UPSC Prelims Practice Questions — ‘Deal with U.S. ready but comparative advantage aspect still being worked out’

Q1. The principle of comparative advantage, which became the cornerstone of nineteenth-century international-trade theory, was first developed in its full form by which one of the following economists?

  • A. Adam Smith
  • B. David Ricardo
  • C. John Stuart Mill
  • D. Eli Heckscher

Q2. In the context of India–U.S. trade in 2026, the term 'temporary 10 per cent tariff' whose expiry has lent urgency to the trade negotiations refers most precisely to which one of the following?

  • A. An across-the-board tariff of 10 per cent imposed by the United States on imports from all of its trading partners for a fixed period of 150 days, after its earlier emergency-powers-based reciprocal tariffs were struck down
  • B. A 10 per cent additional duty imposed by the United States only on countries running a merchandise trade surplus with it, levied for an indefinite period
  • C. A 10 per cent ceiling rate that the United States undertook at the WTO to apply to all developing-country imports pending conclusion of the Doha Round
  • D. A 10 per cent penal duty imposed by the United States specifically on Indian goods on account of India's continued purchase of Russian crude oil

Q3. After the United States Supreme Court struck down the earlier 'reciprocal' tariffs in February 2026, the temporary across-the-board 10 per cent tariff on all trading partners was imposed under which one of the following statutory provisions?

  • A. Section 232 of the Trade Expansion Act, 1962
  • B. Section 301 of the Trade Act, 1974
  • C. Section 122 of the Trade Act, 1974
  • D. The International Emergency Economic Powers Act, 1977

Q4. Which one of the following is the nodal body that conducts negotiations on the India–U.S. Bilateral Trade Agreement on behalf of the Government of India?

  • A. The Department of Commerce, Ministry of Commerce and Industry
  • B. The Directorate General of Foreign Trade, which alone administers all of India's trade agreements
  • C. The Department of Revenue, Ministry of Finance
  • D. The Economic Diplomacy Division of the Ministry of External Affairs

Q5. The statement in July 2026 that the framework of the India–U.S. trade deal is 'ready and will be signed when the time is right' was made in the official capacity of India's Commerce Secretary and chief negotiator for the Bilateral Trade Agreement. Who holds that office?

  • A. Piyush Goyal
  • B. Rajesh Agrawal
  • C. Jamieson Greer
  • D. Sunil Barthwal

Q6. With reference to the WTO framework within which India's bilateral and regional trade agreements operate, consider the following statements. Which of the above is/are NOT correct?

  1. The most-favoured-nation obligation appears in Article I of the General Agreement on Tariffs and Trade, which governs trade in goods.
  2. Article XXIV of GATT permits members to form customs unions and free-trade areas as an exception to the most-favoured-nation obligation.
  3. A free-trade area claiming the benefit of Article XXIV must eliminate barriers on 'substantially all' trade among its members and must not raise barriers against non-members.
  4. Because Article XXIV is an exception to non-discrimination, a member forming a free-trade area is required to extend the same preferential tariffs to all other WTO members within a reasonable period.
  • A. 1 and 3
  • B. 2 and 4
  • C. 4 only
  • D. 2, 3 and 4

Q7. The most-favoured-nation (MFN) principle of the WTO is best defined as which one of the following?

  • A. An obligation on a member not to discriminate between its trading partners, so that a trade favour granted to one member must be extended to all other members
  • B. An obligation on a member to treat imported goods no less favourably than like goods produced domestically once they have entered its market
  • C. An obligation on developed members to grant preferential, non-reciprocal tariff concessions to the exports of the least-developed members
  • D. A right of a member to grant its single largest trading partner the lowest tariff rates in its schedule of concessions

Q8. Among the following trade agreements concluded by India, which one is the most recent to enter into force?

  • A. India–Australia Economic Cooperation and Trade Agreement (ECTA)
  • B. India–EFTA Trade and Economic Partnership Agreement (TEPA)
  • C. India–United Kingdom Comprehensive Economic and Trade Agreement (CETA)
  • D. India–UAE Comprehensive Economic Partnership Agreement (CEPA)

Q9. Under the India–U.S. trade arrangement announced in February 2026, tariffs on Indian exports worth about USD 30.94 billion were cut from 50 per cent to 18 per cent. Approximately what value of Indian exports had its tariff cut all the way to zero under the same arrangement?

  • A. USD 1.36 billion
  • B. USD 10.03 billion
  • C. USD 38 billion
  • D. USD 86.35 billion — that is, the whole of India's merchandise exports to the United States