Comprehension
Read the given passage carefully and answer the questions that follow :
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.
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 developed 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.
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.
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 developed 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.
Question: 1
Define the term ‘globalisation’.
Define the term ‘globalisation’.
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Globalisation = Interconnectivity + Interdependence.
Key drivers: Technology (ICT) and Liberalisation (Policy).
Key drivers: Technology (ICT) and Liberalisation (Policy).
Updated On: Sep 9, 2026
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Solution and Explanation
Concept:
• Globalisation is the process of rapid integration or interconnection between countries.
• It involves the free flow of goods, services, capital, and labor across international borders.
Step 1: Define the core meaning based on the context
Globalisation is the increasing economic, social, and cultural integration of the world's nations.
It is driven by advancements in technology, trade liberalization, and the expansion of multinational corporations.
Step 2: Identify the practical outcome
It leads to the world becoming a "global village" where distances are reduced by communication and transport systems, and economies become interdependent.
• Globalisation is the process of rapid integration or interconnection between countries.
• It involves the free flow of goods, services, capital, and labor across international borders.
Step 1: Define the core meaning based on the context
Globalisation is the increasing economic, social, and cultural integration of the world's nations.
It is driven by advancements in technology, trade liberalization, and the expansion of multinational corporations.
Step 2: Identify the practical outcome
It leads to the world becoming a "global village" where distances are reduced by communication and transport systems, and economies become interdependent.
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Question: 2
Explain the importance of transport system in ‘world trade’.
Explain the importance of transport system in ‘world trade’.
Show Hint
Transport is the "circulatory system" of world trade.
Lower transport costs = Higher trade volumes.
Lower transport costs = Higher trade volumes.
Updated On: Sep 9, 2026
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Solution and Explanation
Concept:
• Trade requires the physical movement of goods from the producer to the consumer across varying distances.
Step 1: Analyze the role of transport in trade facilitation
Efficient transport systems act as the backbone of international trade by allowing goods and services to travel faster and farther than ever before.
They reduce the "friction of distance," making it cost-effective to source raw materials from one country and sell finished products in another.
Step 2: Link transport to market expansion
Advancements in shipping, aviation, and containerization have expanded the reach of markets, allowing even landlocked or remote areas to participate in global value chains.
Without modern transport, the volume and variety of goods traded globally today would be impossible to maintain.
• Trade requires the physical movement of goods from the producer to the consumer across varying distances.
Step 1: Analyze the role of transport in trade facilitation
Efficient transport systems act as the backbone of international trade by allowing goods and services to travel faster and farther than ever before.
They reduce the "friction of distance," making it cost-effective to source raw materials from one country and sell finished products in another.
Step 2: Link transport to market expansion
Advancements in shipping, aviation, and containerization have expanded the reach of markets, allowing even landlocked or remote areas to participate in global value chains.
Without modern transport, the volume and variety of goods traded globally today would be impossible to maintain.
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Question: 3
Why can ‘free trade’ adversely affect domestic producers ?
Why can ‘free trade’ adversely affect domestic producers ?
Show Hint
Free trade benefits consumers (lower prices) but can hurt local producers who lack a "level playing field."
Updated On: Sep 9, 2026
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Solution and Explanation
Concept:
• Free trade removes barriers like tariffs and quotas, leading to intense international competition.
Step 1: Identify the competition challenge
Free trade allows foreign goods to enter domestic markets without significant restrictions.
Domestic producers, especially in developing countries, may not have the technology or scale to compete with cheaper, mass-produced imports from developed nations.
Step 2: Analyze the problem of "dumping"
Countries may "dump" goods (sell them at prices lower than the cost of production) in foreign markets to capture market share.
This practice harms domestic producers, potentially leading to business closures and job losses in local industries that cannot match those artificially low prices.
• Free trade removes barriers like tariffs and quotas, leading to intense international competition.
Step 1: Identify the competition challenge
Free trade allows foreign goods to enter domestic markets without significant restrictions.
Domestic producers, especially in developing countries, may not have the technology or scale to compete with cheaper, mass-produced imports from developed nations.
Step 2: Analyze the problem of "dumping"
Countries may "dump" goods (sell them at prices lower than the cost of production) in foreign markets to capture market share.
This practice harms domestic producers, potentially leading to business closures and job losses in local industries that cannot match those artificially low prices.
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