Test: Trade & Commerce - UPSC MCQ

Trade refers to the exchange of goods and services between nations, regions, or individuals. It plays a crucial role in the economic development of countries and fosters international relations. Through trade, countries can access resources they lack and specialize in producing goods they have a comparative advantage in.

A trade barrier is any measure that restricts or hinders the free flow of goods and services between countries. Import duty, also known as a tariff, is a tax imposed by a government on imported goods. It increases the cost of imported products, making them less competitive compared to domestically produced goods.

The main objective of the WTO is to promote fair and non-discriminatory trade practices among member countries. It aims to ensure that trade flows as smoothly, predictably, and freely as possible while prohibiting unfair practices such as trade barriers and subsidies that distort international trade.

Laissez-faire is an economic theory that advocates minimal government intervention in economic affairs, including trade. It suggests that free markets should operate without restrictions, and the government should not interfere with the pricing, production, or distribution of goods and services.

WIPO is the international organization responsible for promoting the protection of intellectual property rights worldwide. It administers various treaties related to patents, trademarks, copyrights, and trade secrets, ensuring that intellectual property is respected and protected in international trade.

Non-tariff trade barriers are measures other than tariffs that restrict imports or exports. Foreign exchange controls, also known as currency controls, limit the availability or convertibility of a country's currency, affecting the ability of businesses to conduct international trade.

The Theory of Comparative Advantage, proposed by David Ricardo, suggests that a country should specialize in producing goods and services in which it has a lower opportunity cost and trade those goods with other countries. By doing so, all countries can benefit from trade and overall efficiency increases.

The "Most Favored Nation" (MFN) clause is a principle in international trade where a country extends its best trade terms and conditions, including tariffs and market access, to all other trading partners. It ensures that no country receives better treatment than others in terms of trade.

The balance of trade is the difference between the value of a country's exports (goods and services sold to other countries) and its imports (goods and services purchased from other countries) over a specific period. If exports exceed imports, there is a trade surplus, and if imports exceed exports, there is a trade deficit.

NAFTA was a trade agreement among Canada, Mexico, and the United States, aimed at promoting trade and economic cooperation in North America. It eliminated tariffs and reduced barriers to trade and investment among the member countries.

An export subsidy is a financial incentive given by the government to domestic producers to promote exports. It helps domestic producers remain competitive in international markets by reducing their production costs or providing direct financial assistance, thereby encouraging increased exports.

The TPP was a trade agreement among 12 countries bordering the Pacific Ocean, aiming to promote economic integration and reduce trade barriers among member nations. It was designed to enhance economic cooperation and deepen ties between the Asia-Pacific region and the Americas.

The IMF provides financial assistance to member countries facing balance of payments problems, including trade deficits. It offers temporary financial support and policy advice to help countries address economic challenges and stabilize their economies during periods of crisis.

International trade allows countries to access a diverse range of goods and services that may not be available or produced domestically. This provides consumers with a broader selection of products and promotes competition, leading to better quality and more affordable options.

Import substitution is an economic policy that aims to promote domestic industries by reducing reliance on imports. Countries implementing this policy impose trade barriers and restrictions on imported goods to protect domestic producers and encourage consumers to buy locally produced goods.

The Heckscher-Ohlin Theory, also known as the factor-proportions theory, asserts that a country will export goods that use its abundant factors of production more intensively and import goods that use its scarce factors more intensively. It explains trade patterns based on a country's factor endowments.

The WTO not only promotes fair trade practices but also provides a platform for member countries to resolve trade disputes through a formal dispute settlement mechanism. The Dispute Settlement Body (DSB) of the WTO handles disputes and ensures that trade disagreements are addressed based on established rules and procedures.

Comparative Advantage is the ability of a country to produce a good or service at a lower opportunity cost (in terms of other goods sacrificed) than another country. It is the foundation of international trade as it encourages countries to specialize in producing goods they can produce more efficiently than others.

Dumping is a trade practice where a country exports goods to another country at prices lower than their production cost or the domestic market price. This can harm domestic industries in the importing country, distort competition, and lead to trade disputes.

The New Trade Theory suggests that international trade can be influenced by economies of scale, which lead to lower production costs and increased specialization. Additionally, it emphasizes the importance of product differentiation in trade, where unique products can lead to a competitive advantage in international markets.