Governments can both regulate international trade and help expand it. This lesson explains how antidumping laws respond to unfair pricing and how trade negotiations and the World Trade Organization (WTO) work to reduce barriers and resolve disputes.
Dumping occurs when a company charges a lower price for a product in a foreign market than it charges in its home market. A firm might do this to attract customers abroad or to sell surplus goods. A price difference alone does not necessarily prove unfair conduct: differences in the cost of serving each market may explain it.
All flashcards
What is predatory dumping?
Using unsustainably low prices to drive competitors out of a foreign market, potentially gaining control afterward.
What role does the WTO play in trade disputes?
It provides members with a shared process for addressing claims that agreed trade rules were not followed.
What support does the World Bank provide to developing nations?
Low-interest development loans, advice, and information, including support for infrastructure and debt relief.
What is moral hazard in the context of financial rescues?
The risk that protection from the consequences of risky behavior encourages greater risk-taking.
How do the World Bank and IMF differ in their primary assistance?
The World Bank focuses on development support; the IMF provides short-term financial assistance to members in difficulty.
Quiz questions
Why can expectations of an IMF rescue create moral hazard?Answer: Investors may take greater risks if they expect protection from the consequences.
Which measures may be required as conditions for IMF emergency loans?Answer: Commitments such as curtailing imports or devaluing the national currency.
What was an outcome of the United States–European Union dispute over Airbus and Boeing support?Answer: The dispute was resolved through a negotiated settlement that included cooperation on large-aircraft issues.
Which criticism of the WTO appears in debates about global trade rules?Answer: Its rules may favor multinational corporations or place trade ahead of environmental protection.
Based on Introduction to Business 2e by Lawrence J. Gitman, Carl McDaniel, Amit Shah, Monique Reece, Linda Koffel, Bethann Talsma, James C. Hyatt (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.