Management Notes

Reference Notes for Management

________ are quotas that lead to a complete abolishment of trade.

________ are quotas that lead to a complete abolishment of trade.

 Options:

a. embargoes
b. voluntary export restraints
c. nontariff barriers
d. orderly marketing agreements

The Correct Answer Is:

  • a. embargoes

The correct answer is A, “embargoes,” which are trade policies or actions that result in the complete prohibition of trade with a particular country, product, or group of products. Now, let’s explain in detail why embargoes are the correct answer and why the other options (B, C, and D) are not.

Option A:

Embargoes An embargo is a comprehensive trade restriction imposed by a government on specific goods, services, or even all trade with a particular country. Embargoes are the most extreme form of trade barrier and are often used for political, economic, or security reasons. Here’s a detailed explanation:

Complete Prohibition:

Embargoes involve a complete ban on trade activities with the targeted country or specific products. This means that no imports or exports are allowed between the embargoing country and the embargoed party.

Purpose:

Embargoes are typically implemented as a punitive measure or a tool of diplomatic or economic pressure. They may be imposed due to concerns about human rights violations, nuclear proliferation, political conflicts, or other issues.

Examples:

Notable historical examples of embargoes include the United States’ embargo on Cuba and the United Nations sanctions on North Korea. These actions completely halt trade between the embargoing country and the embargoed party.

Option B:

Voluntary Export Restraints (VERs) Voluntary Export Restraints (VERs) are a trade policy in which exporting countries voluntarily limit their exports of certain products to another country. While VERs do restrict trade, they differ from embargoes in several key ways:

Voluntary Nature:

VERs are voluntary agreements between exporting and importing countries, typically negotiated to avoid the imposition of more severe trade restrictions like tariffs or quotas. The exporting country agrees to limit its exports voluntarily.

Limited Scope:

VERs usually target specific products or industries, rather than imposing a complete trade ban. The exporting country can still export other products freely.

Purpose:

VERs are often implemented to address concerns about market disruption or unfair competition. They are not designed to completely abolish trade but rather to manage it more carefully.

Option C:

Nontariff Barriers Nontariff barriers encompass a wide range of trade restrictions, but they do not necessarily lead to the complete abolishment of trade. Instead, they create obstacles that can impede trade flows in various ways. Examples of nontariff barriers include product standards, licensing requirements, and technical regulations. While they can hinder trade, they do not eliminate it entirely.

Diverse Forms:

Nontariff barriers come in various forms and can affect different aspects of trade, such as customs procedures, product standards, and intellectual property rights.

Purpose:

Nontariff barriers are often implemented to protect domestic industries, consumers, or public health. They aim to regulate trade rather than completely stopping it.

Option D:

Orderly Marketing Agreements Orderly Marketing Agreements (OMAs) are trade arrangements between exporting and importing countries that aim to regulate the supply and pricing of certain products. OMAs are not designed to abolish trade but rather to manage it in a structured manner.

Supply Management:

OMAs typically involve agreements on production quotas or supply limits to prevent excessive surpluses or shortages in the market.

Price Stabilization:

OMAs can also include price controls or agreements to stabilize prices within a certain range.

Purpose:

OMAs are used to ensure stable and predictable trade conditions for specific products, such as agricultural goods. They are not meant to eliminate trade but rather to promote orderly trade practices.

In conclusion, embargoes are quotas that lead to a complete abolishment of trade. They involve a comprehensive ban on trade activities with a particular country or specific products and are typically imposed for political, economic, or security reasons.

In contrast, the other options (B, C, and D) represent different trade policies and actions, such as voluntary export restraints, nontariff barriers, and orderly marketing agreements, which do not result in the complete abolition of trade but instead aim to regulate or restrict trade in specific ways for various purposes.

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