Question

Mention the benefits of India as member of the WTO

Answer 1

Promote free trade through gradual reduction of tariffsProvide legal framework for negotiation of trade disputes. This aims to provide greater stability and predictability in trade.Trade without discrimination - avoiding preferential trade agreements.WTO is not a completely free trade body. It allows tariffs and trade restrictions under certain conditions, e.g. protection against 'dumping' of cheap surplus goods.WTO is committed to protecting fair competition. There are rules on subsidies, dumpingWTO is committed to economic development. For example, recent rounds have put pressure on developed countries to accelerate restrictions on imports from the least-developing countries.

Advantages of promoting free trade

Lower prices for consumers. Removing tariffs enables us to buy cheaper importsFree trade encourages greater competitiveness. Through free trade, firms face a higher incentive to cut costs. For example, a domestic monopoly may now face competition from foreign firms.The law of comparative advantage states that free trade will enable an increase in economic welfare. This is because countries can specialise in producing goods where they have a lower opportunity cost.Economies of scale. By encouraging free trade, firms can specialise and produce a higher quantity. This enables more economies of scale, this is important for industries with high fixed costs, such as car and aeroplane manufacture. In new trade theory, it is this specialisation and exploitation of economies of scale that is most important factor in improving economic welfare. See also: Advantages of Free Trade