Future Business Leader Achievments (FBLA) Economics Practice Exam

The part of a trade agreement that extends the benefits of tariff reductions negotiated with one country to all other countries is called __________ clause.

1. universal nation

2. nondiscrimination

3. most-favored-nation

4. multilateral trade

The correct answer is: universal nation

The correct term for the part of a trade agreement that extends the benefits of tariff reductions negotiated with one country to all other countries is the most-favored-nation clause. This clause ensures that if one country is granted a favorable tariff rate or other trade advantages, those same benefits must be granted to all other signatory countries. This concept is foundational in international trade agreements because it promotes equality and fairness among trading partners. By having a most-favored-nation clause, countries can prevent discrimination between trading partners, ensuring that no single country is preferred over others regarding tariff rates and trade benefits. Understanding this mechanism is crucial for navigating global trade, as it helps maintain open and competitive markets, which benefits consumers and economies alike. The incorrect choice of "universal nation" does not pertain to a specific term used in trade agreements, while "nondiscrimination" serves as a broader principle rather than a specific clause. "Multilateral trade" refers to trade agreements involving more than two countries but does not specifically encompass the provision of extending tariff benefits.