Read the passage and answer the questions:
International Trade
International trade is the result of specialisation in production. It is based on the principle of comparative advantage, complimentarity and transferability of goods and services. Undertaking international trade is mutually beneficial to nations if it leads to regional specialisation, higher level of production, better standard of living, worldwide availability of goods and services, equalisation of prices and wages and diffusion of knowledge and culture.
International trade can prove to be detrimental to nations if it leads to dependence on other countries, uneven levels of development, exploitation, and commercial rivalry leading to wars. Global trade affects many aspects of life; it can impact everything from the environment to health and well-being of the people around the world. As countries compete to trade more, production and the use of natural resources spiral up, resources get used up faster than they can be replenished.
As a result, marine life is also depleting fast, forests are being cut down and river basins sold off to private drinking water companies. Multi-national corporations trading in oil, gas mining, pharmaceuticals and agri-business keep expanding their operations at all costs creating more pollution – their mode of work does not follow the norms of sustainable development. If organisations are geared only towards profit making, and environmental and health concerns are not addressed, then it could lead to serious implications in the future.
Which of the following is NOT a demerit of international trade?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Equalisation of prices
Option (1) Uneven level of development — A demerit. Trade can be detrimental when it leads to uneven levels of development. Nations that sell costly finished goods gain far more than those that sell cheap raw materials, so the gap between rich and poor nations widens with every round of trade.
Option (2) Dependence on other countries — A demerit. A nation that buys its food, fuel or machines from others stops producing them itself and becomes dependent on them. If supplies are cut off or prices rise, it has no ready way to meet its needs, so this dependence is one of the harms of trade.
Option (3) Equalisation of prices — Not a demerit. Equalisation of prices and wages is one of the benefits of trade. Goods flow from where they are plentiful and cheap to where they are scarce and dear, so the cheap place gets a better price and the dear place a lower one, and prices draw closer across nations. For this reason trade is called mutually beneficial when it leads to regional specialisation, higher production, a better standard of living, equalisation of prices and wages and the diffusion of knowledge and culture.
Option (4) Commercial rivalry — A demerit. As countries compete to sell more and to secure markets and resources, the competition can harden into commercial rivalry leading to wars, a harm of trade, not a benefit.
NCERT (2025-26): “Concerns Related to International Trade Undertaking international trade is mutually beneficial to nations if it leads to regional specialisation, higher level of production, better standard of living, worldwide availability of goods and services, equalisation of prices and wages and diffusion of knowledge and culture. International trade can prove to be detrimental to nations of it leads to dependence on other countries, uneven levels of development, exploitation, and commercial rivalry leading to wars.…” |