Question

12. If _________ is/are approved, the President has a limited time in which to complete trade negotiations, and Congress must vote up or down on the negotiated agreement within 90 day legislative days of submission,

1. The escape clause
2. Safeguards
3. Trade promotion authority (fast track)
4. Trade remedy laws

13. All of the following countries are part of the TPP except

1. Peru
2. Vietnam
3. China
4. Australia

14. If processing occurs at different stages in production, it is considered

A) Vertical trade whereby traditional patterns of comparative advantage prevail

B) Intra industry trade whereby trade prevails due to product differentiation

C) Horizontal trade whereby trade occurs due to comparative advantage

D) None of the above

15. If the U.S. and China have a tariff war and thus reverse the gains from free trade, who wins and loses according to the Stolper Samuelson theorem. In choosing your answer consider the U.S. to be capital abundant and China to be labor abundant.

1. Capital in the U.S. loses, while labor in China loses
2. Capital in the China loses, while labor in U.S. loses
3. Everybody is a loser as the gains from trade due to economies of scale and variety are lost
4. None of the above

16. There may be NO inherent comparative advantage between countries in which of the following models.

1. Ricardian
2. Heckscher-Ohlin
3. Monopolistic competition
4. Specific factors

Answer 1

12 Option C

Fast track trade promotion authority has become the premier legislative vehicle for airing America’s ambivalence about trade and globalization.Fast track’s power derives from the underlying political compact between Congress and the president rather than its statutory guarantees, which are technically fragile.

13 Option C

The Trans-Pacific Partnership (TPP), also called the Trans-Pacific Partnership Agreement, was a proposed trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the United States.

14.Option B

Intra-industry trade between similar countries produces economic gains because it allows workers and firms to learn and innovate on particular products and often to focus on very particular parts of the value and also results in economies of scale.

15 Option B

Stolper-Samuelson Theorem illustrates the distributional effects of trade (who wins, who loses). The Stolper-Samuelson Theorem assumes that there is an exporting industry and an import-competing industry within a country and that there are two factors of production (labor and capital). The Stolper-Samuelson Theorem argues that free trade benefits the factor of production that is relatively abundant (such as capital in US) and harms the locally scarce factor (such as labor in the US) regardless of industry in which it is employed. This is important to understand because it outlines why the people of developed nations may be reluctant towards free trade (and globalization) and how the people of developing nations usually are more optimistic of free trade.