BA+178+Midterm+A+Summer+2007+Solutions_2 - Solutions to BA...

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Solutions to BA 178 Midterm A Summer 2007 Part A 1. D 11. B 2. C 12. C 3. C 13. A 4. D 14. B 5. C 15. A 6. A 16. C 7. A 17. C 8. D 18. D 9. B 19. C 10. A 20. C Part B A1: The current round of global trade talks under the auspices of the WTO is called the Doha Round. Discuss the four major issues that the Doha Round is negotiating: (10 points) Award 1 point each for correctly identifying the four issues: Award 1.5 point for explaining each of the issues with the relevant analyses below: Cutting tariffs on industrial goods and services (or “market access for nonagricultural goods and services”) Analysis: explain why it is advantageous to cut tariffs to promote international trade (i.e., less distortion in the marketplace; countries with absolute/comparative advantage can be the exporter of the good and not be “taxed out of the market” because import tariffs make their goods artificially high (Great if the student gives some facts about what tariff rates are in various countries) Phasing out subsidies (or “protectionism in agriculture”) Analysis: Subsidies introduce significant distortions into the production of agricultural products. The net effect is to raise prices to consumers, reduce the volume of agricultural trade, and encourage the overproduction of products that are heavily subsidized (with the government typically buying up the surplus). Reducing antidumping laws
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Analysis: WTO rules allow countries to impose antidumping duties on foreign goods that are being sold cheaper than at home, or below their cost of production, when domestic producers can show that they are being harmed. However, the rather vauge definition of what constitutes “dumping” has proved to ba loophole that many countries are exploiting to pursue protectionism. Protecting Intellectual property The reason for this goal is that there is a strong belief among signatories that the protections for intellectual property reduce the incentive for innovation. Because innovation is a central engine of economic growth and rising living standards, the argument has been that a multilateral
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BA+178+Midterm+A+Summer+2007+Solutions_2 - Solutions to BA...

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