Global Trade Dynamics & Economic Policy Insights
International Trade Fundamentals
Is there economic justification for dumping?
Answer: There is no good economic justification for dumping to be considered particularly harmful.
What is an advantage of specialization from international trade?
One advantage of the specialization that results from international trade is that countries can take advantage of:
Answer: Scale economies
What constrains production scale when trade opens?
When trade is opened, the scale of production possible in a country is constrained by:
Answer: The size of the domestic plus the foreign market
Who conducts international trade based solely on internal scale economies?
International trade based solely on internal scale economies in both countries is likely to be carried out by:
Answer: Monopolists in each country
This type of trade cannot be associated with a perfectly competitive industry.
What is the purpose of anti-dumping laws?
Anti-dumping laws:
Answer: Allow domestic firms to be protected from foreign competition by raising their competitors’ costs
Who conducts international trade based on external scale economies?
International trade based on external scale economies in both countries is likely to be carried out by:
Answer: A relatively large number of price-competing firms
Trade Patterns & Protectionism
How do localized industrial clusters improve efficiency?
A localized industrial cluster improves efficiency because:
Answer: It can bring together many firms that collectively provide a large enough market to support a wide range of specialized suppliers.
What is trade between regions within countries called?
Trade that takes place between regions within countries is called:
Answer: Interregional trade
Where is today’s U.S. protectionism concentrated?
Today’s U.S. protectionism is concentrated in:
Answer: Labor-intensive industries
What is the effect of import-substituting policies?
General equilibrium considerations lead to the realization that import-substituting policies have the effect of:
Answer: Discouraging exports
What does China’s recent experience support regarding policy changes?
China’s recent experience supports the proposition that:
Answer: Policy changes can dramatically promote export-oriented growth
What exports have poor developing countries seen rise?
In today’s world markets, poor developing countries have seen the rise in exports of:
Answer: Manufactured products
Why do developing countries oppose labor standards in trade agreements?
Most developing countries oppose including labor standards in trade agreements because:
Answer: They believe this would be used as a protectionist tool by advanced countries
What was the primary cause of Brexit?
Brexit happened because of:
Answer: The populist backlash against the ways Europe sought to become more than a customs union
Why the disappointment with import-substitution policies?
The disappointment with import-substitution policies is in part because:
Answer: Many countries pursuing this strategy experienced stagnation in their growth
Which nation has NOT utilized export-led growth policies?
All of the following nations except Argentina have recently utilized export-led growth policies.
Why did activists protest at the WTO Seattle meeting?
When the WTO met in Seattle to initiate further moves towards international trade, thousands of activists met:
Answer: To protest against the WTO for policies that they believed hurt workers
Trade Wars, Tariffs & Globalization
What characterized U.S.-China relations in 2018-2019?
Over the course of 2018 and 2019, the U.S. and China engaged in:
Answer: Trade Wars
What is the practicality of an optimum tariff?
The optimum tariff is:
Answer: Not practical for a large country due to the likelihood of retaliation
What has resulted from GATT and the WTO?
The General Agreement on Tariffs and Trade (GATT) and the WTO have resulted in:
Answer: Reductions in trade barriers via multilateral negotiations
What does slower growth in Latin America post-liberalization prove?
Growth rates in Brazil and other Latin American countries have actually been slower since the trade liberalization of the late 1980s than they were during import-substituting industrialization. This:
Answer: Proves that trade liberalization does not always lead to rapid economic growth.
What is the best economic case for active industrial policy?
The best economic case one can make for an active industrial policy involves:
Answer: Raising national income
Globalization and the Environment
Globalization:
Answer: Causes degradation in the world’s environment
What is the purpose of a tariff?
- a) To lower the cost of shipping goods to a country
- b) To provide revenue and protect particular domestic actors
- c) To limit the quantity of exports
- d) All are wrong
If a firm is the only producer of a good in a country, what happens with free trade?
- a) It will retain its full monopoly power even with free trade
- b) It will have little ability to raise prices if there are many foreign suppliers
- c) Both are correct
- d) Both are wrong
Trade Policy Instruments & India’s Economic Profile
What do various trade policies have in common?
What do export tariffs, export subsidies, import quotas, and voluntary export restraint policies have in common?
- a) Benefits consumers, hurts producers
- b) Benefits both consumers and producers
- c) Hurts both consumers and producers
- d) Benefits producers and hurts consumers
Which is NOT an instrument of trade policy besides tariffs?
Besides tariffs, other instruments of trade policies include the following, EXCEPT:
- a) Import quotas
- b) Embargo sanctions
- c) Export subsidies
- d) Voluntary export restraints
What is the effect of a tariff on imported goods in a large country?
If a good is imported to country H (large) from country F, the imposition of a tariff in country H:
- a) Raises the price in country H and lowers it in country F
- b) Lowers the price of a good in both countries
India’s Economic Performance and Challenges
India, a key BRICS+ country, was analyzed using a multivariate analysis across five criteria: GDP growth, inflation, FDI inflows, human capital, and sustainability. India shows strong performance in GDP growth (6.8%) and foreign direct investment (USD 49.3 billion), reflecting its economic potential and investor appeal. However, it faces challenges in human capital (index of 0.49) and environmental sustainability (ranked 168/180 in the EPI). Compared to other BRICS+ nations like China and Brazil, India is a high-growth economy with competitive FDI but lags in education, health, and green policies. Overall, India’s position is promising but requires improvements in human development and sustainability to fully leverage its economic strength.