Global political economy chapter 5
vocab/short answer questions
1. Heckscher-Ohlin theory correct answers Comparative advantage results from factors
of production.
A state has a comparative advantage in producing goods that involve intensive use of
the abundant factor of production
2. Stolper-Samuelson theory correct answers Why some domestic groups are
protectionist and others favor free trade?
Trade liberalization benefits abundantly endowed factors of production and hurts poorly
endowed factors
Ex:NAFTA- US/Canada blue collar workers vs Mexico less skilled labor
3. Intra-industry trade correct answers Among DC's w similar factor endowment
EX: Both Germany and Japan produce automobiles & trade w each other
4. Intra-firm trade correct answers between MNCs parent companies & subsidiaries
5. Strategic trade theory/policy correct answers Comparative advantages can be
"created"- competitive advantage.
LDCs should limit industrial imports from DCs (technology deprived vs technology
driven & interventionist policies)
6. Trade liberalization correct answers By lowering tariffs in multilateral negotiations
(MTNs).
Tariffs are preferable to import quotas.
Negotiations on nontariff barriers
7. nondiscrimination correct answers the "fundamental cornerstone" of GATT.
The unconditional most-favored nation (MFN) principle: every trade advantage or
privilege a member gives to any state must be extended to all other members.
8. Unconditional Most-favored
national (MFN) treatment (diffuse reciprocity) correct answers 1 country's trade
concession is given to all WTO organizations, doesn't matter if they can't return
(liberalism)
9. National treatment correct answers members should treat foreign products, once
they have been imported, at least as favorably as domestic products regarding internal
taxes and regulations.
vocab/short answer questions
1. Heckscher-Ohlin theory correct answers Comparative advantage results from factors
of production.
A state has a comparative advantage in producing goods that involve intensive use of
the abundant factor of production
2. Stolper-Samuelson theory correct answers Why some domestic groups are
protectionist and others favor free trade?
Trade liberalization benefits abundantly endowed factors of production and hurts poorly
endowed factors
Ex:NAFTA- US/Canada blue collar workers vs Mexico less skilled labor
3. Intra-industry trade correct answers Among DC's w similar factor endowment
EX: Both Germany and Japan produce automobiles & trade w each other
4. Intra-firm trade correct answers between MNCs parent companies & subsidiaries
5. Strategic trade theory/policy correct answers Comparative advantages can be
"created"- competitive advantage.
LDCs should limit industrial imports from DCs (technology deprived vs technology
driven & interventionist policies)
6. Trade liberalization correct answers By lowering tariffs in multilateral negotiations
(MTNs).
Tariffs are preferable to import quotas.
Negotiations on nontariff barriers
7. nondiscrimination correct answers the "fundamental cornerstone" of GATT.
The unconditional most-favored nation (MFN) principle: every trade advantage or
privilege a member gives to any state must be extended to all other members.
8. Unconditional Most-favored
national (MFN) treatment (diffuse reciprocity) correct answers 1 country's trade
concession is given to all WTO organizations, doesn't matter if they can't return
(liberalism)
9. National treatment correct answers members should treat foreign products, once
they have been imported, at least as favorably as domestic products regarding internal
taxes and regulations.
