Trade Regulations and Industrial Policies
Question 1
The most favored nation is an agreement between countries to provide privileges to one another as those allowed to all other countries with the MFN status.
Question 2
Escape clause specifies the conditions under which a party can be freed from the obligations of a contract. It allows a government to be flexible to economic shocks in times of need. The United States may restrict or modify terms of trade to protect its firm from harm. It will reduce the imports coming into the country, thus increasing domestic trade in the US, favoring local producers.
Question 3
Trade adjustment assistance is a program that helps workers who have lost their jobs or experienced decreased wages due to an increase in importation. It is argued that if a country’s welfare increases due to trade, then those who are harmed by import competition should be compensated.
Question 4
Antidumping refers to the customs duty that is imposed on imports that a country believes are being sold at a price below the fair market level to discourage dumping. On the other hand, countervailing duties refer to the customs duty imposed on goods that have received import subsidies to counter the negative effect, thus protecting domestic producers and avoid dumping.
Question 5
Increase competition for a domestic firm
Offer low-interest loans and guarantees and increase in tax incentives
Advantages
Allows continued employment of US citizens
Enhances movement of resources
Disadvantages
The trade policies in the US have not been as successful since it has seen firm from the United States seek financial importation from other countries rather than the cheap credit offered by the country
Led to the dominance of China in the solar industry
Forcing businesses to make uneconomical investment reduces prosperity of the United States
The US could suffer from credit risk to other counties.