Question

The World Trade Organization (WTO) allows formation of regional trade agreements only if member countries share border. a. The main reason that most developed countries provide subsidy to their agricultural and high-tech sectors is to promote exports of these products. b. Anti-dumping and countervailing duties are imposed to bring import prices to normal price levels in an importing country that suspects dumping and subsidy, respectively. c. The net welfare effects of an import tariff and export tariff may be positive for a large country d.

Answer 1

Answer (a): The World Trade Organization (WTO) allows formation of regional Trade Agreements only if member countries share border: FALSE

                             The World Trade Organization (WTO) promotes the formation of regional Trade Agreements between member countries who share border, because all the member countries want to ultimately benefit from the regional trade between the countries. This is possible to the maximum only if they share border. However, the World Trade organization in no way stops countries from forming Regional Trade Agreements if the member countries do not share border.

Answer (b): The main reason that most developed countries provide subsidy to their agricultural and high-tech sectors is to promote exports of these products: TRUE.

                             This is True because, the higher are the taxes that govern the trade of goods for the agricultural and high-tech sectors, the difficult it becomes for the agricultural sector and high-tech sectors to trade out their products, a they earn lesser profits. Therefore, the Government provides necessary subsidy to these sectors so that they earn higher profits and the Government can earn from the high earnings of these sectors.

Answer (c): Anti-dumping and countervailing duties are imposed to bring import prices to normal price levels in an importing country that suspects dumping and subsidy, respectively: TRUE.

                          When the Government suspects that the imported products are being dumped and subsidized, then the Government usually imparts or increases the Anti-dumping taxes so that dumping is most costly for the importing authorities, hence discouraging dumping.

Answer (d): The net welfare effects of an import tariff and export tariff may be positive for a large country: TRUE

                            This is because the Government of a large country at times needs to control both import and export so that the export and import of the country does not lead to a situation where both the exports and imports are outside the sphere of the Government’s control and moreover may become a redundant situation and in the longer run may lead to a loss for the countries. Hence the control of the import of export by imposing necessary duties leads to a balanced development of the economy.