Reading Comprehension

Source: OG 12th Ed

Many United States companies have,
unfortunately, made the search for legal protection
from import competition into a major line of
work. Since 1980 the United States International
Trade Commission (ITC) has received about 280
complaints alleging damage from imports that
benefit from subsidies by foreign governments.
Another 340 charge that foreign companies
"dumped" their products in the United States at
"less than fair value." Even when no unfair practices
are alleged, the simple claim that an industry has
been injured by imports is sufficient grounds to
seek relief.

Contrary to the general impression, this quest
for import relief has hurt more companies than
it has helped. As corporations begin to function
globally, they develop an intricate web of marketing,
production, and research relationships. The complexity
of these relationships makes it unlikely that a system
of import relief laws will meet the strategic needs of
all the units under the same parent company.

Internationalization increases the danger that
foreign companies will use import relief laws against
the very companies the laws were designed to
protect. Suppose a United States-owned company
establishes an overseas plant to manufacture
a product while its competitor makes the same
product in the United States. If the competitor can
prove injury from the imports-and that the United
States company received a subsidy from a foreign
government to build its plant abroad-the United
States company's products will be uncompetitive in
the United States, since they would be subject to
duties.

Perhaps the most brazen case occurred when
the ITC investigated allegations that Canadian
companies were injuring the United States salt
industry by dumping rock salt, used to de-ice roads.
The bizarre aspect of the complaint was that a
foreign conglomerate with United States operations
was crying for help against a United States
company with foreign operations. The "United
States" company claiming injury was a subsidiary
of a Dutch conglomerate, while the "Canadian''
companies included a subsidiary of a Chicago firm
that was the second-largest domestic producer of
rock salt.

Q1
The passage suggests that which of the following is most likely to be true of United States trade laws?
(A) They will eliminate the practice of "dumping" products in the United States.
(B) They will enable manufacturers in the United States to compete more profitably outside the United States.
(C) They will affect United States trade with Canada more negatively than trade with other nations.
(D) Those that help one unit within a parent company will not necessarily help other units in the company.
(E) Those that are applied to international companies will accomplish their intended result.

OA: D; I pointed it in passage; however, I could not able to understand that why this is correct.

Q2
It can be inferred from the passage that the author believes which of the following about the complaint mentioned in the last paragraph?
(A) The ITC acted unfairly toward the complainant in its investigation.
(B) The complaint violated the intent of import relief laws.
(C) The response of the ITC to the complaint provided suitable relief from unfair trade practices to the complainant.
(D) The ITC did not have access to appropriate information concerning the case.
(E) Each of the companies involved in the complaint acted in its own best interest.

OA: B


Can someone please explain how to solve these two questions?

Can someone or GMAT instructors address my RC?

So it is best here to summarize each paragraph to give you an idea of what is happening

1 - Trade laws allow US co. to ask for relief from imports.

2. in a complex global market these law hurt more than help.

3. foreign companies might be able to use laws against the us - NOT intended.

4. Example of when foreign co. used the laws against a US company.

If you summarize the passage and then answer the question in your own you will generally have better results.

Q1 - the passage suggests that trade laws can be used against the US companies - this isn't what is intended.

A - not about dumping
B- no - nothing about US co. competing outside US.
C. When an answer choice makes a comparison you need to know about all sides, we don't
d. Even though this isn't about US co. it may work because of specific lines in the 2nd paragraph.
e. This goes directly against the passage statements - because now it is difficult to tell who is the parent company.

Q2 - the complaint in the last paragraph fell under trade laws and actually allowed a Dutch company to complain against a US company if you look at the parent companies - it is an example of the bad use of trade laws.

A. we don't know how it was investigated
B. Yes - the intent was for US to gain relief from others and it worked backwards here.
C. we don't know their response
D. we don't know about concealed info.
E. we don't know about the co. interests.

Thanks Becky
I understood Q2 but didn't Q1.

Q1:

The complexity of these relationships makes it unlikely that a system of import relief laws will meet the strategic needs of all the units under the same parent company.

How can we infer D: Those that help one unit within a parent company will not necessarily help other units in the company.

akhp77 wrote:Thanks Becky
I understood Q2 but didn't Q1.

Q1:

The complexity of these relationships makes it unlikely that a system of import relief laws will meet the strategic needs of all the units under the same parent company.

How can we infer D: Those that help one unit within a parent company will not necessarily help other units in the company.

Interestingly this is Author's Main Point question - "Import Protection Laws - may not be helpful to /may very well hurt- the Global companies with multi-country operations"-

Why,lets assume a hypothetical situation wherein, Intel (American company) imports mobile chips from Taiwan but manufactures laptop chips in US, whereas STMicroelectronics (French company) manufactures its mobile chips in US, in this case STMicroelectronics can very well seek protection from Intel's Mobile chip division under trade laws.

In sum, the very law that was made to protect Intel's Laptop chip division can act against Intel's Mobile chip division -- thus this complex relationship does not serves strategic needs of both "Laptop" & "Mobile" chip division of Intel. Consequently we can infer"Those (laws) that help one unit (Laptop div) within a parent company (Intel) will not necessarily help other units (Mobile div) in the company."

I did not understand last 2 paragraphs.......third para graph says "Internationalization increases the danger that foreign companies will use import relief laws against the very companies the laws were designed to protect"

But the example given does not seem to suggest same because in the example a competitor company seeks relief due to injury from imports of goods of a US based company having its production house on a foreign location.

This scenario is what was being talked in passage above so how it justifies that "the danger that foreign companies will use import relief laws against the very companies the laws were designed to protect".

1. The passage is chiefly concerned with
(A) arguing against the increased internationalization of United States corporations
(B) warning that the application of laws affecting trade frequently has unintended consequences
(C) demonstrating that foreign-based firms receive more subsidies from their governments than United States firms receive from the United States government
(D) advocating the use of trade restrictions for "dumped" products but not for other imports
(E) recommending a uniform method for handling claims of unfair trade practices

OA: (B)

I don't understand why is A wrong?