Question

Read the following passage carefully and answer the questions that follow:

Case for Free Trade The act of opening up economies for trading is known as free trade or trade liberalization. This is done by bringing down trade barriers like tariffs. Trade liberalization allows goods and services from everywhere to compete with domestic products and services.            Globalisation along with free trade can adversely affect the economies of developing countries by not giving equal playing field by imposing conditions which are unfavourable. With the development of transport and communication systems goods and services can travel faster and farther than ever before. But free trade should not only let rich countries enter the markets, but allow the developed countries to keep their own markets protected from foreign products.            Countries also need to be cautious about dumped goods; as along with free trade dumped goods of cheaper prices can harm the domestic producers.

1. Explain the meaning of ‘trade liberalisation’. 1
2. How have ‘globalisation’ and ‘free trade’ affected the economies of developing countries? 1
3. What should be done by the developing countries to protect from negative impact of ‘free trade’? Mention any two steps. 1

Answer 1

1. Trade liberalization is reducing trade barriers such as tariffs and import restrictions to promote free movement of products and services between countries.
2. Globalization and free trade often benefit developed countries, resulting in unfair competition. Developing nations may struggle with competition from cheaper imported goods, making it challenging for local companies to survive.
3. Developing countries may reduce the negative impact of free trade by taking the following two steps:
   1. Implement Protective Policies: Governments can use anti-dumping taxes and restrictions to prevent inexpensive foreign goods from damaging local industries.
   2. Strengthen Domestic Industries: Investing in infrastructure, technology, and skill development can boost local industries' competitiveness in the global market.