Ch16 Free Trade, Fair Trade, And South-South Trade Exam Prep

Chapter 16

Free Trade, Fair Trade, and South-South Trade

Multiple Choice Questions

1. Free trade agreements tend to do what?
   1. Compliment the broader economic and social policies of states
   2. Disregard the broader economic and social policies of states
   3. Remain detached from broader economic and social policies of states
   4. Intrude on the broader economic and social policies of states
   5. None of the above
2. From $1.4 trillion in 1990, what was the total value of world exports of merchandise trade in 2018?
   1. Less than $10 trillion
   2. Between $10 and 12 trillion
   3. Between $12 and 14 trillion
   4. Between $15 and 16 trillion
   5. Between $17 and 19 trillion
3. What does the theory of “comparative advantage” hold?
   1. Each nation has an economic advantage relative to other nations in terms of purchasing power parity rates.
   2. Each nation has an economic advantage relative to other nations for the production of some goods.
   3. Economic advantage comes from producing the most appropriate commodity.
   4. Historically, Northern countries have held numerous advantages which make it difficult for Southern countries to benefit from the opening up of the world market.
   5. Some nations will be unable to benefit from an open, globalized market.
4. According to neoliberal doctrine, state intervention in the economy leads to which of the following?
   1. Greater efficiency
   2. Inefficiency
   3. The formation of unions and trade lobbies
   4. Greater individual liberty
   5. Increased competition
5. According to the fair trade perspective, what did rich nations in the North and the newly industrialized countries do?
   1. Practiced Listian industrialization
   2. Rejected protectionism
   3. Opened their borders to the international market
   4. Owed their success to factors such as natural resources and geographic location
   5. Protected their domestic industries
6. “Unequal exchange” restricts and distorts which of the following?
   1. The market value of commodity prices
   2. National development
   3. The effects of commodity control schemes
   4. The “real” value of commodity prices
   5. The ability of nations to diversify their commodity outputs
7. The core issue in the debate between free and fair traders has been about which of the following?
   1. Whether or not the government should intervene in the market
   2. The extent to which the government intervenes in the market
   3. The manner in which the government intervenes in the market
   4. Both A and B
   5. All of the above
8. Which of the following is true about commodity control schemes?
   1. They were managed internationally by the United Nations.
   2. They were permitted by the Bretton Woods system to ensure stability for Southern countries.
   3. They allowed countries to withhold products from markets when prices were low.
   4. Both A and C
   5. All of the above
9. The international trade regime of the Bretton Woods institutions is characteristic of embedded liberalism because it invokes _______________.
   1. a combination of state intervention and liberal trade objectives
   2. Western liberalism, which is thoroughly entrenched in economic discourse and policy
   3. the implementation of fully liberal trade objectives
   4. the period of liberal “consolidation,” when governments are formally removed from market control
   5. None of the above
10. The United Nations Conference on Trade and Development promoted compensatory financial transfers from North to South through which of the following?
    1. Greater transfer of wealth from North to South
    2. Compensation
    3. Fairer trade
    4. Both A and C
    5. All of the above
11. The United Nations Conference on Trade and Development served as ______________.
    1. a catalyst for fair trade policy development
    2. a platform for the promotion of free trade policies in the developing world
    3. a foundation for future compensatory finance schemes
    4. a negotiating forum
    5. an adjudicator in trade disputes
12. By the early 1990s, approximately how many highly-indebted countries were implementing structural adjustment policies?
    1. 10
    2. 20
    3. 40
    4. 60
    5. 100
13. The World Trade Organization is charged with which of the following?
    1. Policing and promoting free trade and deregulation
    2. Ensuring a minimum amount of trade equity between developed and developing countries
    3. Organizing global trade
    4. Mediating trade disputes
    5. The promotion of fair trade policies
14. Since the 1980s, economic growth has slowed for whom?
    1. Everyone
    2. Europe
    3. Most countries in the North
    4. Most countries in the South
    5. No one
15. According to David McNally, many free trade organizations do not promote which of the following?
    1. Fairness
    2. Free trade
    3. Trade equity
    4. Comparative advantage policies
    5. Fair trade
16. What are power/knowledge regimes designed to do?
    1. Naturalize and legitimize the current world order
    2. Produce value-neutral knowledge
    3. Legitimize fair trade policies
    4. Hold a great deal of international political influence
    5. Tend to be very oppressive
17. Whose theory interprets free trade as part of a power/knowledge regime, to naturalize and legitimize the current world order?
    1. Jeffrey Sachs
    2. Antonio Gramsci and Michel Foucault
    3. Andre Gunder Frank
    4. Paul Krugman and Anthony Venables
    5. David Ricardo
18. Which of the following is considered one of the most unpredictable events of the last decade?
    1. The WTO’s complete renunciation of SAPs
    2. The decline of American influence in global governance
    3. The decolonization of the vast majority of development policy
    4. The newly industrialized countries
    5. The “Rise of the South,” especially China
19. Which Taiwanese company based in China had 18 suicides attempted in 2010?
    1. Foxconn Corporation
    2. Apple
    3. Samsung
    4. Sinopec Industries
    5. Acer Industries
20. The example of St Vincent and Grenadines points to what positive indicator in the field of development?
    1. The comparative advantage of small island states
    2. The positive impact of South–South cooperation
    3. The advantages of bilateral trade agreements
    4. The positive move in the IFIs to PRSPs and away from SAPs
    5. The beneficial role of China’s increased stake in the field of development
21. What is meant by absolute advantage?

a) To produce a unit of goods as efficiently as any other country

b) To produce a unit of goods more efficiently using more labour than another country

c) To produce a unit of goods less efficiently using more labour than another country

d) To produce a unit of goods inefficiently using less labour than another country

e) To produce a unit of goods more efficiently using less labour than another country

1. Where can absolute advantage come from?

a) From military supremacy

b) From topology

c) From geography

d) From free trade

e) From the state

1. Can a nation’s economic and social policies create absolute advantage?

a) Yes, if they create the conditions for efficient production relative to competitors.

b) Yes, if they create the conditions for more production.

c) No, if they create the conditions for efficient production relative to competitors.

d) Yes, because they know how create the conditions for efficient production relative to competitors.

e) No, since they cannot create the conditions for efficient production relative to competitors.

1. What would it take for the South to delink from a capitalist system?

a) To focus on autocentric development that prioritizes foreign debt

b) To focus on a welfare state system that prioritizes domestic agriculture and industry

c) To focus on postcolonial development that prioritizes domestic agriculture and industry

d) To focus on autocentric development that prioritizes domestic agriculture and industry

e) To limit autocentric development that prioritizes domestic agriculture and industry

1. What is the role of gender inequality in blocking competitiveness?

a) Many countries are building their advantages upon it.

b) Women should look after children and elderly citizens

c) Children should work in mines

d) Women are not equal to men

e) Competitive does not affect inequality in countries

1. How is income distributed under the conditions of gender inequality?

a) The gains from trade are often distributed evenly

b) The gains from trade are often distributed unevenly to increase the women’s income

c) The gains from trade are often distributed unevenly to increase the man’s income

d) The gains from trade are not distributed unevenly so they increase the man’s income

e) The gains from trade are distributed only among MNOs

1. Has the state remained an essential player in the market?

a) No, it has not

b) Just partly

c) Only in developed countries

d) Only in the South

e) Yes, it has

1. What is the stand taken by free traders in relation to the role of the state?

a) The state should only intervene to create powerful institutions such as the World Bank.

b) The state should intervene to protect public property rights or to create powerful institutions.

c) The state should intervene to protect private property rights without creating powerful institutions.

d) The state should intervene to protect private property rights or to create powerful institutions.

e) The state should only intervene to protect private property rights.

1. What does GATT mean?

a) General Agreement on Tariffs and Fair Trade

b) General Agreement on Tariffs and Free and Fair Trade

c) General Agreement on Tariffs and Territory

d) General Agreement on Tariffs and Trade

e) Global Agreement on Tariffs and Trade

1. What is an unsuccessful example of a commodity control scheme?

a) Sugar

b) Coffee

c) High-Tec

d) Innovation

e) Universities

True or False Questions

A key debate in development circles is the interdependency of free trade and fair trade.

Fair trade is defined as the project of product certification.

Unequal exchange occurs between commodities and industrial goods.

Commodity control schemes were managed internationally by the World Bank.

Embedded liberalism was discouraged by the Bretton Woods Conference.

Commodity control schemes were successful for small-scale coffee producers.

The International Coffee Agreement was one of the least successful examples of regulating international prices.

Structural adjustment programs promoted targeted public spending, protecting vulnerable sectors, and capital controls.

Structural adjustment policies proved to be ineffective in solving the debt crisis.

The World Trade Organization began operations in 1978.

The fair trade network is a third-party certification system.

The decades of neoliberal policies since the 1980s correlate to reduced indicators of human well-being.

According to Michel Foucault, free trade counters the prevailing hegemony.

Power/knowledge regimes naturalize and legitimize the current world order.

According to David McNally, many free trade organizations fail to promote free trade.

According to Michael Goldman, the World Bank acquires power through its construction of development knowledge.

Southern trading powers have not had significant impacts on global trade policy.

The Chinese state is complicit in the human rights abuses which occurred at Foxconn.

The example of the St Vincent and Grenadines demonstrates the utility of South–South development.

Free trade remains the unchallenged discourse on international trade.

Economist Ha-Joon Chang argues that a developing country must “defy comparative advantage.”

International Coffee Agreement (ICA) was formed in 1989.

International Coffee Agreement (ICA) has faced many difficulties, including the persistence of oversupply.

Under the International Coffee Agreement (ICA), Costa Rica attained better development gains than countries with highly unequal distribution of land and resources.

The first United Nations Conference on Trade and Development was held due to the advantageous growth in the South.

The export earnings stabilization system (STABEX) agreement adopted by the European Community in the early 1970s seek to compensate its ex-colonies.

STABEX established target prices for fewer than 10 specific products for which the European Community pledged to make up the difference when prices fell below the target.

Structural adjustment policies were among the most powerful mechanisms for the expansion of free trade policies.

Today, the WTO has more than 80 per cent of all countries in the world as its members.

The fair-trade network emerged in the postwar era out of a variety of direct-purchase projects that linked northern NGOs to poor and disadvantaged artisans and producers.

The fair-trade network seeks to prevent co-operatives or unions in developing countries.

Short Answer Questions

1. Explain the events and actions of the Canadian company Copper Mesa in Ecuador.
2. What is the theory of comparative advantage?
3. How do proponents of fair trade challenge free traders’ historical understanding of trade?
4. How are countries building advantages based on gender inequality?
5. How have Southern nations been affected by “free trade” policies?
6. Define and discuss “commodity control schemes.”
7. Identify the reasons the International Coffee Agreement failed to achieve its goals, and whether a new agreement is worth pursuing.
8. Discuss how UNCTAD was established to make trade fairer.
9. How is free trade related to hegemony?
10. Describe the fair trade network and how it is different from free trade.
11. Discuss some of the criticisms levelled against fair trade network.
12. How does the current free trade regime rate on its “scorecard” compared to the era of fairer trade under embedded liberalism?
13. Why is the World Bank considered to be a power/knowledge regime?
14. Define and describe the “rise of the South.”
15. How does St Vincent and Grenadines represent a possible positive impact of the Rise of the South?
16. What is dynamic comparative advantage?
17. Why is the evidence of sharp inequality in China a cautionary tale for proponents of the Rise of the South?
18. What does fair trade advocates hope for?
19. How can the limited scope of fair trade be exemplified?
20. What have reports said about fair trade certifications?
21. What have reports such as The Scorecard on Globalization said about free trade policies?
22. Why have free trade mechanisms been ineffective at evenly eliminating trade barriers?

Essay Questions

1. Compare and contrast the positions of free trade and fair trade.
2. Why does David McNally argue “free trade” is ostensibly anything but focused on “free” trade?
3. What impact, if any, will the “Rise of the South” have on international trade and development?
4. Why can it be said that free trade is a related to power/knowledge regimes?
5. Describe the impact of COVID-19 on trade.