UPSC Prelims Practice Questions — Anti-multilateral trade deals may hit growth, exports: govt. economists

Q1. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. A free trade agreement can lower the economic welfare of a member country even though it reduces the tariffs that country levies on imports from its partner.
  2. Preferential tariffs can lead a country to replace imports from a lower-cost non-member with imports from a higher-cost partner, so it gives up tariff revenue without a matching fall in the real cost of imports.
  • 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

Q2. With reference to the Most-Favoured-Nation (MFN) principle of the WTO, consider the following statements: Which of the statements given above is/are correct?

  1. If a member lowers its customs duty on a product imported from one member, it must, unless a recognised exception applies, apply the same duty to like products from all other members.
  2. MFN requires a member to levy customs duty on an imported good only if a like domestic good bears an equivalent internal tax.
  3. Despite MFN, a member may impose additional duties on products from a specific country that are found to be traded unfairly.
  • A. 1 only
  • B. 1, 2 and 3
  • C. 1 and 3 only
  • D. 2 and 3 only

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

  1. WTO rules allow members of a free trade area to give one another tariff preferences that they do not extend to other WTO members.
  2. GATT Article XXIV requires the members of a free trade area to apply a common tariff to imports from non-members.
  • 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 rules of origin in preferential trade agreements, consider the following statements: Which of the statements given above is/are correct?

  1. Rules of origin decide whether a product qualifies for the preferential tariff that a trade agreement offers.
  2. Without rules of origin in a free trade area, goods from a non-member could enter through the member with the lowest external tariff and then move to other members at the preferential rate.
  3. Rules of origin are more necessary in a customs union than in a free trade area, because customs union members keep different tariffs on non-members.
  • A. 1 and 3 only
  • B. 2 and 3 only
  • C. 1, 2 and 3
  • D. 1 and 2 only

Q5. With reference to decision-making in the World Trade Organization, consider the following statements: Which of the statements given above are correct?

  1. Decisions are normally taken by consensus among members.
  2. When a vote is taken, each member's vote is weighted by its share in world trade.
  3. A plurilateral agreement binds only those members that have accepted it.
  4. A waiver of a member's obligation, when decided by vote, needs more than a simple majority.
  • A. 1 and 2 only
  • B. 1, 3 and 4 only
  • C. 1, 2, 3 and 4
  • D. 2, 3 and 4 only

Q6. Consider the following facts about WTO dispute settlement: A standing Appellate Body reviews the legal findings of dispute panels. Its reports are adopted unless all members decide by consensus not to adopt them. A panel report under appeal is not adopted until the appeal is completed. Since the term of its last member expired, the Appellate Body has been unable to hear appeals. Which of the following inferences can be drawn from the above?

  1. The losing party in a dispute cannot, on its own, block the adoption of an Appellate Body report.
  2. WTO members can no longer request the establishment of dispute panels.
  3. A losing party that files an appeal can leave the dispute without a final binding ruling.
  • A. 1 and 3 only
  • B. 2 and 3 only
  • C. 1, 2 and 3
  • D. 1 only

Q7. The WTO's World Trade Report 2026 projects that by 2050, compared with a baseline, global GDP would be 2.9% higher and global exports 17.9% higher under enhanced multilateral cooperation. Global GDP would be 5.1% lower and exports 18.6% lower in a world organised around geopolitical blocs, and GDP 6.9% lower and exports 26.9% lower if a network of FTAs replaced the multilateral system. Which of the following inferences can be drawn from the above?

  1. Under each of the three arrangements, trade volumes respond more strongly than output to the choice of trading regime.
  2. Under the FTA arrangement, global GDP in 2050 would be smaller than global GDP today.
  3. Any free trade agreement lowers global welfare compared with the absence of that agreement.
  • A. 1 only
  • B. 2 only
  • C. 1, 2 and 3
  • D. 1 and 3 only