Sales Corporations did not constitute an illegal export subsidy.

ANS: False

 

  1. The Dispute Settlement Body is the sole authority to appoint the panel of experts that decide cases.

ANS: True

 

  1. The final report of the Dispute Settlement Panel can be reversed only by a unanimous vote of the Dispute Settlement Body.

ANS: True

 

  1. Countervailing duties are charges countries place on imported goods to offset subsidies granted to the exporters by their home countries.

ANS: True

 

  1. Antidumping duties are assessed on an entry-by-entry basis in an amount equal to the difference between the U.S. price of the good and the exporters cost of production.

ANS: False

 

  1. Section 301 of the Trade Act of 1974 grants the U.S. Trade Representative investigative, but not retaliatory, powers in trade disputes.

ANS: False

 

  1. In 2000, the WTO Dispute Settlement Body held that the unilateral nature of Section 301 of the Trade Act of 1974 violated the WTO Dispute Settlement Understanding.

ANS: False

 

  1. Section 337 of the Tariff Act of 1930 provides the International Trade Commission the power to grant damage awards to U.S. companies or industries affected by a foreign exporters infringement of intellectual property rights.

ANS: False

 

  1. The North American Free Trade Agreement (NAFTA) established a regional trading bloc among the United States, Canada, Mexico, and the nations of the Caribbean.

ANS: False

 

  1. The long-term goal of NAFTA is the elimination of all tariffs over a 15-year period.

ANS: True

 

  1. NAFTA is unlikely to have any long-term impact on non-tariff trade barriers.

ANS: False

 

MULTIPLE CHOICE

  1. The initial guiding principle behind the formation of GATT was:
  1. Freer trade through the reduction of tariffs worldwide
  2. Freer trade through the establishment of regional trading groups
  3. Freer trade through the harmonization of laws in the industrial countries
  4. Freer trade through the development of the less industrialized nations

ANS: A

 

  1. The three foundational principles of GATT are:
  1. Most favored nation; national treatment principle; principle of transparency
  2. Most favored nation; non-discrimination principle; principle of transparency
  3. National treatment principle; non-discrimination principle; principle of transparency
  4. Most favored nation; non-discrimination principle; national treatment principle

ANS: A

 

  1. A tariff is:
  1. A complete ban on trade with a nation
  2. A ban on the importation of certain products from a nation
  3. An import duty
  4. A tax on goods being imported into a country
  5. C & D

ANS: E

 

  1. In the area of tariffs, binding commitments amount to:
  1. Treating the products of all countries equally
  2. Placing ceilings upon customs tariff rates
  3. Agreeing to lower tariff rates at a specified future date
  4. None of the above

ANS: B

 

  1. The Uruguay round of GATT marked the first time that GATT:
  1. Dealt with trade in services
  2. Expanded into intellectual property issues
  3. Dealt with agricultural tariffs
  4. Both A & B
  5. All of the above

ANS: D

 

  1. When a foreign company exports and sells below the market price, it is known as:
  1. Subsidies
  2. Countervailing measures
  3. Dumping
  4. Punitive barriers
  5. None of the above

ANS: C

 

  1. A country that does not make public its import practices and constantly changes those practices without notice would most likely be in violation of which GATT principle:
  1. Non-discrimination principle
  2. Most favored nation principle
  3. National treatment principle
  4. Transparency principle

ANS: D

 

  1. Countries A, B, and C belong to GATT. Countries A and B are also members of a regional trading group. Country A imposes a 5% tariff rate on semi-conductors from country B and a 10% tariff rate on semi-conductors from country C.  Country A is in violation of:
  1. Most favored nation principle
  2. National treatment principle
  3. Transparency principle
  4. None of the above

ANS: D

 

  1. Countries A, B, and C belong to GATT. Countries A and B are also members of a regional trading group. Country A imposes the same 5% tariff on radios from countries B and C.  However, once the radios enter country’s A stream of commerce, radios from Country C are charged a higher internal tax.  Country A is in violation of:
  1. Most favored nation principle
  2. National treatment principle
  3. Transparency principle
  4. None of the above.

ANS: B

 

  1. The Agreement on Pre-Shipment Inspection gives an importing country the right to pre-inspect goods for quality, quantity, and value when:
  1. The goods are coming from a developing country
  2. An importing country always has the right to pre-inspect goods
  3. The right to pre-inspect goods is afforded only to developing countries
  4. The right to pre-inspect goods is afforded only if the goods are agricultural products.

ANS: C

 

  1. The GATT Agreement on Technical Barriers to Trade requires an importing country to:
  1. Allow importers access to its testing and certification standards and procedure
  2. Reduce tariff barriers on technical products such as computers and electronics
  3. Establish national certification bodies
  4. None of the above

ANS: A

 

  1. International trade disputes are handled by the WTO under the auspices of the:
  1. International Court of Justice
  2. Dispute Settlement Body
  3. International Chamber of Commerce Arbitration Panel
  4. World Court

ANS: B

 

  1. In instances where cases use the maximum amount of time or a case is appealed, the WTO dispute resolution process must be settled within:
  1. 60 days
  2. 90 days
  3. 120 days
  4. 15 months

ANS: D

 

  1. When a foreign exporter sells goods at a price below what it sells them in its home country or below the cost of production, it is known as:
  1. Countervailing
  2. Dumping
  3. Price discrimination
  4. B & C

ANS: D

 

 

  1. In the U.S., antidumping duties can be:
  1. As high as 400% of the value of the goods being imported and assessed for periods of up to 20 years
  2. As high as 200% of the value of the goods being imported and assessed for periods of up to 20 years
  3. As high as 400% of the value of the goods being imported and assessed for periods of up to 40 years
  4. As high as 200% of the value of the goods being imported and assessed for periods of up to 40 years

ANS: A

 

  1. In order to successfully petition for the imposition of countervailing duties on imported goods, a U.S. company or industry must show that:
  1. Foreign exporters are selling their goods on the U.S. market for less than fair value
  2. The dumping causes material injury to U.S. industry
  3. A & B
  4. None of the above

ANS: C

 

  1. The ___________ is authorized by statute to retaliate against activities of other countries that are deemed to violate U.S. rights under international trade agreements.
  1. Department of Commerce
  2. International Trade Commission
  3. Office of the U.S. Trade Representative
  4. World Trade Organization

ANS: C

 

  1. Under Section 301, acts or policies engaged in by U.S. trading partners that violate a trade agreement, or are found to be unjustifiable, unreasonable or discriminatory, and burden or restrict U.S. commerce are known as:
  1. Trade violation practices
  2. Actionable practices
  3. Dumping practices
  4. Trade restrictive practices

ANS: B

 

  1. _________ is most commonly used by the U.S. government to prevent the importation of pirated or counterfeited gray market goods.
  1. Section 301
  2. Trade Act of 1974
  3. Section 337
  4. None of the above

ANS: C

 

  1. Protestors at the Millennium Round of trade talks in Seattle were primarily concerned with:
  1. Labor issues
  2. Environmental issues
  3. Consumer interest issues
  4. All of the above

ANS: D

 

  1. Provisions contained within the North American Free Trade Agreement that allow for the reinstitution of previous tariff levels at times in order to alleviate short-term negative impacts on industry and business are known as:
  1. Jump-back provisions
  2. Snapback provision
  3. Revert provisions
  4. Domestic protection provisions

ANS: B

 

  1. The enumerated goals of NAFTA are:
  1. The elimination of trade barriers
  2. To promote conditions of fair competition
  3. To provide adequate protection of intellectual property rights
  4. A & B only
  5. All of the above

ANS: E

 

  1. In order to freely cross NAFTA borders, goods must be certified as:
  1. Regional goods
  2. Substantially transformed goods
  3. Cost tested goods
  4. National goods

ANS: A

 

  1. In order to be considered for integration into the European Union, a country must:
  1. Have a functioning market economy
  2. Protect Human Rights
  3. Guarantee democracy
  4. All of the above

ANS: D

 

 

 

ESSAY QUESTIONS

  1. Discuss the three foundational principles of GATT.  Describe any exceptions to the principles and provide examples of violations.

ANS: Answers will vary.

  1. What are some of the benefits to international trade gained with the establishment of the World Trade Organization?  According to its critics, what are the WTO’s shortcomings?

ANS: Answers will vary.

  1. Discuss in detail the WTO dispute resolution process under which countries settle international trade disputes.

ANS: Answers will vary.

  1. What is Section 301 and what are considered ‘actionable’ practices under Section 301? What steps will the U.S. Trade Representative take when it finds unfair trade practices taking place?

ANS: Answers will vary.

  1. What are the enumerated goals of the North American Free Trade Agreement?  What are some of the rules of origin that the North American businessperson will need to master in order to take advantage of NAFTA?

ANS: Answers will vary.

 

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