International Trade Policy and Non-Tariff Barriers
Indian Economy
- PYQs7
- Articles1
Background
UPSC frequently examines India's trade policy, its challenges in global trade, the impact of protectionism, and the role of international trade agreements. Understanding NTBs is crucial for analyzing India's economic relations and competitiveness.
International trade policy encompasses the rules, regulations, and agreements governing the exchange of goods and services between countries. While tariffs are direct taxes on imports, non-tariff barriers (NTBs) are non-monetary restrictions that limit trade, often disguised as health, safety, environmental, or labor standards, or as measures against 'dumping' or 'subsidies'.
Facts & tables
- Nature of NTBs
- NTBs can include quotas, import licenses, product standards, subsidies, and measures like anti-dumping duties or countervailing duties.
- U.S. allegations against India
- The article highlights 'forced labor' and 'surplus capacity' as potential NTBs used by the U.S. under Section 301 against India.
- India's trade strategy
- India's strategy involves diversifying trade partners and focusing on R&D to enhance competitiveness, especially in light of challenges with major partners like the U.S.
- Effectiveness of FTAs
- Trade agreements (FTAs) do not guarantee export growth if a country lacks technological competitiveness.
| Type | Reference |
|---|---|
| Conceptual area | Indian Economy |
| Conceptual area | International Relations |
| Body | Role |
|---|---|
| World Trade Organization (WTO) | Regulates |
Prelims angle
Prelims angle: Multi-statement analysis
Prelims angle: Conceptual understanding
- NTBs are non-monetary restrictions on trade (e.g., quotas, standards, 'forced labor' claims).
- U.S. uses Section 301 and claims like 'forced labor' and 'surplus capacity' as NTBs against India.
- India's trade strategy: diversification, R&D investment for competitiveness.
- Trade agreements alone don't guarantee export growth without technological edge.
- WTO plays a role in regulating international trade and resolving disputes related to NTBs.
Treaty = agreement between states; body = institution.
| Year | Framing tags |
|---|---|
| 2021 | Multi-statement analysis, Conceptual understanding |
| 2020 | Multi-statement analysis, Factual recall |
| 2020 | Multi-statement analysis, Factual recall |
| 2020 | Multi-statement analysis, Conceptual understanding |
| 2019 | Conceptual understanding, Policy measures |
| 2017 | Definition-based questions, Policy measures |
| 2017 | Factual recall, Terminology-based question |
Timeline
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Indian Economy
Conceptual area
-
International Relations
Conceptual area
-
Prelims 2017
Definition-based questions, Policy measures
-
Prelims 2017
Factual recall, Terminology-based question
-
Prelims 2019
Conceptual understanding, Policy measures
-
Prelims 2020
Multi-statement analysis, Factual recall
-
Prelims 2020
Multi-statement analysis, Factual recall
-
Prelims 2020
Multi-statement analysis, Conceptual understanding
-
Prelims 2021
Multi-statement analysis, Conceptual understanding
-
Analysing India’s trade bottlenecks
India faces significant challenges in international trade, including tariffs and non-tariff barriers (NTBs) like accusations of 'forced labor' and 'surplus capacity' from partners like the U.S. These barriers, alongside a lack of technological competitiveness, contribute to trade deficits even with trade agreements, necessitating a strategy of diversification and R&D investment.
See also
Past papers
2017–2021 · 7 questions
In the news
Analysing India’s trade bottlenecks
India faces significant challenges in international trade, including tariffs and non-tariff barriers (NTBs) like accusations of 'forced labor' and 'surplus capacity' from partners like the U.S. These barriers, alongside a lack of technological competitiveness, contribute to trade deficits even with trade agreements, necessitating a strategy of diversification and R&D investment.
Try these PYQs
With reference to the Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct?
1. Quantitative restrictions on imports by foreign investors are prohibited.
2. They apply to investment measures related to trade in both goods and services.
3. They are not concerned with the regulation of foreign investments.
Select the correct answer using the code given below:
Statement 1 is correct: The Trade-Related Investment Measures (TRIMS) agreement under the World Trade Organization (WTO) prohibits quantitative restrictions on imports by foreign investors. This means that countries cannot impose conditions like mandatory local sourcing or trade-balancing requirements that distort free trade. Statement 2 is incorrect: TRIMS only applies to trade in goods, not services. The regulation of trade in services falls under the General Agreement on Trade in Services (GATS), not TRIMS. Statement 3 is correct: TRIMS is not directly concerned with the regulation of foreign investments. Instead, it focuses on investment measures that affect trade in goods, ensuring that they do not create barriers to international trade. Hence, option C is the correct answer.
With reference to the international trade of India at present, which of the following statements is/are correct?
1. India’s merchandise exports are less than its merchandise imports.
2. India’s imports of iron and steel, chemicals, fertilisers and machinery have decreased in recent years.
3. India’s exports of services are more than its imports of services.
4. India suffers from an overall trade/current account deficit.
Select the correct answer using the code given below:
Statement 1 is correct. Merchandise trade deficit is the largest component of India's current account deficit. As per RBIs data, India's Merchandise exports during April-August 2019- 2020 were USD 133.14 billion, as compared to USD 210.39 billion of imports during the same period. Statement 2 is incorrect. Commodity-wise composition of imports between 2011-12 and 2018-19 shows that imports of iron and steel, organic chemicals, industrial machinery have registered positive growth rates as % of share in imports. Statement 3 is correct. India's net services (service exports - service imports) have been in surplus. India's Service exports during April-August 2019- 2020 were USD 67.24 billion, as compared to USD 39.25 billion of imports during the same period. Statement 4 is correct. Current Account Deficit (CAD) or trade deficit is the shortfall between exports and imports. As per Economic Survey 2019-20, India's CAD was 2.1% in 2018-19, and 1.5% of GDP in H1 of 2019-20. Therefore, the correct answer is (D) 1, 3 and 4 only. _NOTE: UPSC has not considered this question for marking._
Broad-based Trade and Investment Agreement (BTIA)’ is sometimes seen in the news in the context of negotiations held between India and
The Broad-based Trade and Investment Agreement (BTIA) is negotiated between India and the European Union (EU).
The term ‘Digital Single Market Strategy’ seen in the news refers to -
The Digital Single Market Strategy refers to an initiative by the European Union (EU) that aims to create a unified digital market across all member states. Overall, the Digital Single Market Strategy aims to stimulate growth in the European digital economy by fostering innovation, competition, and consumer confidence in the online marketplace.
Consider the following statements:
The effect of devaluation of a currency is that it necessarily:-
1. improves the competitiveness of the domestic exports in the foreign markets.
2. increases the foreign value of domestic currency.
3. improves the trade balance.
Which of the above statements is/are correct?
Statement 1 is correct. When a country devalues its currency, it becomes cheaper for foreign buyers to purchase the country's exports. This can lead to increased demand for exports, making domestic producers more competitive in the international market. Statement 2 is incorrect. Devaluation actually decreases the foreign value of the domestic currency. The whole point is to make the domestic currency less expensive relative to foreign currencies. Statement 3 is also incorrect. While improved export competitiveness can lead to a better trade balance (more exports, fewer imports), it's not a guaranteed outcome. Other factors like import prices, global demand, and domestic production costs can also influence the trade balance. Devaluation can also lead to increased import costs if the country relies on imported raw materials. Therefore, the correct code is 1 only.
Show 2 more PYQs
Consider the following statements:
1. The value of Indo-Sri Lanka trade has consistently increased in the last decade.
2. “Textile and textile articles” constitute an important item of trade between India and Bangladesh.
3. In the last five years, Nepal has been the largest trading partner of India in South Asia.
Which of the statements given above is/are correct?
Statement 1 is not correct. Bilateral trade between India and Sri Lanka has increased by around 9 times between 2000-01 and 2018-19. Total trade between the two countries was US$ 6.2 billion in 2018-19, out of which India's exports to Sri Lanka were US$ 4.7 billion and imports were US$ 1.5 billion. Although India has always had a trade surplus with Sri Lanka, the gap has widened since 2008-09. In 2012-13 and 2016-17, the trade slumped, thus disturbing the steady increase in the graph. Statement 2 is correct. According to the World Bank, India exports $2.25 billion worth of textile and clothing products to Bangladesh. In turn, it imports $336 million worth of textile and clothing products from Dhaka. Statement 3 is not correct. Bangladesh is India's biggest trade partner in South Asia. Bilateral trade between India and Bangladesh has grown steadily over the last decade. India's exports to Bangladesh in FY 2018-19 stood at $9.21 billion and imports during the same period were at $1.04 billion.
Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee?
To stop the slide of the Rupee (depreciation), the RBI/Government needs to increase the inflow of foreign currency (USD) or decrease the outflow. Option (a), (b), and (c) are likely measures: They either increase the supply of dollars in the Indian market or reduce the demand for dollars, which helps stabilize the Rupee. Option (d) is NOT a likely measure: An expansionary monetary policy usually involves lowering interest rates. When interest rates fall, the "carry trade" becomes less attractive to foreign investors, leading to capital flight. This increases the supply of Rupee in the market and decreases its value further. To stop a slide, the RBI typically follows a contractionary (dear money) policy to attract capital and curb inflation.