BBA 3rd Year Foreign Trade And Economic Growth Short Question Answer Mock papers for self-assessment Semester wise Question Answer Study Material Notes
(Short Answer Questions)
Ans. In international markets, dumping is a widely used strategy. Dumping means selling of a product or commodity below the cost of production or at a lower rate in overseas markets compared to domestic markets. Dumping is considered as ‘unfair’ trade practice by the World Trade Organisation. Anti-dumping duties can be levied on imports of such products under the agreement of anti-dumping practices. A product is considered to be dumpedifits export price is less than either its cost of production or the selling price in the exporting country. Besides, for taking anti-dumping action, there should be genuine ‘material injury to the competing domestic industry. The government in the importing country should assess the extent of dumping and estimate the injury cost to prove dumping.
Dumping may be sporadic, intermittent or long period dumping. The explanations of these concepts are given below:
1. Sporadic Dumping : Sporadic dumping is resorted mostly to sell out the excess stock that may arise occasionally. Firms indulging in sporadic dumping may not have any great interest or commitment in the foreign market, their main interest may be to liquidate the excess stock.
2. Intermittent Dumping: It refers to the periodic sale of goods abroad at prices below the home market. Intermittent dumping may be resorted to gain a foothold in the foreign market, to combat a new competition, order to retain a long period position to eliminate or discipline a competitor etc.
3. Long-period Dumping : It may be resorted to facilitate the utilisation of the full capacity the plant continuously. The foreign market price must at least recoup the marginal cost of the product and the home market price must be above the average cost.
0.2. Give arguments against free trade. (2014)
Ans. Free trade has its own multiple benefits, but there lies some disadvantages as well. The arguments against free trade can be enumerated in the following five points :
1. In the process of free trade various barriers are removed, due to this structural unemployment may occur in a short span of time. It becomes difficult for workers to find employment. So government assistance is required for their protection.
2. Due to international trade the domestic economy of the concerning states becomes instable. Businesses, employees and consumers are more vulnerable to downturns in the economies to trading partners. Its example is recession in the U.S.
3. It is a good argument against free trade that international markets are not a level playing field as countries with surplus products may dump them on world markets at below cost. Various countries whose economies are largely agriculture based face unfavourable terms
of trade whereby their export income is much small.
4. In free trade there exists a competitive environment. So it is hard for developing or new industries to cope with. It becomes difficult to develop economies of scale in the face of
competition from large foreign TNCs.
5. In an environment of free trade there may arise some problems regarding environment and pollution. Free trade can lead to many such problems. The companies fail to include the costs of making pollution free atmosphere in the price of goods in trying to compete with companies operating under weaker environment legislation in developing states.
Q.3. How protection policy helps in promotion of employment?(2015)
Ans. Protection Policy: The case for free trade rests on the proposition that it enables firms and countries to specialise in the activities they perform best; leading to greater efficiency, more production and higher standards of living throughout the world. Jobs are created, consumers enjoy a wider choice of goods, firms have wider markets, and there is extensive communication between people in different nations (thus facilitating world peace and international understanding). Governments increasingly recognise the benefits of free trade, and there has been widespread liberalisation of international trade practices and procedures during the post-Second World War era.
Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to discourage imports and prevent foreign take-over of domestic markets and companies.
This policy contrasts with free trade, where government barriers to trade and movement of capital are kept to a minimum. In recent years, it has become closely aligned with anti-globalisation. The term is mostly used in the context of economics, where protectionism refers to policies or doctrines which protect businesses and workers within a country by restricting or regulating trade with foreign nations.