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International Trade Economics
Previous Year Question Paper with Solution
B.B.A. LL.B. (Five Years) · Sem 10
2014 Dec Examination
munotes.in
Mumbai
B.B.A. LL.B. (Five Years) Sem 10 International Trade Economics 2014 Dec Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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Contents
The questions below are the paper as Karnataka State Law University set it at the 2014 Dec examination, in the order it was set.
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2014 Dec examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.
Duration 3 hours · Total marks 100 · 13 questions answered
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
Q1Define the term "Bound" and explain the limitations on tariff bindings.[16]
Answer
For full marks, cover: the meaning of "bound" (a tariff binding as a legal ceiling in a member's Schedule of Concessions) and of binding coverage; the legal basis (GATT 1994, Article II:1(a) and (b); the Understanding on Article II:1(b)); the purpose of bindings; the limitations on tariff bindings in two senses: A. the lawful ways in which a member may exceed or change a binding (charges equal to internal taxes, anti-dumping and countervailing duties, fees for services: Article II:2; renegotiation under Article XXVIII; safeguards under Article XIX and the agricultural special safeguard; balance of payments surcharges; customs unions under Article XXIV:6; waivers; the general and security exceptions); B. the limits of a binding as a discipline (unbound lines and low coverage; the gap between bound and applied rates; ceiling bindings; non-tariff measures; valuation and classification, Articles II:3 and II:5); the cases (India: ICT Tariffs; United States: Steel Safeguards); India's bindings; a table; a conclusion.
Meaning of "bound"
To bind a tariff is to promise that the customs duty on a product will not exceed a stated rate. The promise is written into the member's Schedule of Concessions. That rate is the bound rate. The member may charge less, and often does, but may not charge more. A product for which no ceiling is promised is unbound, and the member is free to set any duty on it.
Binding coverage is the share of a member's tariff lines that are bound. Developed members have bound almost all their lines. India has bound about 74 per cent of its lines, according to the WTO's tariff profile.
The legal basis
- Article II:1(a). Each member must give other members' trade treatment no less favourable than its Schedule provides.
- Article II:1(b). Scheduled products are exempt from ordinary customs duties above the bound rate. They are also exempt from other duties or charges on importation above those allowed.
- The Understanding on Article II:1(b). It requires "other duties or charges" to be recorded in the Schedule, so that they too are bound.
Schedules are drawn up product by product, and they form an integral part of GATT 1994.
Why bindings matter
A tariff cut that can be reversed tomorrow is worth little. A binding turns a cut into a legal commitment. It gives exporters and investors certainty about the highest duty they can face. Because of MFN, a binding given in one negotiation benefits every member.
A. The lawful ways to exceed or change a binding
1. Charges that Article II itself permits (Article II:2). A member may at any time impose on imports, beyond the bound rate:
- a charge equivalent to an internal tax on the like domestic product, such as a sales tax;
- anti-dumping or countervailing duties applied consistently with Article VI; and
- fees commensurate with the cost of services rendered.
2. Renegotiation (Article XXVIII). A member may modify or withdraw a concession by negotiation. It must negotiate with the members that initially negotiated it and those with a principal supplying interest, and consult those with a substantial interest. Compensation on other products usually follows. If no agreement is reached, the member may still act. Affected members may then withdraw substantially equivalent concessions. The normal window opens every three years.
3. Safeguards (Article XIX and the Safeguards Agreement). Where imports surge and cause or threaten serious injury, a member may suspend a concession temporarily. The measure must be applied to imports from all sources (Safeguards Agreement, Article 2.2).
United States: Steel Safeguards (WT/DS248/AB/R and related reports, adopted 10 December 2003). The US imposed safeguards on ten categories of steel in 2002. The Appellate Body held all ten inconsistent with the rules. The US had not shown unforeseen developments or proper causation, and its measures did not match its investigation. The measures were withdrawn. The case shows that the safeguard escape from a binding is itself strictly policed.
4. The agricultural special safeguard (Agreement on Agriculture, Article 5). For tariffied farm products so designated, an extra duty may be charged when import volumes surge or prices fall.
5. Balance of payments measures (Articles XII and XVIII:B). A member in balance of payments difficulty may restrict imports temporarily. The Uruguay Round Understanding prefers price-based measures, such as import surcharges, to quotas.
6. Customs unions (Article XXIV:6). A member that raises a bound rate on joining a customs union must proceed under Article XXVIII, with compensation.
7. Waivers (Marrakesh Article IX:3). The Ministerial Conference may waive an obligation in exceptional circumstances.
8. General and security exceptions (Articles XX and XXI). These can justify measures that would otherwise breach a binding, subject to their conditions.
B. The limits of a binding as a discipline
- Unbound lines. Where a product is unbound, the member may raise its duty freely. Low coverage weakens the whole system.
- The gap between bound and applied rates. A member applying a duty well below its binding may raise it up to the bound rate without breaking any rule. India's simple average bound tariff is 50.8 per cent, against an average applied rate of 16.0 per cent in 2025. This "binding overhang" leaves much room to raise duties.
- Ceiling bindings. In the Uruguay Round, many developing countries bound farm tariffs at high ceilings unrelated to the duties they applied. This brought farm tariffs under bindings for the first time, but at levels that bind little.
- Non-tariff measures. A binding limits only duties and charges. Quotas, licensing, standards and subsidies may still restrict trade, and are governed by other rules.
- Valuation and classification. A member could impair a binding by inflating customs values or changing currency conversion. Article II:3 forbids this. Article II:5 provides for negotiations where a court classifies a product so as to deny the concession expected.
- Changing products. New products raise questions of whether old bindings cover them.
India: ICT Tariffs (WT/DS582/R, circulated 17 April 2023). The EU complained that India's duties on mobile phones and other information technology goods exceeded India's bound rates. India argued that its commitments under the Information Technology Agreement did not reach products that did not exist when they were made. The panel held that the duties exceeded the bindings, in breach of Article II:1(a) and (b). India appealed on 8 December 2023, and with no Appellate Body sitting, the report has not been adopted.
India's bindings
India's position shows how the limits work in practice. Its bound rates average 113.1 per cent on farm goods and 36.0 per cent on other goods. Its applied averages in 2025 were 36.4 and 12.8 per cent. The large farm overhang lets India raise duties when world prices of farm products fall, without renegotiating. About a quarter of its lines are unbound, mostly outside agriculture. Where India did bind at zero, as for many information technology goods under the Information Technology Agreement, the binding has been enforced against it.
A worked example of renegotiation. Suppose a member wishes to raise its bound duty on cotton yarn from 10 to 20 per cent. Under Article XXVIII it must negotiate with the members that first negotiated the concession and with the principal supplier. It might offer, in compensation, a lower bound duty on machinery of equal trade value. If no deal is reached, it may still raise the duty, but the suppliers may then withdraw equivalent concessions on its exports.
The limitations at a glance
| Limitation | Source | Condition |
|---|---|---|
| Border equivalent of internal tax | Article II:2(a) | Consistent with Article III:2 |
| Anti-dumping and countervailing duties | Article II:2(b); Article VI | Dumping or subsidy, with injury |
| Fees for services | Article II:2(c) | Commensurate with cost |
| Renegotiation | Article XXVIII | Negotiation and compensation |
| Safeguards | Article XIX | Serious injury; all sources |
| Special agricultural safeguard | Agriculture Article 5 | Designated products; volume or price trigger |
| Limitation | Source | Condition |
|---|---|---|
| Balance of payments | Articles XII, XVIII:B | Temporary; price-based preferred |
| Unbound lines and overhang | Schedules | No legal limit beyond the binding |
Conclusion. A bound tariff is a ceiling, written into a member's Schedule under Article II, above which the member may not raise its duty. Bindings give traders certainty and make concessions lasting. They are limited in two ways. A member may lawfully exceed or change a binding through Article II:2 charges, renegotiation under Article XXVIII, safeguards, balance of payments measures and exceptions. And a binding disciplines only bound duties: unbound lines, high ceilings, the gap to applied rates and non-tariff measures all lie outside it. India: ICT Tariffs shows that a binding, once given, is enforced.
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