Understanding Free Trade: True/False, Definitions, and FAQs

Posted on Feb 4, 2025 in International Trade

Free Trade: True or False

  1. Free trade can cause workers in a country to lose jobs: True
  2. NAFTA is a free trade agreement: True
  3. Free trade doesn’t need rules: False
  4. Free trade goal is to create a common trade policy: True
  5. Domestic producers will have increased competition with free trade: True
  6. Free trade areas allow countries to focus on their competitive advantages: True
  7. U.S.A has 20 free trade areas: False
  8. U.S.A. has free trade agreement with 20 countries: True
  9. Colombia is a partner country of the U.S.A: True
  10. Trade agreements increase barriers to US exports: False
  11. Import quotas are a fixed charge for each unit of goods: False
  12. Exchange rate is a payment to a firm: False
  13. WTO is a trade agreement between Canada and the US: False
  14. GATT is an agreement between 23 countries: True
  15. Export subsidy is a purchase by the government: False
  16. National procurement are restrictions of imports: False
  17. With free trade areas workers are likely to lose their jobs: True
  18. FTA allow the agreeing countries to focus on their competitive advantages: True
  19. With FTA producers may struggle with increased competition: True
  20. Producers with FTA acquire an expanded market of potential customers: True

Free Trade Definitions

  1. The common agricultural policy is an ORGANIZATION of 15 EUROPEAN countries.
  2. EXCHANGE rate is the price of one CURRENCY in terms of another.
  3. Export credit SUBSIDY takes the form of a subsidized loan to the BUYER.
  4. Ad valorem tariff is a CHARGE levied when a GOOD is imported.
  5. Import quotas limit the QUANTITY of a good that can be IMPORTED.
  6. Tariff is a FIXED charge for each unit of GOODS imported.
  7. Free trade AGREEMENTS are intended to stimulate trade BETWEEN countries.
  8. Free trade agreements can include PROVISIONS to protect intellectual PROPERTY rights.
  9. Free trade agreements can also promote labor RIGHTS and environmental PROTECTION, promoting overall SOCIAL wellbeing.
  10. Free trade agreements can help strengthen BUSINESS climates and encourage economic GROWTH.
  11. Free trade agreements BREAK down procedural BARRIERS to INTERNATIONAL trade.
  12. The United States also enjoyed a trade SURPLUS in MANUFACTURED goods.
  13. To develop a free trade AREA you need RULES for how the NEW Free trade area will OPERATE.
  14. The GOAL of FTA is to create a trade POLICY that all COUNTRIES in the free trade area AGREE upon.

Key Free Trade Concepts

  • NAFTA: Canada, Mexico, and USA
  • FTA: Increase efficiency and profitability of countries
  • Consumers: Have access to higher quality goods
  • Reduction of trade barriers: Makes it easier and cheaper to export
  • 2014: USA has 14 FTAs in force
  • 2012: USA increased 30% trade surplus
  • Governments: Adopt nondiscriminatory rules
  • Currency depreciation: A drop of exchange rates

Frequently Asked Questions About Free Trade

  1. What are Red-Tape barriers?
  2. What is the goal of a free trade agreement?
    Is to create a trade policy that all countries in the free trade area agree upon.
  3. What does a free trade area allow countries to do?
    To focus on their comparative advantage and to produce the goods.
  4. What do you need to develop a free trade area?
    You need rules.
  5. Who does a free trade area benefit?
    Consumers.
  6. What can happen with producers with the free trade areas?
    Producers may struggle with increased competition.