Unit 6
Goodbye, Free Trade?
Exercises
1.Answer the questions on the text.
1) What was the result when the House of Representatives passed the
Hawley-Smoot Tariff Act in 1930?
The economic recession in the United States became even worse.
2) According to the author, what happens when a currency appreciates?
It diminishes the export advantage of the country and makes it difficult to increase exports or even maintain the status quo.
3) How did American politicians take advantage of the public’s strong
anti-free-trade sentiment in the United States?
They created a talking point in charges of unfair trade so that they thought they could benefit in the mid-term elections.
4) What did American politicians and economists agree and disagree over the
Hawley-Smoot Tariff Act?
Almost all of them agreed that it was a bad law, but they disagreed whether it triggered the Great Depression in the 1930s.
5) What did Milton Friedman think were the more important reasons for the
Great Depression?
The malfunctioning gold standard system and inept monetary policy of the Federal Reserve.
6) What was the foreign reaction unexpected by the American lawmakers after
the Hawley-Smoot Tariff Act was enacted?
The trading partners were angered and imposed discriminatory tariffs on American goods. Canada in particular, as the largest export market for the US, reacted fiercely and handed its market over to the British competitors.
7) Why is it unlikely for the US to adopt another Smoot-Hawley today in the eye
of the author?
(1)The US is much more integrated into the world economy today than it was in
the 1930s.
(2)Import restrictions seldom achieve their intended goals, instead, often end up
hurting American industries and consumers.
(3)The Americans have learned to consider the possible strong foreign
retaliation against US exporters.
8) What were the respective results for those countries withdrawing from the
gold standard and those clinging to it during the 1930s according to the author?
Those countries going off the gold standard allowed their currencies to depreciate, avoided protectionist trade policies and, instead, used monetary policy to end price deflation and stimulate economic growth.
Those countries choosing to stay on pursued protectionist trade policies by imposing high tariffs, import quotas and exchange controls, which did little in boosting their economic growth. Thus they suffered a longer economic depression.
9) How does the author justify his support for the policy of "quantitative
easing"?
(1) Historically, the most important tool for resisting protectionist sentiment in the
1930s was a monetary policy that would promote economic growth.
Today the US is in a similar situation. Taking right monetary policy can alleviate the pressure on Washington to adopt protectionist trade policy and can help to raise output before it leads to a high inflation.
(2) He also quotes what Charles Evens said: Additional measures taken by the Fed
to stimulate growth should condoned, not condemned.
(3) What Mr. Friedman wrote 1997 about Japan: The surest road to a healthy
economic recovery is to increase the rate of monetary growth, to shift from tight money to easier money.
10) What does the author imply about the US Congress?
In comparison with the Fed, the US Congress is following a trade protectionist policy in blaming other countries for its unemployment and may cause serious trade retaliations from trading partners.
2. Fill in each blank of the following sentences with one of the phrases in the list given below. Make changes when necessary.
1)As the financial scandal involves so many people, the probe in to it could drag
on for another year.
2)In the age of globalization more individuals are forced to integrate into
multinational work teams.
3)Many in Europe are now very much worried that it may sink into a Japan-style
economic recession.
4)But the business leaders yesterday warned against interest rate rises, arguing that
inflation was being driven not by consumer spending, but by rising commodity prices.
5)After the call scandal, the American automakers and some politicians there were
so eager to keep their rival Toyota at bay in the auto market.
6)Under the current labor law, two categories of employees are exempt from
minimum wage and overtime requirements.
7)Though the local partner made a revised offer, the foreigner investor refused and
reverted back to the original agreement conditions.
8)Last Friday the two parties met for more than five hours only to end up walking
away from the table once again, reaching no agreement at all.
