Question

Michael established a cotton spinning mill in the United States of America and imported raw cotton from India. However, while importing raw materials from India, the United States government imposed high tariffs. Similarly, India imposed high taxes on the clothes imported from the USA.

Based on the above information, answer the following questions:
(a) Why did the USA impose trade barriers?
(b) How can the problem of trade barriers be resolved?

• A. (a) To penalise all the people who import goods from other countries
  (b) By consulting the United Nations
• B. (a) To penalise all the people who import goods from other countries
  (b) By consulting the International Monetary Fund
• C. (a) To protect its domestic industries from foreign competition
  (b) By consulting the World Trade Organization
• D. (a) To protect its domestic industries from foreign competition
  (b) By consulting the International Trade Centre

Answer 1

The correct option is C (a) To protect its domestic industries from foreign competition

(b) By consulting the World Trade Organization
The WTO aims to remove obstacles that influence global trade. These obstacles may be in the form of economic policies of different countries like imposing taxes on goods imported from other countries. This is done to protect their domestic industries from foreign competition. These are known as trade barriers. This makes imported products more expensive. Such taxes on imports are a source of income for the government.