PRACTICE QUESTIONS FOR INTERNATIONAL ECONOMICS FINAL EXAM -- as of 03/04/2008 04:13 PM
Compare and contrast the Classical and HO models of trade.
Explain why each of the following is not a valid argument for protection.
a) patriotism
b) fair play (e.g. level international playing fields)
c) preservation of jobs
What is dumping? What changes in static welfare occur as a result of dumping? Why would firms engage in dumping? Is predatory dumping likely to occur? Is it likely to succeed?
Compare and contrast US law concerning subsidies and countervailing duties and the agreement on subsidies reached during the Uruguay Round. SKIP QUESTIONS THAT ARE STRUCK THROUGH.
Compare and contrast the Unconditional Most Favored Nation principle and national treatment.
Write an essay on the role of the WTO in today’s international economy.
Explain and discuss the views of Jagdish Bhagwati and Paul Krugman concerning the merits of regional trade agreements and how they affect the multilateral trade liberalization process of the WTO. Agree with one of these economists. Disagree with the other. Support your position with valid arguments.
Compare and contrast NAFTA and the EU in terms of the types of agreements that they are, the institutions that operate under the agreement, and the long-term goals of the arrangements.
The way in which a country grows affects the pattern of trade of a country. True or false? Discuss.
What is immizerizing growth? If it were to occur, how would the prospect of immizerizing growth affect the trade policy of a developing nation? Do you think it is likely to occur in the real world? Illustrate and explain.
What is the meaning of direct foreign investment (DFI)? List some of the factors that induce companies to invest abroad.
Does the economic interest of a U.S. company investing abroad in
manufacturing subsidiaries coincide with the interest of the United States? If not, in
what ways do the interests diverge? Why does the U.S. labor movement object to foreign
investment by U.S. companies?
How are foreign subsidiaries of U.S. companies taxed? What are transfer prices and how are they affected by differential taxation?
Why might the labor-skill theory of the commodity composition of trade be appropriate in a world where multinational corporations handle production and trade?
What are the effects of labor migration on (a) the world as a whole, (b) the host country, (c) the source country, and (d) labor in the two countries? Also explain which groups in each country would favor or oppose labor migration (on economic grounds) and why. Illustrate graphically.
Examine the effects of direct foreign investment (DFI) on the welfare of (a) the source country (b) the host country, and (c) the world as a whole. Also explain which groups in each country would favor or oppose DFI and why. Illustrate graphically.
Write an essay that compares and contrasts primary-export-led development policies with import-substitution policies. Include the experience of the Latin American countries and the high-performance Asian economies (HPAE) in your answer
"Japan’s experience makes the infant industry case for protection better than any theory. In the early 1950s Japan was a poor nation that survived by exporting textiles and toys. The Japanese government protected what at first were inefficient, high-cost steel and automobile industries, and those industries came to dominate world markets." Discuss critically.
A
country currently imports automobiles at $8000 each. Its government believes
domestic producers could manufacture autos for only $6000 given time but
that there would be an initial shakedown period during which autos would
cost $ 10,000 to produce domestically.
a. Suppose that each firm that tries to produce autos must go through the
shakedown period of high costs on its own. Under what circumstances would
the existence of the initial high costs justify infant industry
protection?
b. Now suppose, on the contrary, that once one firm has borne the costs of
learning to produce autos at $6000 each, other firms can imitate it and do
the same. Explain how this can prevent development of a domestic industry,
and how infant industry protection can help.
Why might import-substituting industrialization be more successful in large developing countries such as Brazil than in smaller nations such as Ghana?
Suppose a country has the Harris-Todaro problem. That is, for some reason urban wages are much higher than rural, leading to inefficiently low manufacturing production, but at the same time there is high urban unemployment because rural workers migrate to the cities in search of high-wage jobs. What policy or combination of policies would you advocate to solve this problem?
"Import quotas on capital-intensive industrial goods and subsidies for the import of capital equipment were meant to create manufacturing jobs in many developing countries. Unfortunately, they have probably helped create the urban unemployment problem." Explain this remark.
In his article "Is Free Trade Passé?" Krugman identifies two arguments against free trade. What are they?
In the Boeing-Airbus example presented by Krugman, why are subsidies so crucial? Suppose the US committed itself to a subsidy equal to the EU. Would this commitment change the outcome of the game? How might Europe respond?
What policy
issues confront a government attempting to implement a strategic trade policy?
i. How would
one attempt to measure the positive externalities associated with research and
development?
ii. Could the US
Congress implement a strategic trade policy impartially? Would any new
institutions help in conducting strategic trade policy?
iii. Do you think
that the government would do a superior job in allocating scarce capital to
private industry than private capital markets?
What is Krugman's conclusion regarding free trade? Why?
Discuss
the main ideas advanced by Jagdish Bhagwati in his article "Free Trade:
Why AFL-CIO, The Sierra Club and Congressman Gephardt Should Like It."
SKIP THIS ONE.
Here
are some questions concerning the "Dropped
Stitches" article:
In
the article "Dropped Stitches," has the trade agreement led to
improved working conditions?
Do
you think Em Vandeun is exploited?
Are
these apparel factories sweat shops?
Did
UNITE act in the best interests of Cambodian workers?
How
will Cambodia's experience with this agreement influence future bilateral
negotiations between developing nations and the US?
Can
trade policy be used to improve the lives of workers in poor countries?
What are some of the challenges that face the new USTR?