Test: Government Intervention in International Trade - UGC NET MCQ

Governments intervene in international trade primarily to address political and economic objectives. This intervention can take various forms, such as tariffs, subsidies, quotas, and regulations, aimed at protecting domestic industries, ensuring national security, or achieving specific policy goals. By intervening, governments seek to balance domestic pressures with the need for efficient trade systems, even though free trade is generally associated with greater overall benefits. This delicate balancing act highlights the complexities policymakers face when navigating international trade dynamics.

The main challenge policymakers encounter when contemplating government interventions in international trade is balancing domestic pressures with the necessity for efficient trade systems. This challenge arises from the competing demands of protecting domestic industries, safeguarding national interests, and fostering international economic cooperation. Policymakers must navigate these complex dynamics to formulate trade policies that effectively address both domestic concerns and broader economic objectives. Achieving this balance is crucial for promoting sustainable economic growth and maintaining a competitive position in the global marketplace.

• Assertion: The assertion is correct. Import standards play a vital role in ensuring that foreign goods meet the safety and environmental regulations of the importing country.
• Reason: The reason is also correct. Restrictions on imports of strategic materials and technology are indeed important for national security concerns, but they do not directly explain the need for import standards related to safety and environmental regulations.
• Explanation: While both the assertion and reason are true, they are not directly related to each other. Import standards primarily focus on product quality and safety compliance, while national security concerns are addressed through different measures such as strategic material restrictions.

• After the solution Disguise things, substantially limit imports
• Labeling rules that indicate the origin and content
• Import duties and quotas
• Safety regulations for motor vehicles and electrical equipment Import restrictions refer to various tariff and non-tariff barriers imposed by an importing nation to control numerous of goods entering the country from other countries.
• Import restrictions are imposed to maintain the exchange rate of the country's currency.
• The main types of trade restrictions are tariffs, quotas, embargoes, licensing requirements, standards, and subsidies.
• A tariff is a tax imposed on goods imported from abroad.
• General Requirements on Hygienic and Sanitary Practices to be followed by all Food Business Operators applying for License
• The establishment in which food is being handled, processed, manufactured, packed, stored, and distributed by the food business operator and the persons handling them should conform to the sanitary and hygienic requirement, food safety measures, and other standards

Both the assertion and reason are true, but the reason does not provide a correct explanation for the assertion. While quotas protect domestic farmers, they can also restrict consumer choices, which is not directly related to ensuring fair competition.

Tariffs are taxes imposed on imported goods with the primary purpose of protecting domestic industries from foreign competition. By increasing the price of imported goods, tariffs make them less attractive compared to locally produced goods, thereby safeguarding domestic industries. This measure aims to support the economy by maintaining the competitiveness of local producers and preserving jobs within the country.

Subsidies provided to domestic producers aim to help them compete with cheaper imports. While subsidies lower the cost of locally made goods, they can distort market conditions by artificially influencing the competitiveness of certain industries. This can lead to overproduction and potentially create inefficiencies within the market.

• Dumping in reference to international trade means the export by country or company of product at a price that is lower in the foreign market than the price charged in the domestic market.
• Dumping typically involves substantial export volumes of a product, it often endangers the financial viability of the product's manufacturer or producer in the importing nation.
• The biggest advantage of dumping is the ability to flood a market with product prices that are often considered unfair.
• Countries use tariffs and quotas to protect their domestic producers from dumping.

Assertion Analysis: The assertion statement is true as tariffs can indeed reduce the incentive for local firms to innovate by providing a protective environment that may lessen the need for innovation.

Reason Analysis: The reason statement is false as protectionist measures like tariffs do not necessarily directly create a cushion for domestic firms. They may provide short-term advantages but can hinder long-term growth and innovation.

Explanation: While the assertion is true, the reason is false. The reason does not correctly explain the assertion, as tariffs can stifle innovation rather than directly create a cushion for firms.

• Assertion: The assertion is correct. Tariffs and quotas are tools used by governments to protect domestic industries from foreign competition, thereby shielding emerging industries and preserving jobs.
• Reason: The reason is also correct. Import controls can indeed help improve a country's trade balance and contribute to short-term GDP growth by reducing imports and potentially saving jobs.
• Explanation: The reason provides a logical explanation for the assertion, as import controls like tariffs and quotas directly impact the competitiveness of domestic industries by limiting foreign competition.