Q.Read the following 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 liberalization. This is done by bringing down trade barriers like tariffs. Trade liberalization 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. (18.1) Explain the meaning of 'trade liberalisation'. (18.2) How have 'globalisation' and 'free trade' affected the economies of developing countries ? (18.3) What should be done by the developing countries to protect from negative impact of 'free trade' ? Mention any two steps.
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Start your 14-day free trial to unlock the full solution →Trade liberalisation means removing barriers to allow free flow of goods across borders, but globalisation and free trade have often hurt developing countries by favouring rich nations — so developing countries must act strategically to protect their own producers.
(18.1) Explain the meaning of 'trade liberalisation'.
Trade liberalisation is the process of opening up a country’s economy to international trade by reducing or eliminating barriers such as tariffs, quotas, and import restrictions. The core idea is to let goods and services from different countries compete freely in domestic markets, without government-imposed hurdles. In practice, this means lowering customs duties on imported products, removing limits on the quantity of goods that can be brought in, and simplifying regulations that foreign companies must follow. The goal is to create a more integrated global marketplace where trade flows as smoothly as possible.
Trade liberalisation is often pursued as part of broader economic reforms, especially when a country moves from a protected, state-controlled economy toward a more market-driven one. India’s 1991 reforms are a classic example.
(18.2) How have 'globalisation' and 'free trade' affected the economies of developing countries ?
Globalisation and free trade have had a mixed — and often uneven — impact on developing countries. On the positive side, they have opened up new export opportunities, attracted foreign investment, and given consumers access to a wider variety of goods and services at competitive prices. Improved transport and communication systems have made it possible for products to travel faster and farther, connecting producers in developing nations to global supply chains.
However, the passage points out a serious downside: developing countries have not been given an equal playing field. Rich countries often push for free trade in developing markets while keeping their own markets protected through subsidies, tariffs, and non-tariff barriers. This asymmetry means that farmers and manufacturers in developing countries struggle to compete with heavily subsidised imports from wealthier nations. Additionally, the phenomenon of “dumped goods” — products sold at artificially low prices in foreign markets — can destroy local industries. Small-scale producers, who lack the resources to match such low prices, are often forced out of business. In short, globalisation and free trade have sometimes deepened economic inequalities rather than reducing them.
The key problem is not free trade itself, but the unfair terms on which it is often imposed — developing countries are asked to open their markets while developed countries keep their own barriers intact.
(18.3) What should be done by the developing countries to protect from negative impact of 'free trade' ? Mention any two steps.
Developing countries need to be cautious and strategic, not passive, in the face of free trade. Two important steps they can take are: …
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