Read the passage and answer the questions:
Trade Liberalisation
The act of opening up economies for trading is known as free trade or trade liberalisation. This is done by bringing down trade barriers like tariffs. Trade liberalisation allows goods and services from everywhere to compete with domestic products and services.
Globalisation along with free trade can adversely affect the economies of developing countries by not giving equal playing field by imposing conditions which are unfavourable. With the development of transport and communication systems goods and services can travel faster and farther than ever before. But free trade should not only let rich countries enter the markets, but allow the developing countries to keep their own markets protected from foreign products.
Countries also need to be cautious about dumped goods; as along with free trade dumped goods of cheaper prices can harm the domestic producers.
How can free trade along with globalisation adversely affect developing countries?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → By imposing unfavourable conditions
Option (1) By producing more goods — Incorrect. More goods add to a country’s output; that is a gain, not a harm.
Option (2) By producing more services — Incorrect. More services likewise add to the economy.
Option (3) By producing more goods and services — Incorrect. Both together are still a gain in output, not a harm.
Option (4) By imposing unfavourable conditions — Correct. Free trade lets rich countries enter the markets of developing countries, and globalisation can impose conditions which are unfavourable to them. Their producers then compete without an equal playing field and without protection for their own markets, so their economies are adversely affected.
NCERT (2025-26): “Case for Free Trade The act of opening up economies for trading is known as free trade or trade liberalisation. This is done by bringing down trade barriers like tariffs. Trade liberalisation allows goods and services from everywhere to compete with domestic products and services. Case for Free Trade … Globalisation along with free trade can adversely affect the economies of developing countries by not giving equal playing field by imposing conditions which are unfavourable. With the development of transport and communication systems goods and services can travel faster and farther than ever before.…” |