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Global Marketing, 6e (Keegan/Green)

Chapter 3 Regional Market Characteristics and Preferential Trade Agreements


1) The Free Trade Agreement deal between the United States and South Korea, one of the
world's largest bilateral agreements, will reduce tariffs on about 90 percent of product categories.
Answer: TRUE
Diff: 1
Page Ref: 74
2) GATT (General Agreement on Tariffs and Trade) itself had no enforcement power and the
losing party in a dispute was entitled to ignore the ruling.
Answer: TRUE
Diff: 2
Page Ref: 75
AACSB: Reflective Thinking
3) Since GATT did not have enforcement power and the process of dealing with disputes
sometimes stretched on for years, some critics referred to it as General Agreement to Talk and
Talk.
Answer: TRUE
Diff: 1
Page Ref: 75
4) At the WTO, a Dispute Settlement Body (DSB) handles disagreements between countries.
Answer: TRUE
Diff: 1
Page Ref: 75
AACSB: Reflective Thinking
5) It remains to be seen whether the WTO will live up to expectations when it comes to
additional major policy initiatives on such vexing issues as foreign investment and agricultural
subsidies.
Answer: TRUE
Diff: 2
Page Ref: 75-76
AACSB: Reflective Thinking
6) A preferential trade agreement is a mechanism that confirms special treatment on select
trading partners, thereby at times discriminating against other trading partners.
Answer: TRUE
Diff: 2
Page Ref: 76
AACSB: Reflective Thinking
7) The ultimate goal of a free trade agreement is to have zero duties on goods that cross borders
between the partners.
Answer: TRUE
Diff: 2
Page Ref: 76
AACSB: Reflective Thinking

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8) A free trade area represents the most fully developed form of preferential trade agreement
among nations.
Answer: FALSE
Diff: 2
Page Ref: 76
AACSB: Reflective Thinking
9) About 50 percent of global trade takes place among nations linked by Free Trade Areas.
Answer: TRUE
Diff: 2
Page Ref: 76
AACSB: Reflective Thinking
10) The Group of Three (G3) is a Free Trade Area encompassing Brazil, Mexico, and Venezuela.
Answer: FALSE
Diff: 1
Page Ref: 77
11) A Customs Union represents the most fully developed form of preferential trade agreement
among nations.
Answer: FALSE
Diff: 1
Page Ref: 78
AACSB: Reflective Thinking
12) Despite the fact that 16 member nations ratified a proposed European Constitution, the
initiative was derailed after voters in France and the Netherlands voted against the measure.
Answer: TRUE
Diff: 2
Page Ref: 78
AACSB: Reflective Thinking
13) In a Common Market there are no internal barriers to trade and it allows for free movement
of factors of production such as labor and capital.
Answer: TRUE
Diff: 2
Page Ref: 78
AACSB: Reflective Thinking
14) Under Economic Union a doctor or lawyer qualified in one country can practice in another
member country.
Answer: TRUE
Diff: 1
Page Ref: 78
AACSB: Reflective Thinking
15) As a result of CFTA, Canada takes 20 percent of U.S. exports and the United States buys
approximately 85 percent of Canada's exports.
Answer: TRUE
Diff: 2
Page Ref: 80
AACSB: Analytic Skills

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16) In spite of NAFTA creating a free trade area, Mexican avocado growers can only ship their
fruit to the United States during the winter months, and only to states in the northeast subject to a
quota of $ 30 million worth of avocados per year.
Answer: TRUE
Diff: 3
Page Ref: 81
AACSB: Reflective Thinking
17) In spite of NAFTA, Canadians fear that their own national industries will not be able to
survive the global juggernaut originating south of the border and are concerned about their
cultural preservation.
Answer: TRUE
Diff: 2
Page Ref: 82
AACSB: Reflective Thinking
18) NAFTA ensures that any product for sale in the U.S., Mexico, and Canada bearing a
certificate of origin qualifies for tariff reduction.
Answer: FALSE
Diff: 1
Page Ref: 81-82
AACSB: Reflective Thinking
19) El Salvador, Honduras, Guatemala, Nicaragua, Costa Rica, and Panama are all members of
the Central American Integration System.
Answer: TRUE
Diff: 2
Page Ref: 83
20) Implementation of the Central American Free Trade Agreement with the United States
created a free trade area known as DR-CAFTA.
Answer: TRUE
Diff: 2
Page Ref: 83
21) Despite trade agreements, attempts to achieve integration in Central America have been
described as uncoordinated, inefficient, and costly. There are still tariffs on imports of sugar,
coffee, and alcoholic beverages.
Answer: TRUE
Diff: 2
Page Ref: 84
AACSB: Reflective Thinking
22) In the year 2000, in an attempt to bring rampant inflation under control, Ecuador adopted the
U.S. dollar as its official currency.
Answer: TRUE
Diff: 3
Page Ref: 84
AACSB: Reflective Thinking
23) After President Hugo Chavez declared Venezuela to adapt socialism, there are no U.S. firms
operating in that country.
Answer: FALSE
Diff: 2
Page Ref: 84-85
AACSB: Reflective Thinking
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24) Mercosur or the Common Market of the South resulted from a treaty signed by four
countries: Argentina, Brazil, Paraguay, and Venezuela.
Answer: FALSE
Diff: 3
Page Ref: 86
AACSB: Reflective Thinking
25) The currency devaluation made Argentina's wine industry a major player in the world
market..
Answer: TRUE
Diff: 2
Page Ref: 87
AACSB: Reflective Thinking
26) Chile decided to become only an associate member of Mercosur since full membership
would have required raising external tariffs.
Answer: TRUE
Diff: 2
Page Ref: 87-88
AACSB: Reflective Thinking
27) CARICOM's main objective has been to achieve a deepening of economic integration by
means of a Caribbean common market.
Answer: TRUE
Diff: 2
Page Ref: 88
AACSB: Reflective Thinking
28) Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand were the original six
members of the Association of Southeast Asian Nations (ASEAN).
Answer: TRUE
Diff: 2
Page Ref: 90
AACSB: Reflective Thinking
29) Singapore has more engineers per capita than the United States.
Answer: TRUE
Diff: 1
Page Ref: 91
AACSB: Reflective Thinking
30) Singapore's standard of living is second highest in the region as well as its seaport is the
world's second largest container port.
Answer: TRUE
Diff: 2
Page Ref: 91
31) ASEAN's goal is to strengthen intra-regional trade relationships so members do not have to
trade with China.
Answer: FALSE
Diff: 2
Page Ref: 90-91
AACSB: Reflective Thinking

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32) Japan has changed from being a closed market to one that is a tough market. Marketers have
to master the 'kei retsu' system of tightly knit corporate alliances.
Answer: TRUE
Diff: 2
Page Ref: 91-92
AACSB: Reflective Thinking
33) The objective of the EU member countries is to harmonize national laws and regulations so
that goods, services, people, and eventually money can flow freely across national boundaries.
Answer: TRUE
Diff: 2
Page Ref: 92
AACSB: Reflective Thinking
34) The adoption of a single currency euro helps countries in the euro zone by eliminating costs
associated with currency conversion and exchange rate uncertainty.
Answer: TRUE
Diff: 2
Page Ref: 93
AACSB: Analytic Skills
35) Slovakia became a member of Euro Zone on January 01, 2009 because the government has
kept inflation low and the budget deficit below 3 percent of GDP.
Answer: TRUE
Diff: 2
Page Ref: 94
AACSB: Reflective Thinking
36) As a result of the formation of EU, record companies like Sony, Warner and EMI are forced
to adopt more uniform pricing policies across Europe.
Answer: TRUE
Diff: 2
Page Ref: 95
AACSB: Analytic Skills
37) Markets in Central and Eastern Europe are not eager to embrace well-known global brands
such as McDonald's, 3M International, and Philips Electronics.
Answer: FALSE
Diff: 2
Page Ref: 96
AACSB: Reflective Thinking
38) The Gulf Cooperation Council or GCC countries in Middle East hold about 45 percent of the
world's known oil reserves.
Answer: TRUE
Diff: 2
Page Ref: 97-98
39) The ultimate goal of SADC (Southern African Development Community) is to fully develop
a customs union and a common currency.
Answer: FALSE
Diff: 1
Page Ref: 100-101

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40) Dubai World, a state-owned company, is negotiating a deal in Nigeria's energy sector that
could be valued at several billion dollars.
Answer: TRUE
Diff: 2
Page Ref: pp. 101-102
AACSB: Reflective Thinking
41) Open markets are one way that globalization has led to economic integration. The United
States and South Korea recently completed negotiations on the world's largest bilateral trade
agreement. The deal will result in:
A) a trade conference to be held once every year.
B) increase in tariffs for all product categories.
C) a series of multilateral trade negotiations among neighboring countries.
D) increase in trade gap between South Korea and the United States.
E) reduction of tariffs on about 90 percent of product categories.
Answer: E
Diff: 2
Page Ref: 74
AACSB: Reflective Thinking
42) The World Trade Organization, which came into existence on January 1, 1995, is the
successor of another organization with the abbreviation:
A) DSB.
B) GATT.
C) FTAA.
D) NAFTA.
E) ASEAN.
Answer: B
Diff: 1
Page Ref: 75
AACSB: Reflective Thinking
43) Which form of regional cooperation agreement, when fully implemented, entails creation of
a unified central bank, the use of a single currency, and common policies on agriculture, social
services and welfare?
A) free trade area
B) customs union
C) common market
D) economic union
E) dispute settlement body
Answer: D
Diff: 2
Page Ref: 78
AACSB: Reflective Thinking

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44) Arrange the following in order from lowest to highest level of economic integration.
A) customs unioneconomic unionfree trade areacommon market
B) economic unioncustoms unioncommon marketfree trade area
C) common marketfree trade areaeconomic unioncustoms union
D) free trade areacustoms unioncommon marketeconomic union
E) common marketeconomic unioncustoms unionfree trade area
Answer: D
Diff: 3
Page Ref: 76-78
AACSB: Reflective Thinking
45) The form of economic cooperation that calls for 1) eliminating internal barriers to trade and
2) establishing common external barriers is known as a(n) ________ .
A) free trade area
B) economic union
C) customs union
D) free trade area
E) common market
Answer: C
Diff: 2
Page Ref: 76-78
AACSB: Reflective Thinking
46) As a result of CFTA the U.S. automakers participate in the Canadian auto market, thereby
benefiting due to:
A) greater economies of scale.
B) decreased production costs.
C) reduced competition.
D) ease of exporting automobiles.
E) creating a continental demand.
Answer: A
Diff: 2
Page Ref: 78-80
AACSB: Analytic Skills
47) The form of economic cooperation that calls for countries to eliminate all internal barriers to
trade among themselves even while maintaining independent trade policies vis--vis third
countries is known as a(n) ________ :
A) economic union
B) customs union
C) free trade area
D) common market
E) none of the above
Answer: C
Diff: 2
Page Ref: 76-80
AACSB: Reflective Thinking

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48) A new bilateral agreement between the European Union and Turkey will eliminate internal
trade barriers and establish common external tariffs. This arrangement is a(n):
A) free trade area.
B) customs union.
C) common market.
D) economic union.
E) none of the above
Answer: B
Diff: 2
Page Ref: 78-80
AACSB: Reflective Thinking
49) Agricultural subsidies and quotas that developed outside the multilateral framework under
GATT remained a divisive issue because:
A) affluent countries protect and subsidize farm production.
B) home-market consumers pay lower prices.
C) surplus agricultural output is sold abroad at high prices.
D) agricultural land became scarce in some countries.
E) American farmers did not participate in export.
Answer: A
Diff: 3
Page Ref: 79
AACSB: Analytic Skills
50) NAFTA creates a free trade area, as opposed to a customs union or a common market, due to
the fact that:
A) the agreement does not leave the door open for discretionary protectionism.
B) the governments of all three nations decided to eliminate tariffs.
C) the issue of illegal immigration from Mexico to the United States is resolved.
D) restrictions are imposed on the use of goods, services, and investments.
E) restrictions are imposed on labor movements among members.
Answer: B
Diff: 3
Page Ref: 80-81
AACSB: Reflective Thinking
51) The most important preferential trading arrangements in Latin America do not include:
A) SICA.
B) the Andean Community.
C) CARICOM.
D) Mercosur.
E) BRIC.
Answer: E
Diff: 2
Page Ref: 80-81
AACSB: Reflective Thinking

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52) The United States and Canada are bound together by many things, including a trade
agreement, a shared border, and a common language. However, from the cultural point of view,
many Canadians are worried of certain trade-related issues such as:
A) statistics indicating that 95 percent of the movies shown in theaters are not Canadian.
B) statistics indicating that 84 percent of the recorded music that Canadians buy is foreign.
C) Canadians fear that their own industries will not be able to survive the global juggernaut
originating south of the border.
D) foreign ownership of the book publishing business.
E) all of the above
Answer: E
Diff: 1
Page Ref: 82
AACSB: Reflective Thinking
53) Which member of the Central American Integration System has both the largest economy
and the largest population?
A) El Salvador
B) Honduras
C) Guatemala
D) Nicaragua
E) Costa Rica
Answer: C
Diff: 2
Page Ref: 81-83
54) Implementation of the Central American Free Trade Agreement with the United States
created a free trade area known as DR-CAFTA that includes all SICA members except:
A) Honduras.
B) Guatemala.
C) Nicaragua.
D) Panama.
E) Costa Rica.
Answer: D
Diff: 2
Page Ref: 83-84
55) As a result of America's failure to follow through on its promises in the Latin American
region, Mercosur, CARICOM, SICA, and the Andean Community intend to pursue further
integration among themselves as well as with:
A) Russia.
B) China.
C) Europe.
D) Asia.
E) Australia.
Answer: C
Diff: 3
Page Ref: 89
AACSB: Reflective Thinking

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56) Which of the Andean Community members adopted the U.S. dollar as official currency?
A) Bolivia
B) Ecuador
C) Colombia
D) Peru
E) Venezuela
Answer: B
Diff: 2
Page Ref: 84
AACSB: Reflective Thinking
57) Argentina provides a good example of how a country can emerge from an economic crisis as
a stronger global competitor. An example of emergency measures implemented by Argentina
include:
A) Argentina reduced the duties on consumer goods.
B) Argentina devalued its currency for exports and capital transactions.
C) Argentina added tariffs on imported wines.
D) Argentina adapted U.S. dollar as official currency.
E) Argentina added tariffs on wine produced within the country.
Answer: B
Diff: 2
Page Ref: 87
AACSB: Reflective Thinking
58) "ASEAN plus three" refers to the expanded roster of members which include:
A) all ASEAN members and Australia, New Zealand, and India.
B) all ASEAN members and Canada, Japan, and India.
C) all ASEAN members and Japan, China, and Korea.
D) all ASEAN members and India, Bangladesh, and Pakistan.
E) all ASEAN members and Australia, Korea, and China.
Answer: C
Diff: 2
Page Ref: 90
AACSB: Reflective Thinking
59) There are barriers in Japan for global marketers in terms of attitudes as well as laws. Barriers
include all of the following except:
A) any organization wishing to compete in Japan must be committed to providing top-quality
products and services.
B) repeat visits and extended socialization with distributors.
C) goods marketed should have a semblance of western products and services.
D) marketers must master the keiretsu system of tightly knit corporate alliances.
E) trust has to be built before conducting successful business.
Answer: C
Diff: 2
Page Ref: 91
AACSB: Multicultural and Diversity

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60) The business environment in Europe has undergone considerable transformation with
significant implications for all elements of the marketing mix, which includes all of the
following except:
A) harmonization in product standards, testing and certification process.
B) creating a more competitive environment.
C) direct comparability of prices in the Euro zone.
D) transshipment of products are not permitted.
E) common guidelines on TV broadcasting.
Answer: D
Diff: 2
Page Ref: 93-95
AACSB: Reflective Thinking
61) Markets of Central and Eastern Europe present interesting opportunities and challenge.
Companies such as 3M International, McDonald's, Philips Electronics, and Henkel are moving
into the region for all of the following reasons except:
A) the region is an important new source of growth.
B) that the first company to penetrate a country market often emerges as leader.
C) wage rates are much lower than those in Spain, Portugal, and Greece.
D) the region offers attractive locations for low-cost manufacturing.
E) core products and Western brand names need changes to meet consumer demands.
Answer: E
Diff: 3
Page Ref: 95-96
AACSB: Analytic Skills
62) Which of the following ASEAN countries ranks number one in terms of two-way trade with
the United States?
A) Brunei
B) Malaysia
C) Singapore
D) Thailand
E) Vietnam
Answer: C
Diff: 2
Page Ref: 90-91
63) The new country that joined EU on January 01, 2009 is:
A) Romania.
B) Slovakia.
C) Bulgaria.
D) Slovenia.
E) Cyprus.
Answer: B
Diff: 1
Page Ref: 94
AACSB: Reflective Thinking

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64) Which of the following is not a member of the European Union?


A) Sweden
B) Austria
C) Switzerland
D) Italy
E) Greece
Answer: C
Diff: 1
Page Ref: 94
65) The Maastricht Treaty called for:
A) the creation of an Asia Free Trade Area (AFTA).
B) the creation of an economic and monetary union (EMU) in Europe.
C) Chile's acceptance into Mercosur.
D) the purchase of CDs and tapes from distributors in Europe.
E) the creation of the seven-nation European Free Trade Association (EFTA).
Answer: B
Diff: 2
Page Ref: 92-93
66) The introduction of Euro by EU resulted in multifaceted advantages which include:
A) elimination of costs associated with currency conversion.
B) fixed exchange rate worldwide.
C) elimination of paper currency and coins.
D) withdrawal of French Francs from circulation.
E) a choice for using local or European currency.
Answer: A
Diff: 1
Page Ref: 92-94
67) Management strategic options pertaining to products that are facilitated by a single European
market include:
A) standardized packaging and labeling.
B) consolidate production.
C) shift from brand to benefit segmentation.
D) seek marketing economies.
E) all of the above
Answer: E
Diff: 2
Page Ref: 95
AACSB: Reflective Thinking
68) The practice of transshipment under the single European market helped the music industry
by:
A) helping online downloading of music by customers.
B) allowing music retailers in Europe to buy CDs from a single distributor.
C) forcing major record companies to adopt uniform pricing policies across Europe.
D) allowing record companies to decide on price based on cost in each country.
E) letting record companies to maintain their own distribution system.
Answer: C
Diff: 3
Page Ref: 95
AACSB: Analytic Skills
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69) The enlargement of the EU has impacted marketing strategies in the Euro zone countries by:
A) making it difficult to export food products from one country to another.
B) increasing the cost of production since Euro replaced local currency.
C) shifting products from one market to another in the event of shortages.
D) reduced tariffs and quotas for products imported from non-EU members.
E) having less flexibility in the placement of factories.
Answer: C
Diff: 3
Page Ref: 95
AACSB: Reflective Thinking
70) The markets of Central and Eastern Europe present interesting opportunities and offer
attractive locations for low-cost manufacturing due to:
A) their location being close to sea.
B) the cultural similarities.
C) wage rates being lower than in Spain, Portugal and Greece.
D) strict laws and regulations.
E) prohibitive tariffs and export restrictions.
Answer: C
Diff: 2
Page Ref: 95-96
AACSB: Reflective Thinking
71) The country in the middle east which ranks highest in terms of freedom is:
A) Kuwait.
B) Saudi Arabia.
C) Bahrain.
D) Iraq.
E) Oman.
Answer: C
Diff: 2
Page Ref: 96
AACSB: Reflective Thinking
72) Political and social instability in the Middle Eastern region can primarily be attributed to:
A) desert conditions and lack of agricultural land.
B) cultural differences among nations.
C) a wide gap between rich and poor nations due to oil revenues.
D) lack of water purification facilities.
E) absence of Western corporations.
Answer: C
Diff: 2
Page Ref: 96-97
AACSB: Reflective Thinking

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73) The member of the Gulf Cooperation Council (GCC) with the largest economy and
population size is:
A) Bahrain.
B) Kuwait.
C) Oman.
D) Qatar.
E) Saudi Arabia.
Answer: E
Diff: 2
Page Ref: 97
AACSB: Analytic Skills
74) In spite of having about 45% of the world's known oil reserves, Saudi Arabia and other
Middle Eastern countries post current-account deficits, largely because:
A) of poor accounting practices.
B) of vast economic diversification.
C) they must import most of the goods and services.
D) most of the oil is exported.
E) new businesses are being developed.
Answer: C
Diff: 2
Page Ref: 97-98
AACSB: Analytic Skills
75) The Middle East and North Africa are sometimes viewed as a regional entity referred to as:
A) GCC.
B) AMU.
C) MENA.
D) ACC.
E) ECOWAS.
Answer: C
Diff: 1
Page Ref: 98-99
76) In recent years, the economy of selected countries in ECOWAS has improved except in:
A) Ivory Coast.
B) Ghana.
C) Benin.
D) Sierra Leone.
E) Nigeria.
Answer: D
Diff: 2
Page Ref: 99-100

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77) In order to form a free trade area, South Africa has been in discussion with:
A) Swaziland.
B) EU.
C) Namibia.
D) Angola.
E) Japan.
Answer: B
Diff: 2
Page Ref: 100-101
AACSB: Reflective Thinking
78) The highest GNP among ECOWAS members is found in ________, a country that generates
significant revenues from oil exports:
A) Ghana
B) Niger
C) Mauritania
D) Nigeria
E) Senegal
Answer: D
Diff: 2
Page Ref: 100
AACSB: Analytic Skills
79) In 2003 South Korea decided to lift the ban on U.S. beef and in return the United States
agreed to exclude South Korea's rice industry from trade agreement because:
A) a high import tariff means that local rice farmers can charge much higher prices for their
crops than farmers in other rice-producing countries.
B) rice is not a very popular food commodity in the United States.
C) beef is not a very popular food item in South Korea.
D) South Korea was more interested in selling rice to other rice-producing countries.
E) no correct answer
Answer: A
Diff: 2
Page Ref: 103
80) The Ecuadorian government and the National Parks Service have maintained strict rules for
protecting Galapagos Island, an ecotourism destination, which includes all of the following
except:
A) all tourists must be accompanied by tourist guides.
B) there is a $ 100 per person entrance fee to the park.
C) visitors must follow a strict itinerary.
D) limits on the seafood harvested by local population.
E) visitors are limited to the fifty designated sites on the island.
Answer: D
Diff: 2
Page Ref: 104

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81) Why do some critics refer to GATT as the "General Agreement to Talk and Talk" and how
does its successor, WTO, provide a better forum for trade agreements?
Answer: GATT was an organization that was handling 300 trade disputes during its half century
of existence. It itself had no enforcement power and the process of dealing with disputes
stretched for years. The losing party had the right to ignore the ruling. Therefore it was referred
to as more of a talking rather than enforcing body. WTO provides a forum for trade-related
negotiations among its 150 members. The WTO has a Dispute Settlement Body (DSB) that
mediates complaints concerning unfair trade barriers and other issues between the WTO's
member countries. During a sixty day consultation period, parties to a complaint are expected to
engage in good-faith negotiations and reach an amicable resolution. If that fails, the complainant
can ask the DSB to appoint a three-member panel of trade experts to hear the case. The panel has
nine months within which to issue its ruling. The losing party has the option of turning to a
seven-member appellate body. If, after due process, a country's trade policies are found to violate
WTO rules, it is expected to change those policies. If changes are not forthcoming, the WTO can
authorize trade sanctions against the loser. Thus the formation of WTO took care of many of the
problems that existed during GATT.
Diff: 2
Page Ref: 75-76
AACSB: Reflective Thinking
82) A laptop manufactured in Canada and imported by Chile would not be subjected to duty. If
the same laptop was manufactured in the USA and exported to Chile, it will have to pay duty. In
order to avoid duty can the manufacturer in the USA send the computer via Canada?
Answer: There is a Free Trade Area (FTA) which is formed when two or more countries agree to
eliminate tariffs and other barriers that restrict trade. However, there are rules of origin that
discourage the importation of goods into the member country with the lowest external tariff for
transshipment to one or more FTA members with higher external tariffs. Thus, even though the
laptop can be shipped via Canada, it will have the label as "made in USA" and therefore subject
to duty.
Diff: 2
Page Ref: 76-77
AACSB: Reflective Thinking
83) Why does NAFTA create a free trade area as opposed to a customs union or a common
market? Explain the difference giving examples.
Answer: Under a customs union, in addition to eliminating internal barriers to trade, members
agree to the establishment of common external tariffs. For example, the EU and Turkey initiated
a customs union in an effort to boost two-way trade. In a common market, in addition to the
removal of internal barriers to trade and the establishment of common external tariffs, free
movement of factors of production such as labor and capital is allowed.
NAFTA helps in promoting economic growth through tariff elimination; expanded trade and
investment; as well as no restrictions on labor and other factor movements within the three
nations. The benefits of continental free trade will enable all three countries to meet the
economic challenges of the decades to come. The gradual elimination of barriers to the flow of
goods, services, and investment, coupled with strong protection of intellectual property rights
will further benefit businessmen, workers, farmers, and consumers. The agreement also leaves
the door open for discretionary protectionism.
Diff: 3
Page Ref: 77-78
AACSB: Reflective Thinking
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84) Historically most of the Latin American nations have witnessed decades of slow or no
growth; crippling inflation; increasing foreign debt; protectionism; the bloated government
payrolls; money laundering problems; and currency fluctuations. What measures are now being
taken by countries in that region that will begin the process of economic transformations?
Answer: The allure of the Latin American market has been its considerable size; its strategic
location; and huge resource base. Many countries are implementing economic reforms such as
priority to have a balanced budget and privatization of certain industries. Free markets, open
economies, and deregulation are becoming governmental priorities. Tariffs are being lowered and
free trades are being encouraged. Global corporations are encouraged by import liberalization,
lower tariffs, and the potential for establishing more efficient regional production. Many
observers envision a free trade area within the entire region. The four most important preferential
trading arrangements in Latin America are the SICA, the Andean Community, the Common
Market of the South (Mercosur), and the Caribbean Community and Common Market
(CARICOM).
Diff: 3
Page Ref: 82-88
AACSB: Reflective Thinking
85) Although the ASEAN countries are geographically close, they have historically been divided
in many respects. Elaborate on this statement and highlight the important economic development
of member countries within ASEAN. How does Singapore represent a special case within the
ASEAN nations?
Answer: The Association of Southeast Asian Nations (ASEAN) was established as an
organization for economic, political, social, and cultural cooperation among its member
countries. Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand were the
original six members. Vietnam, Cambodia, Laos, and Myanmar joined later on. Individually and
collectively, ASEAN countries are active in regional and global trade. However, all the abovementioned countries were under different political orders and the population is very different
from the religious and cultural point of view. Some of these countries are advancing rapidly
whereas others still have a long way to go. There are different natural resources in each of the
member countries. Some have undergone political unrest and wars recently. For example,
Singapore transformed itself from a British colony to a vibrant industrial power. One of the
reasons for its success is its extremely efficient infrastructure. The Port of Singapore is the
world's second-largest container port. It has a high standard of living, second only to Japan.
There is a93 percent literacy rate and is very much advance in business. Many foreign companies
are attracted to Singapore. Singapore alone accounts for more than one-third of U.S. trading
activities with ASEAN countries.
Diff: 2
Page Ref: 90-92
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86) According to experts, mastering the Japanese market is considered to be a very difficult task.
However, with the lucrative market in Japan, it is imperative to understand the intricacies in
order to be successful in business. What are some of the factors that need to be considered by
corporations that would like to conduct business in Japan?
Answer: Conducting business in the Japanese market demands understanding, flexibility,
ambitions, and long-term commitment. Although the Japanese market has changed from a closed
market to just being a tough market, there are still several barriers that need to be overcome.
These barriers include difference in business attitude as well as laws. Companies interested in
doing business with Japan should be willing and able to provide top-quality products and
services. Also, the products and services should be tailored to local tastes. All this requires
countless visits and socializing to build trust as well as mutual understanding. Marketers must
also master the "keir etsu" system of tightly knit corporate alliances.
Diff: 2
Page Ref: 90-92
AACSB: Analytic Skills
87) The formation and enlargement of the European Union have wide everlasting impact on
marketing strategies and marketing mix. Discuss this giving examples from member nations.
Answer: European Union has concluded over 20 different trade pacts with other nations. The
business environment in Europe has undergone considerable transformation with significant
implications for all elements of the marketing mix. For example, there is harmonization of
product standards thereby reducing the number of adaptations needed in each country. Similarly,
from a pricing point of view the environment has become more competitive. Common guidelines
are also set for promotion and distribution. Thus all components of the marketing mix are getting
standardized and harmonized. Corporations are beginning to treat the entire region as one entity
with very little adaptations. For example, France will be able to shop around for distributions of
products or services and select the best one in any member country. This selection can be based
on cost, quality, or local preferences. Food safety laws can also be made uniform with some
modifications that can be adapted. The members in the European Union will find it easier to do
business at any of the member countries' including setting up of manufacturing plants or
headquarters. It will also help in balancing the inventory and moving products from one country
to another in case of shortages.
Diff: 3
Page Ref: 92-96
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88) McDonalds, Philips Electronics, 3 M International and many other similar well known global
corporations are operating in Central and Eastern Europe. Some countries in the region are still
recovering from decades of command economies. What makes the region so attractive for global
business corporations?
Answer: The extraordinary political and economic reforms that swept through Central and
Eastern Europe in 1990s attracted the attention of many corporations toward the new 430-million
person market. The transition in the region from command to market economies has toppled a
number of entrenched institutions. New pacts such as Central European Free Trade association
(CEPTA) are being formed. The signatories are pledging cooperation in areas such as
infrastructure and telecommunications. The governments of Russia and Belarus agreed to form a
customs union and remove border posts between their two countries. Ford opened a $ 10 million
vehicle assembly plant outside Minsk, predicting future economic growth in that region. The
markets of central and Eastern Europe present interesting opportunities since they are in the
process of transition. Also, with wage rates in these regions being much lower than those in
Spain or Portugal, the region offers attractive locations for low-cost manufacturing.
Diff: 2
Page Ref: 95-96
AACSB: Reflective Thinking
89) With the increase in oil prices, many of the Middle Eastern countries will find a hefty
windfall income. Also, with greater involvement of world powers in the Middle Eastern region.
there are certain unprecedented opportunities. What are some of the marketing issues that should
be taken into consideration?
Answer: In Middle Eastern countries the majority of the resident population are Arabs. Islam is
the predominant religion. In spite of the apparent homogeneity, there are vast differences. The
price of oil is the driving force behind all businesses. Although oil revenues help economically
they also widen the gap between rich and poor countries within the region. This disparity also
creates political and social instability. As far as the business dealings are concerned, connections
are keys for any success. Relationships with key government and business individuals open
many doors. A predilection for bargaining is culturally ingrained. The Arab businessperson does
business with the individual, not with the company. Understanding of Arab customs is very
important. Women usually do not play an apparently prominent role in business.
Diff: 2
Page Ref: 96-99
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