MIB International Trade & Policy 2

Question 1

What is 'trade diversion' in the context of regional trade agreements?

Accepted Answer

Shifting trade from efficient non-member producers to less efficient member producers due to preferential tariffs

Answer

Redirecting exports to higher-value markets

Answer

Diversifying export markets to reduce risk

Answer

Moving trade flows from land to sea routes

Question 2

The 'new trade theory' introduced by Paul Krugman emphasizes that international trade is driven by:

Accepted Answer

Economies of scale and consumer preference for variety

Answer

Only comparative cost differences between nations

Answer

Natural resource endowments

Answer

Currency exchange rate differentials

Question 3

Under the WTO's Agreement on Subsidies and Countervailing Measures (ASCM), which type of subsidy is prohibited?

Accepted Answer

Export subsidies contingent on export performance

Answer

R&D subsidies for civilian technologies

Answer

Infrastructure subsidies for domestic transportation

Answer

Agricultural support payments

Question 4

Which mechanism allows businesses to resolve trade disputes directly with foreign governments under international investment agreements?

Accepted Answer

Investor-State Dispute Settlement (ISDS)

Answer

WTO Dispute Settlement Body

Answer

ICC International Court of Arbitration

Answer

UNCITRAL Mediation Rules

Question 5

The 'gravity model' of international trade predicts that trade volume between two countries is:

Accepted Answer

Positively related to their economic size and negatively related to the distance between them

Answer

Proportional to their cultural similarity only

Answer

Determined solely by tariff levels

Answer

Based on historical colonial relationships

Question 6

Which US trade law provision allows the President to impose tariffs on national security grounds?

Accepted Answer

Section 232 of the Trade Expansion Act of 1962

Answer

Section 301 of the Trade Act of 1974

Answer

Title VII of the Tariff Act of 1930

Answer

Section 201 of the Trade Act of 1974