[Lambswool Tax] the U

question 18

Multiple Choice

[Lambswool tax] The U.S. and Canada are members of the World Trade Organization and GATT. Frustrated by the tough competition from Canadian suppliers, Lambswool suppliers in the U.S. have pressured Congress to pass a law requiring importers to pay a tax per pound of lambswool imported to the U.S. and restricting the number of pounds of lambswool imported from specific countries, including Canada. Wholly Wool, Inc., is a Canadian company that sells lambswool that is nearly identical to lambswool produced and sold in the U.S.
-Wholly Wool's president claims the United States is in violation of GATT because of the improper restriction on the amount of lambswool that can be imported. Is he correct?

• A) Yes, because GATT prohibits all restrictions on importation of domestic animal products.
• B) Yes, because the quantitative restriction was made for national economic reasons.
• C) No, because GATT allows quantitative restrictions that have a rational basis.
• D) No, because the goods are also produced in the United States.
• E) No, because the U.S. is entitled to tax like goods.

---

Definitions:

Compromise

An agreement or settlement of a dispute that is reached by each side making concessions.

Industrial Economy

A system characterized by large-scale, automated manufacturing, capital-intensive production, and the significant role of the industry sector in economic activities.

Service-Dominated Economy

An economy primarily focused on the provision of services rather than goods production.

American Business

Refers to the commercial activities, practices, and standards primarily associated with companies operating in the United States.