Global Marketing, 6e (Keegan/Green)
Chapter 3 Regional Market Characteristics and Preferential Trade Agreements
1) The Free Trade Agreement deal between the United States and South Korea, one of the world's largest bilateral agreements, will reduce tariffs on about 90 percent of product categories.
Answer: TRUE
Diff: 1 Page Ref: 74
2) GATT (General Agreement on Tariffs and Trade) itself had no enforcement power and the losing party in a dispute was entitled to ignore the ruling.
Answer: TRUE
Diff: 2 Page Ref: 75
AACSB: Reflective Thinking
3) Since GATT did not have enforcement power and the process of dealing with disputes sometimes stretched on for years, some critics referred to it as General Agreement to Talk and Talk.
Answer: TRUE
Diff: 1 Page Ref: 75
4) At the WTO, a Dispute Settlement Body (DSB) handles disagreements between countries.
Answer: TRUE
Diff: 1 Page Ref: 75
AACSB: Reflective Thinking
5) It remains to be seen whether the WTO will live up to expectations when it comes to additional major policy initiatives on such vexing issues as foreign investment and agricultural subsidies.
Answer: TRUE
Diff: 2 Page Ref: 75-76
AACSB: Reflective Thinking
6) A preferential trade agreement is a mechanism that confirms special treatment on select trading partners, thereby at times discriminating against other trading partners.
Answer: TRUE
Diff: 2 Page Ref: 76
AACSB: Reflective Thinking
7) The ultimate goal of a free trade agreement is to have zero duties on goods that cross borders between the partners.
Answer: TRUE
Diff: 2 Page Ref: 76
AACSB: Reflective Thinking
8) A free trade area represents the most fully developed form of preferential trade agreement among nations.
Answer: FALSE
Diff: 2 Page Ref: 76
AACSB: Reflective Thinking
9) About 50 percent of global trade takes place among nations linked by Free Trade Areas.
Answer: TRUE
Diff: 2 Page Ref: 76
AACSB: Reflective Thinking
10) The Group of Three (G3) is a Free Trade Area encompassing Brazil, Mexico, and Venezuela.
Answer: FALSE
Diff: 1 Page Ref: 77
11) A Customs Union represents the most fully developed form of preferential trade agreement among nations.
Answer: FALSE
Diff: 1 Page Ref: 78
AACSB: Reflective Thinking
12) Despite the fact that 16 member nations ratified a proposed European Constitution, the initiative was derailed after voters in France and the Netherlands voted against the measure.
Answer: TRUE
Diff: 2 Page Ref: 78
AACSB: Reflective Thinking
13) In a Common Market there are no internal barriers to trade and it allows for free movement of factors of production such as labor and capital.
Answer: TRUE
Diff: 2 Page Ref: 78
AACSB: Reflective Thinking
14) Under Economic Union a doctor or lawyer qualified in one country can practice in another member country.
Answer: TRUE
Diff: 1 Page Ref: 78
AACSB: Reflective Thinking
15) As a result of CFTA, Canada takes 20 percent of U.S. exports and the United States buys approximately 85 percent of Canada's exports.
Answer: TRUE
Diff: 2 Page Ref: 80
AACSB: Analytic Skills
16) In spite of NAFTA creating a free trade area, Mexican avocado growers can only ship their fruit to the United States during the winter months, and only to states in the northeast subject to a quota of $ 30 million worth of avocados per year.
Answer: TRUE
Diff: 3 Page Ref: 81
AACSB: Reflective Thinking
17) In spite of NAFTA, Canadians fear that their own national industries will not be able to survive the global juggernaut originating south of the border and are concerned about their cultural preservation.
Answer: TRUE
Diff: 2 Page Ref: 82
AACSB: Reflective Thinking
18) NAFTA ensures that any product for sale in the U.S., Mexico, and Canada bearing a certificate of origin qualifies for tariff reduction.
Answer: FALSE
Diff: 1 Page Ref: 81-82
AACSB: Reflective Thinking
19) El Salvador, Honduras, Guatemala, Nicaragua, Costa Rica, and Panama are all members of the Central American Integration System.
Answer: TRUE
Diff: 2 Page Ref: 83
20) Implementation of the Central American Free Trade Agreement with the United States created a free trade area known as DR-CAFTA.
Answer: TRUE
Diff: 2 Page Ref: 83
21) Despite trade agreements, attempts to achieve integration in Central America have been described as uncoordinated, inefficient, and costly. There are still tariffs on imports of sugar, coffee, and alcoholic beverages.
Answer: TRUE
Diff: 2 Page Ref: 84
AACSB: Reflective Thinking
22) In the year 2000, in an attempt to bring rampant inflation under control, Ecuador adopted the U.S. dollar as its official currency.
Answer: TRUE
Diff: 3 Page Ref: 84
AACSB: Reflective Thinking
23) After President Hugo Chavez declared Venezuela to adapt socialism, there are no U.S. firms operating in that country.
Answer: FALSE
Diff: 2 Page Ref: 84-85
AACSB: Reflective Thinking
24) Mercosur or the Common Market of the South resulted from a treaty signed by four countries: Argentina, Brazil, Paraguay, and Venezuela.
Answer: FALSE
Diff: 3 Page Ref: 86
AACSB: Reflective Thinking
25) The currency devaluation made Argentina's wine industry a major player in the world market..
Answer: TRUE
Diff: 2 Page Ref: 87
AACSB: Reflective Thinking
26) Chile decided to become only an associate member of Mercosur since full membership would have required raising external tariffs.
Answer: TRUE
Diff: 2 Page Ref: 87-88
AACSB: Reflective Thinking
27) CARICOM's main objective has been to achieve a deepening of economic integration by means of a Caribbean common market.
Answer: TRUE
Diff: 2 Page Ref: 88
AACSB: Reflective Thinking
28) Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand were the original six members of the Association of Southeast Asian Nations (ASEAN).
Answer: TRUE
Diff: 2 Page Ref: 90
AACSB: Reflective Thinking
29) Singapore has more engineers per capita than the United States.
Answer: TRUE
Diff: 1 Page Ref: 91
AACSB: Reflective Thinking
30) Singapore's standard of living is second highest in the region as well as its seaport is the world's second largest container port.
Answer: TRUE
Diff: 2 Page Ref: 91
31) ASEAN's goal is to strengthen intra-regional trade relationships so members do not have to trade with China.
Answer: FALSE
Diff: 2 Page Ref: 90-91
AACSB: Reflective Thinking
32) Japan has changed from being a closed market to one that is a tough market. Marketers have to master the 'kei retsu' system of tightly knit corporate alliances.
Answer: TRUE
Diff: 2 Page Ref: 91-92
AACSB: Reflective Thinking
33) The objective of the EU member countries is to harmonize national laws and regulations so that goods, services, people, and eventually money can flow freely across national boundaries.
Answer: TRUE
Diff: 2 Page Ref: 92
AACSB: Reflective Thinking
34) The adoption of a single currency euro helps countries in the euro zone by eliminating costs associated with currency conversion and exchange rate uncertainty.
Answer: TRUE
Diff: 2 Page Ref: 93
AACSB: Analytic Skills
35) Slovakia became a member of Euro Zone on January 01, 2009 because the government has kept inflation low and the budget deficit below 3 percent of GDP.
Answer: TRUE
Diff: 2 Page Ref: 94
AACSB: Reflective Thinking
36) As a result of the formation of EU, record companies like Sony, Warner and EMI are forced to adopt more uniform pricing policies across Europe.
Answer: TRUE
Diff: 2 Page Ref: 95
AACSB: Analytic Skills
37) Markets in Central and Eastern Europe are not eager to embrace well-known global brands such as McDonald's, 3M International, and Philips Electronics.
Answer: FALSE
Diff: 2 Page Ref: 96
AACSB: Reflective Thinking
38) The Gulf Cooperation Council or GCC countries in Middle East hold about 45 percent of the world's known oil reserves.
Answer: TRUE
Diff: 2 Page Ref: 97-98
39) The ultimate goal of SADC (Southern African Development Community) is to fully develop a customs union and a common currency.
Answer: FALSE
Diff: 1 Page Ref: 100-101
40) Dubai World, a state-owned company, is negotiating a deal in Nigeria's energy sector that could be valued at several billion dollars.
Answer: TRUE
Diff: 2 Page Ref: pp. 101-102
AACSB: Reflective Thinking
41) Open markets are one way that globalization has led to economic integration. The United States and South Korea recently completed negotiations on the world's largest bilateral trade agreement. The deal will result in:
A) a trade conference to be held once every year.
B) increase in tariffs for all product categories.
C) a series of multilateral trade negotiations among neighboring countries.
D) increase in trade gap between South Korea and the United States.
E) reduction of tariffs on about 90 percent of product categories.
Answer: E
Diff: 2 Page Ref: 74
AACSB: Reflective Thinking
42) The World Trade Organization, which came into existence on January 1, 1995, is the successor of another organization with the abbreviation:
A) DSB.
B) GATT.
C) FTAA.
D) NAFTA.
E) ASEAN.
Answer: B
Diff: 1 Page Ref: 75
AACSB: Reflective Thinking
43) Which form of regional cooperation agreement, when fully implemented, entails creation of a unified central bank, the use of a single currency, and common policies on agriculture, social services and welfare?
A) free trade area
B) customs union
C) common market
D) economic union
E) dispute settlement body
Answer: D
Diff: 2 Page Ref: 78
AACSB: Reflective Thinking
44) Arrange the following in order from lowest to highest level of economic integration.
A) customs union→economic union→free trade area→common market
B) economic union→customs union→common market→free trade area
C) common market→free trade area→economic union→customs union
D) free trade area→customs union→common market→economic union
E) common market→economic union→customs union→free trade area
Answer: D
Diff: 3 Page Ref: 76-78
AACSB: Reflective Thinking
45) The form of economic cooperation that calls for 1) eliminating internal barriers to trade and 2) establishing common external barriers is known as a(n) ______.
A) free trade area
B) economic union
C) customs union
D) free trade area
E) common market
Answer: C
Diff: 2 Page Ref: 76-78
AACSB: Reflective Thinking
46) As a result of CFTA the U.S. automakers participate in the Canadian auto market, thereby benefiting due to:
A) greater economies of scale.
B) decreased production costs.
C) reduced competition.
D) ease of exporting automobiles.
E) creating a continental demand.
Answer: A
Diff: 2 Page Ref: 78-80
AACSB: Analytic Skills
47) The form of economic cooperation that calls for countries to eliminate all internal barriers to trade among themselves even while maintaining independent trade policies vis-à-vis third countries is known as a(n) ______:
A) economic union
B) customs union
C) free trade area
D) common market
E) none of the above
Answer: C
Diff: 2 Page Ref: 76-80
AACSB: Reflective Thinking
48) A new bilateral agreement between the European Union and Turkey will eliminate internal trade barriers and establish common external tariffs. This arrangement is a(n):
A) free trade area.
B) customs union.
C) common market.
D) economic union.
E) none of the above
Answer: B
Diff: 2 Page Ref: 78-80
AACSB: Reflective Thinking
49) Agricultural subsidies and quotas that developed outside the multilateral framework under GATT remained a divisive issue because:
A) affluent countries protect and subsidize farm production.
B) home-market consumers pay lower prices.
C) surplus agricultural output is sold abroad at high prices.
D) agricultural land became scarce in some countries.
E) American farmers did not participate in export.
Answer: A
Diff: 3 Page Ref: 79
AACSB: Analytic Skills
50) NAFTA creates a free trade area, as opposed to a customs union or a common market, due to the fact that:
A) the agreement does not leave the door open for discretionary protectionism.
B) the governments of all three nations decided to eliminate tariffs.
C) the issue of illegal immigration from Mexico to the United States is resolved.
D) restrictions are imposed on the use of goods, services, and investments.
E) restrictions are imposed on labor movements among members.
Answer: B
Diff: 3 Page Ref: 80-81
AACSB: Reflective Thinking
51) The most important preferential trading arrangements in Latin America do not include:
A) SICA.
B) the Andean Community.
C) CARICOM.
D) Mercosur.
E) BRIC.
Answer: E
Diff: 2 Page Ref: 80-81
AACSB: Reflective Thinking
52) The United States and Canada are bound together by many things, including a trade agreement, a shared border, and a common language. However, from the cultural point of view, many Canadians are worried of certain trade-related issues such as:
A) statistics indicating that 95 percent of the movies shown in theaters are not Canadian.
B) statistics indicating that 84 percent of the recorded music that Canadians buy is foreign.
C) Canadians fear that their own industries will not be able to survive the global juggernaut originating south of the border.
D) foreign ownership of the book publishing business.
E) all of the above
Answer: E
Diff: 1 Page Ref: 82
AACSB: Reflective Thinking
53) Which member of the Central American Integration System has both the largest economy and the largest population?
A) El Salvador
B) Honduras
C) Guatemala
D) Nicaragua
E) Costa Rica
Answer: C
Diff: 2 Page Ref: 81-83
54) Implementation of the Central American Free Trade Agreement with the United States created a free trade area known as DR-CAFTA that includes all SICA members except:
A) Honduras.
B) Guatemala.
C) Nicaragua.
D) Panama.
E) Costa Rica.
Answer: D
Diff: 2 Page Ref: 83-84
55) As a result of America's failure to follow through on its promises in the Latin American region, Mercosur, CARICOM, SICA, and the Andean Community intend to pursue further integration among themselves as well as with:
A) Russia.
B) China.
C) Europe.
D) Asia.
E) Australia.
Answer: C
Diff: 3 Page Ref: 89
AACSB: Reflective Thinking
56) Which of the Andean Community members adopted the U.S. dollar as official currency?
A) Bolivia
B) Ecuador
C) Colombia
D) Peru
E) Venezuela
Answer: B
Diff: 2 Page Ref: 84
AACSB: Reflective Thinking
57) Argentina provides a good example of how a country can emerge from an economic crisis as a stronger global competitor. An example of emergency measures implemented by Argentina include:
A) Argentina reduced the duties on consumer goods.