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Consider the following statements with reference to Preferential Trade Agreement (PTA) in international trade:
1. Two or more partners give preferential rights to certain products by reducing duties on an agreed number of tariff lines.
2. Tariffs can not be reduced to zero for products in a PTA.
Which of the statements given above is/are correct?
  • a)
    1 only
  • b)
    2 only
  • c)
    Both 1 and 2
  • d)
    Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
Consider the following statements with reference to Preferential Trade...
  • In Preferential Trade Agreement (PTA) two or more partners give preferential right of entry to certain products. This is done by reducing duties on an agreed number of tariff lines. Hence, statement 1 is correct.
  • Tariffs may even be reduced to zero for some products even in a PTA. Hence, statement 2 is not correct.
  • India signed a PTA with Afghanistan.
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Community Answer
Consider the following statements with reference to Preferential Trade...
Preferential Trade Agreement (PTA) in international trade

Statement 1: Two or more partners give preferential rights to certain products by reducing duties on an agreed number of tariff lines.

This statement is correct. A Preferential Trade Agreement (PTA) is a trade agreement between two or more countries or regions that grants preferential treatment to certain products by reducing or eliminating tariffs or other trade barriers. Under a PTA, the participating countries agree to lower tariffs on a specific number of products, known as tariff lines. These tariff lines are chosen based on the products that each country wants to promote or protect. By reducing tariffs on these specific products, the participating countries aim to increase trade and economic cooperation among themselves.

Statement 2: Tariffs cannot be reduced to zero for products in a PTA.

This statement is incorrect. In a Preferential Trade Agreement (PTA), tariffs can indeed be reduced to zero for certain products. The purpose of a PTA is to give preferential treatment to specific products, and one way to achieve this is by completely eliminating tariffs on those products. This allows the participating countries to enhance trade in those particular goods and reap the benefits of increased market access and competitiveness.

It is important to note that while tariffs can be reduced to zero for certain products, this does not mean that all products are included in the PTA or that all tariffs are eliminated. PTAs typically cover a limited number of products and tariff lines, focusing on the sectors that are mutually beneficial for the participating countries. The extent of tariff reduction or elimination depends on the negotiations and agreements reached among the countries involved in the PTA.

In conclusion, both statements are not correct. Statement 1 is correct as PTAs involve reducing duties on an agreed number of tariff lines. Statement 2 is incorrect as tariffs can be reduced to zero for products included in a PTA, depending on the negotiations and agreements among the participating countries.
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Consider the following statements with reference to Preferential Trade Agreement (PTA) in international trade:1. Two or more partners give preferential rights to certain products by reducing duties on an agreed number of tariff lines.2. Tariffs can not be reduced to zero for products in a PTA.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?
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