Trade/WTO Quiz

According to classical economists, instead of mercantilism, which says countries should produce everything themselves, what should countries do?

• Specialize in producing what they are good at producing, and import other goods

• Use tariffs to protect local industries

• Engage in trade wars to try to gain an advantage

• Create an organization that dictates how countries should trade

A tax on imports, often used to influence customers to buy local goods, is called

• subsidy

• quota

• tariff

• free trade

A limit on how much of a good can be imported, often used to protect domestic producers, is called

• subsidy

• tariff

• quota

• free trade

Financial support paid by a government to a particular industry, often used to support an industry that is struggling, is called

• quota

• subsidy

• tariff

• free trade

Which of the following statements about trade deficits is true?

• Composite trade deficits indicate countries have certain comparative advantages, while bilateral trade deficits are a result of how a country’s economy operates.

• Trade deficits are always bad.

• The U.S. trade deficit with China has led to China’s investing in the United States.

• Trade deficits are never a problem.

Why are many goods sold in the United States produced overseas, often in several countries?

• It results in much lower prices for consumers.

• It reduces the U.S. trade deficit.

• Overseas production is better for the environment.

• There are no tariffs on imports to the United States.

Although the World Trade Organization (WTO) has near-universal membership and is meant to be the main organization for regulating trade worldwide, there are also many regional trade agreements (RTAs). Which of the following accurately compares the WTO to RTAs?

• Today, most trade policy is being negotiated through regional trade agreements rather than through the WTO.

• The WTO often serves as a “laboratory” for trade policies that can be implemented through RTAs.

• The WTO has been able to successfully address disagreements about agricultural subsidies and intellectual property and medicines, but RTAs have not.

• The WTO can usually reach agreements more quickly than RTAs can.

Which of the following is NOT an accurate statement about raising tariffs?

• Raising tariffs on a product tends to raise the price of that product.

• Raising tariffs on a good tends to encourage consumers to buy more of that good from abroad.

• Raising tariffs on a good tends to help domestically produced substitutes of that good.

• Raising tariffs tends to lead to retaliation from other countries in the form of other tariffs.

Which of the following was a consequence of China joining the WTO?

• Competition from Chinese producers did not harm manufacturing jobs in the United States.

• The Chinese economy has grown while on the whole U.S. companies have seen higher profits and U.S. consumers have seen lower prices.

• Trade has brought Western ideas to China, leading to greater openness and political freedom.

• China has kept to the letter and spirit of WTO regulations and faced no official disputes.