Question

Which of the following, indicate whether each statement about regional trade agreements is true or false. Statement True False

Answer 1

Answer: Please refer to Explanation

Explanation:

Under regional trade agreements, several countries eliminate tariffs among themselves and lower tariffs against all other countries.

FALSE.

Under regional Trade Agreements, countries do indeed eliminate tariffs amongst themselves but there is no obligation to reduce tariffs against countries not part of the agreement.

Regional trade agreements contradict GATT’s most favored nation principle.

TRUE

Regional Trade Agreements do indeed violate the GATT's and the WTO's most favoured principle which states that rights granted to 1 nation of GATT must be granted to all nations in GATT.

The countries in the European Union (EU) keep their own tariffs with the countries outside the EU.

FALSE.

As a political and economic union, the EU maintains a common tariff against countries outside the EU.

A good imported into Mexico from China will not be granted duty-free access to the U.S. market if no value is added to this good in Mexico.

TRUE.

Agreements between China and Mexico do not bound the US if they are not in the agreement as well. Seeing however, as there is an agreement between Mexico and the US, Mexican products can come into the US duty free so for a Chinese product to do tge same, it needs to have been added value to in Mexico.

Rules of origin specify the types of goods that can be shipped duty-free within a free trade area.

TRUE

Rules of origin are made to decide which goods can be shipped duty free.

Rules of origin specify the types of goods that can be shipped duty-free within a customs union.

FALSE.

Rule of Origin do not necessarily apply in a Customs Union as they are supposed to maintain a fixed tariff rate against all countries outside the Customs Union.