August-TIF Ch07

Chapter 7: Trade in Goods
True or False Questions
1. The Kennedy Round produced an agreement on anti-dumping.
Answer: True
Diff: 1
Topic: History of Contemporary International Trade Law
Skill: Legal Concepts
2. The Tokyo Round led to the establishment of the World Trade Organization.
Answer: False
Diff: 2
3. Multilateral Trade Agreements of the WTO Agreement are binding on all members of
the WTO.
Answer: True
Diff: 1
4. The WTO can make a decision by a vote if a consensus cannot be reached.
Answer: True
Diff: 1
Topic: The World Trade Organization
5. The term safeguard refers to the relinquishment of an obligation owed by another.
Answer: False
Diff: 2
6. The member states of GATT 1994 owe legal obligations to the contracting parties of
GATT 1947
Answer: False
Diff: 2
Topic: The 1994 General Agreement on Tariffs and Trade
7. The provisions of GATT that prohibit a state from taking action contrary to the General
Agreement are directly effective.
Answer: True
Diff: 1
8. The Generalized System of Preferences, allows developing countries to export all (or
nearly all) of their products to a participating developed country on a nonreciprocal basis.
Answer: True
Diff: 1
9. A customs union consists of a group of states that have reduced or eliminated tariffs
among themselves but that maintain their own individual tariffs in dealing with other
states.
Answer: False
Diff: 2
10. Even after a free trade area or customs union is established, GATT rules apply to the
constituent states, and not to the area or union as a whole.
Answer: False
Diff: 2
11. General exceptions are situations that excuse a WTO member state from complying
with its GATT obligations in order for the state to protect certain essential public policy
objectives.
Answer: True
Diff: 1
12. The Australia Group is an informal multilateral group of states concerned with
curbing the proliferation of chemical and biological weapons.
Answer: True
Diff: 1
13. The Zangger Committee is also known as Non-Proliferation Treaty Exporters

Committee.
Answer: True
Diff: 2
14. Each member of the Missile Technology Control Regime administers its missile-
related export controls independently.
Answer: True
Diff: 1
15. The Agreement on Implementation of Article VII of GATT 1994 is designed to

harmonize the methods used by WTO member states to determine the value of goods for
customs purposes.
Answer: True
Diff: 1
Topic: Multilateral Trade Agreements
16. Deductive value is the customs value of imported goods that is based on the price
actually paid or payable for goods at the time they were sold for export.
Answer: False
Diff: 1
17. Derived value is the customs value of goods that is based on their price calculated
from the cost of manufacture, overhead, and handling.
Answer: False
Diff: 1
18. Selling exported goods at prices below their normal value is called subsidizing.
Answer: False
Diff: 2
19. The Anti-dumping Code prohibits dumping.
Answer: False
Diff: 2
20. A tax credit is an example of a subsidy.
Answer: True
Diff: 1
21. Nonactionable subsidies are also known as yellow subsidies.
Answer: False
Diff: 2
22. Prohibited subsidies are also known as red subsidies.
Answer: True
Diff: 1
23. An actionable subsidy is permissible and nonchallengeable, such as government

funding to underwrite research activities, to aid disadvantaged regions, or to help existing
facilities adapt to new environmental requirements.
Answer: False
Diff: 2
24. A countervailing measure is a duty specifically levied to offset dumping.
Answer: False
Diff: 1
25. A safeguard is an emergency action that a WTO member state may take in order to
protect its domestic industry from serious injury due to a sudden increase in the quantity
of an imported product.
Answer: True
Diff: 1
Multiple Choice Questions
26. Which of the following was a function of the International Monetary Fund?
A. It ensured monetary stability and facilitated currency exchange.

B. It assisted war-ravaged and developing countries to reconstruct or upgrade their
economies.
C. It administered a comprehensive code governing the conduct of world trade.
D. It discouraged trade discrimination.
Answer: A
Diff: 3
27. The ________ is a multilateral agreement that set out the rules under which the
contracting states parties were committed to negotiate reductions in customs tariffs and
other impediments to international trade in goods.
A. Agreement on Preshipment Inspection

B. General Agreement on Tariffs and Trade
C. Agreement on Safeguards
D. Wassenaar Arrangement
Answer: B
Diff: 2
28. Once goods are legally imported, they must be treated the same way as domestic
goods. This is called ________.
A. dumping
B. direct effect
C. transparency
D. national treatment
Answer: D
Diff: 2
29. A round is a meeting of the contracting parties of GATT to participate in ________.
A. a Harmonized System
B. multilateral trade negotiations
C. commodity arrangements
D. the Wassenaar Arrangement
Answer: B
Diff: 1
30. The ________ included the GATT MTNs held from 1964 to 1967 that established the
practice of setting an agenda for and defining the techniques to be used during GATT
negotiations.
A. Dillon Round
B. Tokyo Round
C. Kennedy Round
D. Uruguay Round
Answer: C
Diff: 1
31. The ________ included the GATT MTNs held from 1973 to 1979 that produced six
nontariff codes.
A. Dillon Round
B. Tokyo Round
C. Kennedy Round
D. Uruguay Round
Answer: B
Diff: 1
32. The World Trade Organization was a result of the ________.
A. Dillon Round
B. Tokyo Round
C. Kennedy Round
D. Uruguay Round
Answer: D
Diff: 2
33. Which of the following is an organ of the World Trade Organization?
A. Council for Trade in Services

B. International Monetary Fund
C. World Bank
D. Nuclear Suppliers Group
Answer: A
Diff: 2
34. The making of a decision by general agreement and in the absence of any voiced
objection is called ________.
A. social referencing
B. expropriation
C. waiver
D. consensus
Answer: D
Diff: 1
35. Which of the following terms refers to the relinquishment of an obligation owed by
another?
A. social referencing
B. consensus
C. waiver
D. direct effect
Answer: C
Diff: 1
36. Which of the following best describes direct effect?
A. It is the making of a decision by general agreement and in the absence of any voiced
objection.
B. It is the relinquishment of an obligation owed by another.
C. It is a principle whereby a treaty may be invoked by a private person to challenge the
actions of a state that is a party to the treaty.
D. It is a principle that governments must make their rules, regulations, and practices
open and accessible to the public and other governments.
Answer: C
Diff: 3
37. The ________ is a GATT scheme that allows a developing state to obtain tariff
concessions from a developed state on a nonreciprocal basis.
A. National treatment rule

B. Generalized System of Preferences
C. South-South Preferences
D. Escape clause
Answer: B
Diff: 2
38. The ________ is a GATT scheme that allows developing states to grant tariff
preferences to each other without having to grant them to developed states.
A. National treatment rule

B. Generalized System of Preferences
C. South-South Preferences
D. Escape clause
Answer: C
Diff: 2
39. Which of the following best describes transparency?
A. It is the making of a decision by general agreement and in the absence of any voiced
objection.
C. It is a principle whereby a treaty may be invoked by a private person to challenge the
actions of a state that is a party to the treaty.
D. It is a principle which states that governments must make their rules, regulations, and
practices open and accessible to the public and other governments.
Answer: D
Diff: 3
40. A ________ is a group of states that have reduced or eliminated tariffs among
themselves but that maintain their own individual tariffs in dealing with other states.
A. customs union
B. free trade area
C. Harmonized System
Answer: B
Diff: 1
41. A ________ is a group of states that have reduced or eliminated tariffs among
themselves and have also established a common external tariff.
A. customs union
B. free trade area
C. Harmonized System
Answer: A
Diff: 1
42. Products obtained by extraction or harvest that require minimal processing before
being used are called ________.
A. core products
B. secondary resources
C. augmented products
D. primary commodities
Answer: D
Diff: 1
43. ________ is the proposal of developing countries that would establish a Common
Fund to underwrite the costs of maintaining a buffer stock of primary commodities as a
way to stabilize supplies.
A. Customs Valuation Code

B. General Agreement on Tariffs and Trade
C. Integrated Program for Commodities
D. Agreement on Trade Related Investment Measures
Answer: C
Diff: 2
44. The ________ allows a WTO member state to withdraw temporarily from its GATT
obligations when there is a surge in the number of imports coming from other member
states.
A. escape clause
B. general exception
C. security exception
D. indemnification clause
Answer: A
Diff: 1
45. Emergency trade measures imposed to protect domestic industry from a surge of
imports are called ________.
A. customs
B. tariffs
C. waivers
D. safeguards
Answer: D
Diff: 1
46. ________ are situations that excuse a WTO member state from complying with its
GATT obligations in order for the state to protect certain essential public policy
objectives.
A. Harmonized Systems
B. General exceptions
C. Safeguards
D. Security exceptions
Answer: B
Diff: 1
47. ________ are situations that excuse a WTO member state from complying with its
GATT obligations when those are in conflict with its essential security interests or its
duties under the United Nations Charter.
A. Harmonized Systems
B. General exceptions
C. Safeguards
D. Security exceptions
Answer: D
Diff: 1
48. The ________ is the intergovernmental arrangement and organization to coordinate

national policies so that transfers of conventional arms and dual-use goods and
technologies do not contribute to the development or enhancement of military capabilities
that undermine international and regional security and are not diverted to support such
capabilities.
A. Agreement on Trade Related Investment Measures

B. Harmonized System
C. Wassenaar Arrangement
D. Integrated Program for Commodities
Answer: C
Diff: 2
49. The ________ is a multilateral association of states concerned with curbing the
proliferation of chemical and biological weapons.
A. Australia Group
B. Zangger Committee
C. Nuclear Suppliers Group
D. Harmonized System
Answer: A
Diff: 1
50. The ________ is the exporting states parties to the Treaty on Non- Proliferation of
Nuclear Weapons that seek to harmonize their interpretations of the treatys export-
control provision.
A. Australia Group
B. Zangger Committee
C. Nuclear Suppliers Group
D. Harmonized System
Answer: B
Diff: 1
51. Which of the following is true of the Missile Technology Control Regime?
A. It is a group of nuclear supplier countries.

B. It authorizes the UN Security Council to impose sanctions, including the adoption of
bans on trade, on states whose actions threaten international peace.
C. It is a formal group with a permanent organization.
D. It was established to limit the proliferation of missiles capable of delivering nuclear
weapons.
Answer: D
Diff: 3
52. Sectoral agreements of the WTO deal with ________.
A. technical barriers to trade

B. customs valuation
C. textiles and clothing
D. import-licensing procedures
Answer: C
Diff: 2
53. ________ is the customs value of imported goods that is based on the price actually
paid or payable for goods at the time they were sold for export.
A. Transaction value
B. Deductive value
C. Computed value
D. Derived value
Answer: A
Diff: 1
54. ________ is the customs value of imported goods that is based on the price actually
paid for similar goods by unrelated persons in the importing country at about the same
time.
B. Deductive value
C. Computed value
D. Derived value
Answer: B
Diff: 1
55. ________ is the customs value of goods that is based on their price calculated from
the cost of manufacture, overhead, and handling.
B. Deductive value
C. Computed value
D. Derived value
Answer: C
Diff: 1
56. ________ is the customs value of goods that is determined by using whichever of the
other methods best fit and adjusting it to the particular circumstances.
B. Deductive value
C. Computed value
D. Derived value
Answer: D
Diff: 1
57. ________ are mandatory laws and provisions that specify the characteristics of
products; the processes and production methods for creating products; and the
terminology, symbols, packaging, marking, or labeling requirements for products,
processes, or production methods.
A. Stabilization clauses
B. Technical regulations
C. Rules of origin
D. Safeguards
Answer: B
Diff: 1
58. ________ are voluntary guidelines that specify the same things that technical
regulations mandatorily specify.
A. Standards
B. Safeguards
C. Rules of origin
D. Conformity assessment procedures
Answer: A
Diff: 1
59. The ________ defines the measures that WTO member states may take to protect the
life and health of humans, animals, and plants.
A. Anti-Dumping Code
B. Agreement on the Application of Sanitary and Phytosanitary Measures
C. Agreement on Technical Barriers to Trade
D. Agreement on Preshipment Inspection
Answer: B
Diff: 1
60. Which of the following best describes dumping?
A. It is a duty specifically levied to offset a subsidy.

C. It is a financial contribution made by a government or other public body that confers a
benefit on an enterprise, a group of enterprises, or an industry.
D. It is the selling of exported goods at prices below their normal value.
Answer: D
Diff: 3
61. A(n) ________ is a subsidy that is permissible and nonchallengeable, such as

government funding to underwrite research activities, to aid disadvantaged regions, or to
help existing facilities adapt to new environmental requirements.
A. actionable subsidy
B. prohibited subsidy
C. nonactionable subsidy
D. consumption subsidy
Answer: C
Diff: 2
62. A(n) ________ is a subsidy that is presumed to be trade distorting because it requires
export performance or is contingent upon the use of domestic instead of imported goods.
A. nonactionable subsidy
B. consumption subsidy
C. actionable subsidy
D. prohibited subsidy
Answer: D
Diff: 2
63. A(n) ________ is a subsidy that may be challenged as trade distorting if it injures the
domestic industry of another WTO member state, nullifies or impairs the benefits due to
another member state, or causes or threatens to cause serious prejudice to the interests of
another member state.
A. nonactionable subsidy
B. consumption subsidy
C. actionable subsidy
D. prohibited subsidy
Answer: C
Diff: 2
64. A(n) ________ is a duty specifically levied to offset a subsidy.
A. countervailing measure
B. customs duty
C. safeguarding measure
D. excise duty
Answer: A
Diff: 1
65. A(n) ________ is an emergency action that a WTO member state may take in order to
protect its domestic industry from serious injury due to a sudden increase in the quantity
of an imported product.
A. servitude
B. safeguard
C. delict
D. usus
Answer: B
Diff: 1
66. ________ are laws, regulations, and administrative procedures used by states for
determining the country of origin of goods.
A. Rules of origin
B. Anti-dumping codes
C. Countervailing measures
D. Conformity assessment procedures
Answer: A
Diff: 2
Essay Questions
67. Explain any three of the main principles of GATT 1947?
Answer: The main principles of GATT 1947 were as follows: (1) Trade discrimination
was forbidden. Each contracting state had to accord the same trading privileges and
benefits (or most-favored-nation status) to all other contracting states equally; and, once
foreign trade goods were imported into one contracting state from another, the foreign
goods had to be treated (according to the national treatment principle) the same way as
domestic goods. (2) With some exceptions, the only barriers that one contracting state
could use to limit the importation of goods from another contracting state were customs
tariffs. (3) The trade regulations of contracting states had to be transparent, that is,
published and available to other contracting states and their nationals. (4) Customs unions
and free trade agreements between contracting states were regarded as legitimate means
for liberalizing trade so long as they did not, on the whole, discriminate against third-
party states that were also parties to GATT. (5) GATT-contracting states were allowed to
levy only certain charges on imported goods: (a) an import tax equal in amount to internal
taxes, (b) anti-dumping duties to offset advantages obtained by imported goods that were
sold below the price charged in their home market or below their actual cost, (c)
countervailing duties to counteract foreign export subsidies, and (d) fees and other proper
charges for services rendered.
Diff: 3
68. What was the significance of the Uruguay Round of the GATT?
Answer: The Uruguay Round (19861994) brought about a major change in the
institutional structure of the GATT, replacing the informal GATT institution with a new
institution: the World Trade Organization. The round concluded on April 15, 1994, when
representatives of 108 states signed its Final Act at a ceremony in Marrakesh, Morocco,
and committed their governments to ratify the results of the round. Again, as it had with
the ITO Charter, the world waited to see if the U.S. Congress would approve of the new
institution. This time, after much delay, including time out for an election, Congress
convened in an extraordinary session and ratified the Final Act on December 8, 1994.
Moments after the vote was announced in Washington, the representatives of the old
GATT convened an Implementation Conference in Geneva and agreed that its successor
institution, the World Trade Organization, would officially come into existence on
January 1, 1995.
Diff: 3
69. What are the responsibilities of the World Trade Organization?
Answer: The World Trade Organization is an intergovernmental organization responsible

for (1) implementing, administering, and carrying out the WTO Agreement and its
annexes; (2) acting as a forum for ongoing MTNs; (3) serving as a tribunal for resolving
disputes; and (4) reviewing the trade policies and practices of WTO member states.
Diff: 2
70. Enlist the five main organs of the WTO.
Answer: The WTO has five main organs: (1) a Ministerial Conference, (2) a General
Council that also functions as the WTOs Dispute Settlement Body and Trade Policy
Review Body, (3) a Council for Trade in Goods, (4) a Council for Trade in Services, and
(5) a Council for Trade-Related Aspects of Intellectual Property Rights.
Diff: 2
71. Explain the concept of direct effect in the context of GATT.
Answer: Some of the provisions of GATT 1994 are directly effective. That is, they may
be relied upon by private persons (including both natural and juridical persons) to
challenge the actions of a member state. In particular, those provisions that prohibit a
state from taking action contrary to the General Agreement are directly effective. Those
that require a contracting state to take some positive action may only be challenged by
individuals if the state adopts implementing legislation authorizing such a challenge.
Diff: 3
72. Differentiate between free trade area and customs union.
Answer: A free trade area is a group of states that have reduced or eliminated tariffs
among themselves but that maintain their own individual tariffs in dealing with other
states. Whereas, a customs union is a group of states that have reduced or eliminated
tariffs among themselves and have also established a common external tariff.
Diff: 3
73. What is an escape clause?
Answer: Article XIX of GATT 1994entitled Emergency Action on Imports of

Particular Productsis an escape clause or safety valve that allows a member state to
avoid, temporarily, its GATT obligations when there is a surge in the number of imports
coming from other member states. The injured state can impose emergency restrictive
trade measuresknown as safeguardsif it can demonstrate that there is an actual or
seriously threatened injury to one of its domestic industries.
Diff: 3
74. Differentiate between general exceptions and security exceptions.
Answer: General exceptions are situations that excuse a WTO member state from
complying with its GATT obligations in order for the state to protect certain essential
public policy objectives. Security exceptions are situations that excuse a WTO member
state from complying with its GATT obligations when those are in conflict with its
essential security interests or its duties under the United Nations Charter.
Diff: 3
75. Explain the Wassenaar Arrangement.
Answer: In July 1996, 33 countriesincluding Canada, France, Great Britain, Japan,

Russia, and the United Statesapproved the Wassenaar Arrangement on Export Controls
for Conventional Arms and Dual-Use Goods and Technologies. As of July 2011 there
were 40 members of the Wassenaar Arrangement. Its goals are to promote transparency,
the exchange of views and information, and greater responsibility in transfers of
conventional arms and dual-use goods and technologies. Member countries, through their
own national policies, seek to ensure that such transfers do not contribute to the
development or enhancement of military capabilities that undermine international and
regional security and are not diverted to support such capabilities. The Wassenaar
Arrangement, however, is not meant to impede bona fide transactions and is not directed
against any state or group of states.
Diff: 3
76. What is a subsidy? What are the different types of subsidies?
Answer: A subsidy is a financial contribution made by a government or other public body

that confers a benefit on an enterprise, a group of enterprises, or an industry. The different
types of subsidies are: (1) prohibited subsidy, (2) actionable subsidy, and (3)
nonactionable subsidy.
Diff: 1

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Chapter 7: Trade in Goods

True or False Questions

1. The Kennedy Round produced an agreement on anti-dumping.

4. The WTO can make a decision by a vote if a consensus cannot be reached.

5. The term safeguard refers to the relinquishment of an obligation owed by another.

13. The Zangger Committee is also known as Non-Proliferation Treaty Exporters

15. The Agreement on Implementation of Article VII of GATT 1994 is designed to

19. The Anti-dumping Code prohibits dumping.

20. A tax credit is an example of a subsidy.

21. Nonactionable subsidies are also known as yellow subsidies.

22. Prohibited subsidies are also known as red subsidies.

23. An actionable subsidy is permissible and nonchallengeable, such as government

Multiple Choice Questions

A. It ensured monetary stability and facilitated currency exchange.

A. Agreement on Preshipment Inspection

29. A round is a meeting of the contracting parties of GATT to participate in ________.

32. The World Trade Organization was a result of the ________.

33. Which of the following is an organ of the World Trade Organization?

A. Council for Trade in Services

36. Which of the following best describes direct effect?

A. National treatment rule

A. National treatment rule

39. Which of the following best describes transparency?

A. Customs Valuation Code

48. The ________ is the intergovernmental arrangement and organization to coordinate

A. Agreement on Trade Related Investment Measures

A. It is a group of nuclear supplier countries.

A. technical barriers to trade

60. Which of the following best describes dumping?

A. It is a duty specifically levied to offset a subsidy.

61. A(n) ________ is a subsidy that is permissible and nonchallengeable, such as

64. A(n) ________ is a duty specifically levied to offset a subsidy.

67. Explain any three of the main principles of GATT 1947?

69. What are the responsibilities of the World Trade Organization?

Answer: The World Trade Organization is an intergovernmental organization responsible

70. Enlist the five main organs of the WTO.

71. Explain the concept of direct effect in the context of GATT.

73. What is an escape clause?

Answer: Article XIX of GATT 1994entitled Emergency Action on Imports of

74. Differentiate between general exceptions and security exceptions.

75. Explain the Wassenaar Arrangement.

Answer: In July 1996, 33 countriesincluding Canada, France, Great Britain, Japan,

76. What is a subsidy? What are the different types of subsidies?

Answer: A subsidy is a financial contribution made by a government or other public body

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