UPSC Prelims Practice Questions — India-U.S. pact to be based on changed circumstances: Goyal

Q1. With reference to the types of trade agreements that India has signed or is negotiating, consider the following statements: Which of the statements given above is/are correct?

  1. Upgrading an existing Preferential Trade Agreement into a Comprehensive Economic Partnership Agreement requires the two partners to adopt a common tariff on imports from third countries.
  2. A Preferential Trade Agreement typically lowers duties on a negotiated list of products, rather than freeing substantially all trade between the partners.
  3. A Comprehensive Economic Partnership Agreement generally goes beyond tariffs on goods to cover areas such as services and investment.
  • A. 1 only
  • B. 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q2. With reference to how trade agreements are negotiated and brought into effect, consider the following statements: Which of the statements given above is/are correct?

  1. A country can have a bilateral trade agreement in force with one member of a regional bloc while its negotiations with that bloc as a whole are still under way.
  2. Each negotiating round held after the Terms of Reference are signed produces tariff commitments that become binding on the parties when that round closes.
  3. A trade agreement that has already been signed may still take several months to enter into force.
  • A. 1, 2 and 3
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1 and 3 only

Q3. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. Although negotiations for the India–EU Free Trade Agreement were concluded in January 2026, the agreement does not yet oblige either side to grant its tariff concessions.
  2. Concluding negotiations settles the text of an agreement, but legal scrubbing, formal signature and ratification must follow before the agreement takes legal effect.
  • A. Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • B. Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • C. Statement-I is correct, but Statement-II is incorrect
  • D. Statement-I is incorrect, but Statement-II is correct

Q4. With reference to the World Trade Organization's most-favoured-nation (MFN) principle and its exceptions, consider the following statements: Which of the statements given above are correct?

  1. A tariff reduction that a WTO member grants to like products of one member must generally be extended to like products of all other members.
  2. A free trade area covered by GATT Article XXIV must not raise barriers to trade with countries outside it.
  3. The Enabling Clause permits preferential arrangements in goods trade among developing-country members without extending those preferences to all members.
  4. Preferential agreements on trade in services need no WTO exception at all, because the MFN obligation applies only to trade in goods.
  • A. 1 and 2 only
  • B. 1, 2 and 3 only
  • C. 2, 3 and 4 only
  • D. 1, 2, 3 and 4

Q5. With reference to free trade areas and customs unions as recognised under GATT Article XXIV, consider the following statements: Which of the statements given above is/are correct?

  1. Members of a customs union generally negotiate tariff concessions with non-member countries as a single bloc rather than individually.
  2. Members of a free trade area must apply substantially the same duties to imports from non-member countries.
  3. Forming a customs union involves replacing the members' separate customs territories with a single customs territory.
  • A. 1 and 3 only
  • B. 2 and 3 only
  • C. 1, 2 and 3
  • D. 1 only

Q6. Consider the following facts: In February 2026, the U.S. agreed to lower its tariff on Indian goods to 18% from 50%. In June 2026, India's Commerce Minister said the deal would take effect only once India had a tariff advantage over economies such as Vietnam, Bangladesh and Indonesia, and that the U.S. must find appropriate tools and legal backing to ensure this. Which of the following inferences can be drawn from the above?

  1. India regards its tariff relative to competing exporters as more decisive for its exports than the absolute rate it faces.
  2. The U.S. has already put in place legal instruments that guarantee India's preferential position over these competitors.
  3. India would gain nothing from the cut to 18% if the U.S. later lowered its tariffs on rival exporters to the same level.
  • A. 2 and 3 only
  • B. 1 only
  • C. 1 and 3 only
  • D. 1 and 2 only

Q7. Consider the following assertion: The 'limited and temporary' arrangement on selected goods under discussion between India and the Eurasian Economic Union would not, on its own, qualify as a free trade area under GATT Article XXIV. Which of the statements given above support/supports the assertion?

  1. A free trade area under Article XXIV must eliminate duties on substantially all the trade between its members.
  2. An arrangement confined to selected goods does not free substantially all the trade between the parties.
  3. The India–EAEU trade agreement under negotiation is reported to exclude trade in services.
  • A. 1, 2 and 3
  • B. 2 and 3 only
  • C. 1 and 2 only
  • D. 1 only