Question

Country A is a developed country, and country B is a developing country. Both the countries are members of the World Trade Organization (WTO).
Country A banned imports from country B because the producers of country B dumped cheaply priced products in country A.

Which of the following do you think is correct?

• A. Country A should not ban imports from country B as both the countries are members of the WTO.
• B. Country A's decision was correct as cheap imports would harm its domestic producers.
• C. Country A should also dump cheaply priced products in country B.
• D. Such a situation won't arise as WTO will solve the dispute between countries A and B.

Answer 1

The correct option is B Country A's decision was correct as cheap imports would harm its domestic producers.

As a result of liberalisation, countries A and B reduced their trade barriers. To ensure free trade, both the countries joined the World Trade Organization. But cheaper imports decrease the demand for domestic goods. The market competition drives out small producers from the market.