B.A. LL.B. (Five Years) Sem 10 International Trade Economics 2017 Dec Question Paper with Solutions

For full marks, cover: what a barrier to trade is and why governments erect barriers (revenue, protection, the balance of payments, health and safety, security); Part A, tariffs: meaning (Customs Act 1962 section 12; Customs Tariff Act 1975 section 2), kinds by direction, by method, by purpose and the special duties, their economic effects with a worked example, tariff escalation and peaks, and the WTO rules (GATT Article II bindings, Article XXVIII, tariffication); India's bound and applied averages; Part B, non-tariff barriers (NTBs): meaning and the main families, each with its WTO discipline: quantitative restrictions (Article XI; India: Quantitative Restrictions), technical regulations and standards (TBT; European Communities: Asbestos), sanitary and phytosanitary measures (SPS; European Communities: Hormones), customs procedures (valuation, preshipment inspection, rules of origin, import licensing, trade facilitation), subsidies and State trading, government procurement, investment conditions, contingent protection, export restrictions; Part C: tariffs and NTBs compared, and why the WTO prefers tariffs; a conclusion.

1. By direction: import duties, the common kind; export duties, used to conserve resources or raise revenue; and transit duties, now rare.
2. By method: ad valorem duties, a percentage of value; specific duties, a fixed sum per unit; and compound duties, combining both.
3. By purpose: revenue tariffs, kept low so that trade continues, and protective tariffs, set high to shield domestic producers.
4. Special duties: anti-dumping, countervailing and safeguard duties, imposed above normal rates to meet particular situations.

Economic effects: a worked example. Suppose the world price of a bicycle is 5,000 rupees and India imposes a 20 per cent tariff.

1. Price. The imported bicycle now costs 6,000 rupees in India.
2. Protection. Indian makers can sell at up to 6,000 rupees and still compete, so domestic production rises.
3. Consumption. Buyers pay more and buy fewer bicycles.

4. Tariffication. The Agreement on Agriculture converted farm quotas and similar measures into tariffs, which were then bound (Article 4.2).
5. Rounds. Eight GATT rounds reduced tariffs step by step by reciprocal bargaining.

India's tariffs. The WTO's tariff profile puts India's simple average bound tariff at 50.8 per cent. That is 113.1 per cent on farm goods and 36.0 per cent on other goods. Its simple average applied MFN tariff in 2025 was 16.0 per cent. That is 36.4 per cent on farm goods and 12.8 per cent on other goods. About 74 per cent of its tariff lines are bound. The gap between bound and applied rates gives India room to raise duties without breaching its commitments.

Part B: Non-tariff barriers

Meaning. Non-tariff barriers are measures other than ordinary customs duties that restrict or distort trade. Many pursue legitimate aims, such as health or safety. They become barriers when they discriminate or restrict more than necessary. As tariffs fell after 1947, NTBs became the main obstacle to trade.

European Communities: Asbestos (WT/DS135/AB/R, adopted 5 April 2001). France banned asbestos products, and Canada complained. The Appellate Body held that health risks bear on whether products are "like". The ban was in any case necessary to protect health under Article XX(b). It also held that a ban with exceptions can be a technical regulation. The EC won.

3. Sanitary and phytosanitary measures. Food safety, animal and plant health rules may hide protection. The SPS Agreement requires such measures to rest on scientific principles and a risk assessment. They must not discriminate arbitrarily.

European Communities: Hormones (WT/DS26/AB/R, adopted 13 February 1998). The EC banned meat from cattle treated with growth hormones. The Appellate Body held that the ban was not based on a risk assessment as Article 5.1 requires. A member may still choose a higher level of protection than international standards. The United States and Canada won.

4. Customs procedures. Slow clearance, arbitrary valuation, unclear rules of origin and complex licensing all raise costs. WTO agreements discipline each of them: Customs Valuation, Preshipment Inspection, Rules of Origin, Import Licensing and, since 2017, Trade Facilitation.

Why the WTO prefers tariffs. A tariff is visible, predictable and easy to negotiate down, and it keeps foreign competition alive. Many NTBs are hidden and arbitrary, and can stop trade completely. That is why GATT allows tariffs but bans quotas, and why the Uruguay Round converted farm quotas into tariffs.