CHAPTER 8 Cross-National Cooperation and Agreements 1. _____ integration is the political and economic agreements among countries that give preference to member countries to the agreement. a. Global b. Economic c. Bilateral d. Regional Answer: b. Economic 2. When only two countries agree to cooperate more closely, this is called _____ integration. a. double b. economic c. regional d. bilateral Answer: d. bilateral 3. The European Union is an example of _____ integration. a. regional b. relative c. global d. bilateral Answer: a. regional 4. The World Trade Organization helps promote _____ integration. a. regional b. economic c. global d. bilateral Answer: c. global 5. Which of the following statements most accurately describes the relationship between trading groups and MNEs? a. Trading groups have no influence on the size of the regional market. b. Regional trading groups can define the rules under which companies must operate. c. Companies never need to change their organizational structure to take advantage of regional trading groups. d. Regional trading groups have no influence on an MNE's strategy. Answer: b. Regional trading groups can define the rules under which companies must operate. 6. As companies expand internationally, they must change their _____ to take advantage of regional trading groups. a. operating strategies b. market opportunities c. bilateral trade agreements d. cultural structure Answer: a. operating strategies 7. Companies looking to expand internationally must _____. a. not worry about the regional trading groups in the area b. change their organizational structure to fit the norms in the foreign country c. disregard changes in trading groups that could affect the company d. be aware of the regional trading groups that encompass good market opportunities Answer: d. be aware of the regional trading groups that encompass good market opportunities 8. Which of the following statements illustrates a way that regional trading groups can influence MNEs' strategies? a. Trading groups have no influence on the size of the regional market. b. Trading groups cannot define the rules under which an MNE must operate. c. Companies considering international expansion must change their operating strategies to take advantage of regional trading groups. d. Regional trading groups can decide which companies may or may not invest in countries within that groupage. Answer: c. Companies considering international expansion must change their operating strategies to take advantage of regional trading groups. 9. The _____ clause embodied the fundamental principle of GATT—trade without discrimination. a. most-favored-nation b. nontariff barriers c. free rider d. normal trade relations Answer: a. most-favored-nation 10. The _____is a WTO privilege that allows member nations that restrict tariff cuts to members. a. most-favored-nation b. nontariff barrier c. free rider policy d. normal trade relations Answer: d. normal trade relations 11. Which WTO privilege replaced the most-favored-nation clause of GATT? a. nontariff barrier b. free rider policy c. normal trade relations d. least-favored-nation Answer: c. normal trade relations 12. The WTO replaced the most-favored-nation clause of GATT with the concept of _____. a. nontariff barriers b. normal trade relations c. free rider policy d. least-favored-nation Answer: b. normal trade relations 13. Neighboring countries tend to ally for which of the following reasons? a. The distances that goods need to travel between such countries are wide. b. Consumers' tastes are usually very dissimilar. c. Neighboring countries may be more willing to coordinate their policies. d. Distribution channels are not easily established in adjacent countries. Answer: c. Neighboring countries may be more willing to coordinate their policies. 14. Which of the following statements explains why neighboring countries tend to create regional trading groups? a. Neighboring countries usually do not have a common history or interests. b. Adjacent countries are reluctant to coordinate policies. c. Consumers' tastes are unlikely to be similar. d. The distances that goods need to travel between such countries are short. Answer: d. The distances that goods need to travel between such countries are short. 15. Most trade groups contain countries in the same area of the world. Why is this so? a. The distances that goods need to travel between such countries are short. b. Distribution channels are not easily established in adjacent countries. c. Adjacent countries are reluctant to coordinate policies. d. Neighboring countries usually lack a common history and interests. Answer: a. The distances that goods need to travel between such countries are short. 16. Which of the following groups of countries is most likely to form a regional trading group? a. India, Argentina, France b. Canada, United States, Mexico c. Brazil, Ukraine, Japan d. Spain, South Africa, Mongolia Answer: b. Canada, United States, Mexico 17. The goal of a(n) _____ is to abolish all tariffs among member countries. a. customs union b. common market c. free trade agreement d. Common internal tariff Answer: c. free trade agreement 18. Member countries of a(n) _____ levy a common external tariff on goods being imported from nonmembers. a. customs union b. common market c. free trade agreement d. regional trade agreement Answer: a. customs union 19. A(n) _____ results when free mobility of factors of product are added to a customs union. a. customs union b. common market c. free trade agreement d. regional trade agreement Answer: b. common market 20. The European Union is an example of a(n) _____. a. customs union b. free trade agreement c. regional trade agreement d. common market Answer: a. customs union 21. _____ effects are the shifting of resources from inefficient to efficient companies as trade barriers fall. a. Dynamic b. Static c. Economic d. Barrier Answer: b. Static 22. _____ effects are the overall growth in the market and the impact on a company caused by expanding production and by the company's ability to achieve greater economies of scale. a. Dynamic b. Static c. Economic d. Barrier Answer: a. Dynamic 23. The shifting of resources from inefficient to efficient companies as trade barriers fall produces _____ effects. a. economic b. dynamic c. static d. barrier Answer: c. static 24. _____ effects result when trade barriers come down and the size of the market increases. a. Economic b. Static c. Barrier d. Dynamic Answer: d. Dynamic 25. _____ occurs when production shifts to more efficient producers for reasons of comparative advantage. a. Trade creation b. Trade diversion c. Trade specialization d. Trade internalization Answer: a. Trade creation 26. _____ allows consumers access to more goods at a lower price than would have been possible without integration. a. Trade specialization b. Trade diversion c. Trade creation d. Trade internalization Answer: c. Trade creation 27. When trade shifts to countries in the group at the expense of trade with countries not in the group, even though the nonmember companies might be more efficient in the absence of trade barriers, this is known as _____. a. trade specialization b. trade diversion c. trade creation d. trade internalization Answer: b. trade diversion 28. Assume that U.S. companies are importing the same product from Mexico and Taiwan. The United States enters into an FTA with Mexico but not with Taiwan. Consequently, the United States begins to import more goods from Mexico (due to lower tariffs) than from Taiwan even though the Mexican products may not be any better or cheaper. This is an example of _____. a. trade specialization b. trade internalization c. trade creation d. trade diversion Answer: d. trade diversion 29. Because the size of the market increases when trade barriers fall, companies can increase their production, which will result in lower costs per unit. This phenomenon is known as _____. a. job creation b. economies of scale c. diseconomies of scale d. budget control Answer: b. economies of scale 30. The _____ provides the European Union's political leadership and direction and initiates proposals for legislation. a. European Commission b. European Council c. European Parliament d. European Court of Justice Answer: a. European Commission 31. The _____ is the European Union's ultimate decision-making body and is composed of the different ministers of the member countries. a. European Commission b. European Council c. European Parliament d. European Court of Justice Answer: b. European Council 32. The three major responsibilities of the _____ are legislative power, control over the budget, and supervision of executive decisions. a. European Commission b. European Council c. European Parliament d. European Court of Justice Answer: c. European Parliament 33. The _____ set steps to accomplish monetary union in the European Union, which includes the creation of the euro. a. Single European Act b. Treaty of Maastricht c. European Monetary Union d. European Central Bank Answer: b. Treaty of Maastricht 34. The _____ is the common currency of the European Union. a. franc b. pound c. euro d. mark Answer: c. euro 35. How has the euro impacted commerce in Europe and other areas of the world? a. The euro has not been widely traded since its introduction. b. Consumers inside of Europe must still factor in exchange rates when comparing prices. c. Accounting records must still be reconciled to the home currency. d. Companies can more easily establish pricing policies. Answer: d. Companies can more easily establish pricing policies. 36. Which of the following statements explains the advantages of the euro? a. The introduction of the euro has eliminated currency as a barrier to trade. b. The euro has not been widely traded since its introduction. c. Accounting records must still be reconciled to the home currency. d. Companies still have difficulty establishing pricing policies. Answer: a. The introduction of the euro has eliminated currency as a barrier to trade. 37. Which of the following statements correctly describes how the European Union can influence corporate strategy of MNEs? a. Production location is not an important choice when doing business in the European Union. b. An MNE expanding within the European Union can grow only through joint ventures and mergers. c. Companies need to balance the "commonness" of the EU with national differences. d. Managers of MNEs located within the European Union must learn to speak at least three of the languages found in Europe. Answer: c. Companies need to balance the "commonness" of the EU with national differences. 38. In determining how to grow within the European Union, which of the following alternatives applies to MNEs? a. Growth is possible only through new product lines. b. Mergers, acquisitions, and takeovers are not likely to work in Europe. c. It is impossible to expand market presence in Europe. d. Companies located in Europe have many opportunities to expand and grow, including new investments and joint ventures. Answer: d. Companies located in Europe have many opportunities to expand and grow, including new investments and joint ventures. 39. Although the European Union is a common market, there are many differences between its member countries, including _____. a. different economic growth rates b. different currencies c. different tariff policies d. different legal systems Answer: a. different economic growth rates 40. An MNE looking to expand into the European Union must consider which of the following factors? a. which language the CEO speaks best b. which country has the best production location c. which currency has the most favorable exchange rate d. which tariff policy will reduce trade barriers the most Answer: b. which country has the best production location 41. Which of the following statements accurately describes a challenge facing the European Union? a. The European Union is accepting no new members, which will cause stagnation and inflation. b. The European Union must balance 25 different constitutions without a common, overarching constitution. c. The agricultural policies are outdated and must be updated to accommodate the new members. d. Although economic growth rates are similar among the current members of the European Union, the potential new members have much slower growth rates. Answer: c. The agricultural policies are outdated and must be updated to accommodate the new members. 42. The adoption of the new European Union constitution _____. a. is effective only by a majority vote b. replaces individual national constitutions c. has been accepted by all the member countries d. was voted down by several countries, including France Answer: d. was voted down by several countries, including France 43. The _____ was adopted in 1962 with the objectives of providing farmers with a reasonable standard of living and consumers with quality food at fair prices. a. Common Agricultural Policy b. European Agricultural Policy c. European Agricultural Plan d. Common Agricultural Plan Answer: a. Common Agricultural Policy 44. Which of the following statements accurately explains the economic situation in the European Union? a. Economic growth is similar in each country, so no competitive advantage exists. b. The only high unemployment rates are found in the new member countries. c. Most governments use only fiscal policy to manage their economies. d. The challenge is how to manage interest rates in a way to benefit all member countries. Answer: d. The challenge is how to manage interest rates in a way to benefit all member countries. 45. Which of the following countries are members of NAFTA? a. the United States, Canada, and Mexico b. North America and Latin America c. the United Kingdom, the United States, and Canada d. the United States, Canada, and Australia Answer: a. the United States, Canada, and Mexico 46. The main rationale for NAFTA is _____. a. similar-sized economies b. the tremendous size of the Canadian economy in comparison to the American economy c. geographic proximity and trading importance d. to create competition for the European Union Answer: c. geographic proximity and trading importance 47. NAFTA is an example of which of the following types of economic integration? a. customs union b. common market c. services market d. free trade agreement Answer: d. free trade agreement 48. NAFTA is a good example of _____. a. trade divestment b. trade diversion c. trade loss d. trade implementation Answer: b. trade diversion 49. Rules of origin ensure that _____. a. only goods that were produced mostly within the North American region are eligible for the more liberal tariff conditions created by NAFTA b. only American products may be shipped to Canada and Mexico duty-free c. the members of NAFTA may import products from only neighboring members d. all members have the same external tariffs Answer: a. only goods that were produced mostly within the North American region are eligible for the more liberal tariff conditions created by NAFTA 50. According to regional content rules, at least _____ percent of the net cost of most products must come from the NAFTA region. a. 62.5 b. 50.0 c. 45 d. 70 Answer: b. 50.0 51. For a car assembled in Mexico to enter Canada and the United States according to the preferential NAFTA duty, at least _____ percent of its value must come from North America. a. 50.0 b. 45 c. 62.5 d. 70 Answer: c. 62.5 52. The NAFTA side agreement includes _____. a. labor standards only b. internal tariff laws c. environmental standards only d. environmental and labor standards Answer: d. environmental and labor standards 53. Trade and investment in NAFTA have _____ since the agreement was signed in 2004. a. decreased slightly b. increased dramatically c. increased slightly d. not changed Answer: b. increased dramatically 54. Which of the following statements about trade among the United States, Canada, and Mexico is most accurate? a. The United States relies primarily on Canada and Mexico for the majority of its trade. b. Mexico exports 89 percent of its merchandise to Canada. c. The trading relationship between the United States and Canada is the largest flow of goods, services, and income in the world. d. Mexico is the largest export market for U.S. goods. Answer: c. The trading relationship between the United States and Canada is the largest flow of goods, services, and income in the world. 55. One of the United States' concerns about NAFTA was that _____. a. investment would move to Mexico b. investment would move to Canada c. foreign investment would be diverted to China d. too much foreign investment would flow into the United States. Answer: a. investment would move to Mexico 56. One of NAFTA's major challenges is _____. a. environmental problems in America b. competition from the European Union c. investment leaving NAFTA and entering China d. immigration Answer: d. immigration 57. The major trade group in South America is _____.. a. MERCOSUR b. CAN c. APEC d. CAFTA Answer: a. MERCOSUR 58. _____ is a proposed free trade agreement between the United States and six Central American nations. a. MERCOSUR b. CAFTA c. CAN d. CSN Answer: b. CAFTA 59. The _____ was organized in 1967 and comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. a. APEC b. OAU c. ASEAN d. CAFTA Answer: c. ASEAN 60. _____ was formed in 1989 to promote multilateral economic cooperation in trade and investment in the Pacific Rim. a. ASEAN b. CAFTA c. APRTA d. APEC Answer: d. APEC 61. What are the two types of commodity agreements? a. quota and buffer stock systems b. producers' alliances and international commodity control agreements c. price stabilization agreements and producers' alliances d. quota system and international commodity control agreements Answer: b. producers' alliances and international commodity control agreements 62. _____ are exclusive membership agreements between producing and exporting countries. a. International commodity control agreements b. Buffer stock systems c. Producers' alliances d. Price stabilization mechanisms Answer: c. Producers' alliances 63. _____ are agreements between producing and consuming countries. a. International commodity control agreements b. Buffer stock systems c. Producers' alliances d. Price stabilization mechanisms Answer: a. International commodity control agreements 64. OPEC is an example of a(n) _____. a. international commodity control agreement b. buffer stock system c. producers' alliance d. price stabilization mechanisms Answer: c. producers' alliance 65. In a(n) _____ system, an organization or a country purchases a supply of the commodity from the market and holds it as security. a. quota b. buffer stock c. price stabilization d. membership agreement Answer: a. quota 66. A _____ system is one in which producing countries divide total output and sales to stabilize the price. a. quota b. buffer stock c. price stabilization d. membership agreement Answer: b. buffer stock 67. The quota system is most effective when _____. a. many countries share in world production b. each member country sets its own quota c. a single country has a large share of world production d. it is implemented within a free trade agreement Answer: c. a single country has a large share of world production 68. Producers of easily _____ commodities have _____ control over the price. a. obtainable; more b. obtainable; less c. substitutable; more d. substitutable; less Answer: c. substitutable; more 69. Regional integration is better known as global integration through the World Trade Organization. Answer: False 70. Bilateral integration is where two countries decide to cooperate closer together, usually in the form of tariff reductions. Answer: True 71. Only bilateral trading groups have an influence on MNEs' strategies. Answer: False 72. As companies expand internationally, they must change their organizational structure and operating strategies to take advantage of regional trading groups. Answer: True 73. The fundamental principle of the WTO is embodied in its "most-favored-nation" clause. Answer: False 74. GATT's contribution to trade liberalization made possible the expansion of world trade in the second half. Answer: True 75. One of the reasons that neighboring countries tend to ally is similar consumer tastes. Answer: True 76. Although neighboring countries may have a similar history and interests, they are usually not willing to coordinate their policies. Answer: False 77. The goal of an FTA is to abolish all tariffs among member countries. Answer: True 78. The type of cooperation where free mobility of factors of production is added to a common market results in a customs union. Answer: False 79. Static effects are the shifting of resources from inefficient to efficient companies as trade barriers fall. Answer: True 80. Static effects are the overall growth in the market and the impact on a company caused by expanding production and by the company's ability to achieve greater economies of scale. Answer: False 81. Trade creation allows consumers access to more goods at a lower price than would have been possible without integration. Answer: True 82. If the United States were to import clothing from Mexico instead of Taiwan due to an FTA with Mexico, even though Taiwan offers a lower price, this is an example of trade diversion. Answer: True 83. The European Court of Justice ensures consistent interpretation and application of EU treaties. Answer: True 84. The European Commission is the European Union's ultimate decision-making body and is composed of the different ministers of the member countries. Answer: False 85. The introduction of the euro has eliminated currency as a barrier to trade in European countries. Answer: True 86. Even though the euro has been widely traded since its introduction, consumers inside of Europe must still factor in exchange rates when comparing prices. Answer: False 87. MNEs located in Europe have many opportunities to expand and grow, including through new investments and joint ventures. Answer: True 88. Production location is not an important choice when doing business in the European Union. Answer: False 89. One of the challenges facing the European Union is the admission of new members, which will add to its economic output while straining the EU's financial resources. Answer: True 90. The adoption of the new European Union constitution will replace individual national constitutions. Answer: False 91. NAFTA is an example of a common market. Answer: False 92. Geographic proximity and trading importance were the main rationale for the creation of NAFTA. Answer: True 93. Each country in NAFTA sets its own tariffs to the rest of the world. Answer: True 94. NAFTA is based on only one goal: to reduce tariffs. Answer: False 95. At the inception of NAFTA, Mexico's economy was the fifteenth largest in the world; it has now become the ninth largest. Answer: True 96. So far, immigration has not been a major challenge to NAFTA. Answer: False 97. CAFTA is a proposed free trade agreement between the United States and six Central American countries. Answer: True 98. ASEAN was formed in 1989 to promote multilateral economic cooperation in trade and investment in the Pacific Rim. Answer: False 99. Producers' alliances are exclusive membership agreements between producing and exporting countries. Answer: True 100. Quota system and international commodity control agreements are the two types of commodity agreements. Answer: False 101. If a commodity is easily substitutable, the producers have more control over price. Answer: False 102. The quota system is most effective when a single country has a large share of world production. Answer: True 103. Describe the different types of regional economic integration and give an example of each type. Answer: a. Free trade area (FTA)—The goal of a free trade area is to abolish all tariffs among member countries. Free trade agreements usually begin modestly by eliminating tariffs on goods that already have low tariffs, and there is usually an implementation period over which all tariffs are eliminated on all products. In addition, each member country maintains its own external tariff against non-FTA countries. Examples: the European Free Trade Association, the Central European Free Trade Agreement, the North American Free Trade Agreement, and Association of South East Asian Nations. b. Customs union—In addition to eliminating internal tariffs, member countries levy a common external tariff on goods being imported from nonmembers. Example: MERCOSUR. c. Common market—A common market has all the elements of a customs union plus it allows free mobility of production factors such as labor and capital. Examples: the Caribbean Community and Common Market, the Central American Common Market, the Andean Groupage. d. Complete economic integration—Complete economic integration has all the elements of a common market and creates even greater economic harmonization through the adoption of common economic policies. Example: the European Union. 104. Explain the static effects and dynamic effects of economic integration. What is the difference between trade creation and trade diversion resulting from economic integration? Answer: Static effects are the shifting of resources from inefficient to efficient companies as trade barriers fall. Dynamic effects are the overall growth in the market and the impact on a company of expanding production and achieving greater economies of scale. Static effects may develop when either of two conditions occurs: a. Trade creation—Production shifts to more efficient producers for reasons of comparative advantage, allowing consumers access to more goods at a lower price than would have been possible without integration. b. Trade diversion—Trade shifts to countries in the group at the expense of trade with countries not in the group, even though the nonmember company might be more efficient in the absence of trade barriers. Dynamic effects of integration occur when trade barriers come down and the size of the market increases. 105. What are the functions of the European Commission, the European Parliament, the Council of Ministers, and the European Court of Justice? Answer: a. The European Commission provides the European's political leadership and direction. The original intent was for the commission to act as a supranational government for Europe. There are three distinct functions of the commission: (1) initiating proposal for legislation, (2) guardian of the treaties, (3) the manager and executor of union policies and of international trade relationships. The legislative process begins with a proposal from the commission, which gathers input from various national constituencies and tries to determine what is in the best interest of the community at large. As guardian of the treaties, the commission determines whether or not member states are correctly applying EU legislation. If the countries are not, the commission may fine the countries or firms, subject to appeal by the Court of Justice. Finally, the commission manages the annual budget of the EU, manages the EU, and negotiates trade agreements. b. The three major responsibilities of the European Parliament are: legislative power, control over the budget, and supervision of executive decisions. The commission presents community legislation to the parliament. Parliament may approve legislation, amend it, or reject it outright. Parliament also approves the EU's budget each year and monitors spending. c. The council is also known as the Council of Ministers, which is composed of different ministers of the member countries. The European Council is important because it sets priorities, gives political direction, and resolves issues that the Council of Ministers cannot resolve. d. The European Court of Justice ensures consistent interpretation and application of EU treaties. Member states, community institutions, or individuals and companies may bring cases to the court. The Court of Justice is an appeals court for individuals, firms, and organizations fined by the commission for infringing treaty law. The reason why the Court of Justice is relevant to MNCs is because it deals mostly with economic matters. 106. What was the rationale for NAFTA? Answer: NAFTA, which includes Canada, the United States, and Mexico, went into effect in 1994, but it originated with the Canada-U.S. Free Trade Agreement. The United States and Canada historically have had various forms of mutual economic cooperation. In February 1991, Mexico approached the United States to establish a free trade agreement. The formal negotiations that began in June 1991 included Canada. The resulting North American Free Trade Agreement became effective on January 1, 1994. NAFTA has a logical rationale, in terms of both geographic location and trading importance. Although Canadian-Mexican trade was not significant when the agreement was signed, U.S.-Mexican and U.S.-Canadian trade was. The two-way trading relationship between the United States and Canada is the largest in the world. NAFTA provides the static and dynamic effects of economic integration. For example, Canadian and U.S. consumers benefit from lower-cost agricultural products from Mexico, a static effect of economic liberalization. U.S. producers also benefit from the large and growing Mexican market, which has a huge appetite for U.S. products—a dynamic effect. 107. What are the rules of origin and local content provisions of NAFTA? Answer: Because NAFTA is a free trade agreement and not a customs union, each country sets its own tariff for the rest of the world. Rules of origin ensure that only goods that have been the subject of substantial economic activity within the free trade area are eligible for the more liberal tariff conditions created by NAFTA. According to local content rules, at least 50 percent of the net cost of most products must come from the NAFTA region. The exceptions are 55 percent for footwear, 62.5 percent for passenger automobiles and light trucks and the engines and transmissions for such vehicles, the 60 percent for other vehicles and automotive parts. 108. What has been the impact of NAFTA on trade and employment? Answer: Since NAFTA has been in place, the United States, Canada, and Mexico have tripled their business dealings with trade among the countries equaling $1.7 billion per day. U.S. exports to Mexico have increased, but Mexican exports to the United States have surged even more. The investment and employment picture are far more complicated. One concern for U.S. workers was that investment would move to Mexico due to lower wages and lax environmental standards in Mexico. 109. What are the major regional trading groups in Africa, Latin America, and Asia? Answer: a. The major trade group in South America is MERCOSUR. In 1991, Brazil, Argentina, Paraguay, and Uruguay established MERCOSUR as a subregional group ALADI. MERCOSUR is significant because of its size; the four original members generate 80 percent of South America's GNP. Although the Andean Common Market is not as significant economically as MERCOSUR, it is the second most important regional group in South America. b. The Association of South East Asian Nations (ASEAN), organized in 1967, comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. It is promoting cooperation in many areas, including industry and trade. Member countries are protected in terms of tariff and nontariff barriers. 110. What is the purpose of commodity agreements? Answer: Commodity agreements are of two basic types: producers' alliances and international commodity control agreements (ICCAs). Producers' alliances are exclusive membership agreements between producing and exporting countries. Examples are Organization of Petroleum Exporting Countries (OPEC) and the Union of Banana Exporting Countries. ICCAs are agreements between producing and consuming countries. Examples of ICCAs are the International Cocoa Organization (ICCO) and the International Sugar Organization. Most developing countries traditionally have relied on the export of one or two commodities to supply the foreign currencies from industrial countries they need for economic development. However, commodity prices are not stable. One approach to counteract price instability was the buffer-stock system. A buffer-stock system is a partially managed commodity agreement that a central agency monitors. Another approach is a quota system, where producing countries divide total output and sales to stabilize the price. For the quota system to work, participating countries must cooperate among themselves to prevent sharp fluctuations in supply. The quota system is most effective when a single country has a large share of world production or consumption because it is able to control supply much more easily. Test Bank for International Business: Environments and Operations John D. Daniels, Lee H. Radebaugh, Daniel P. Sullivan 9780131869424, 9780201846188, 9780130308016, 9780201566260, 9780201107135, 9780132668668
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