SNAP 2018 Question Paper

Read the following passage and answer the questions that follow.

Frederic Bastiat, who was that rarest of creatures, a French free-market economist, wrote to this newspaper in 1846 to express a noble and romantic hope: ”May all the nations soon throw down the barriers which separate them." Those words were echoed 125 years later by the call of John Lennon, who was not an economist but a rather successful global capitalist, to "imagine there's no countries”. As he said in his 1971 song. it isn't hard to do. But despite the spectacular rise in living standards that has occurred as barriers between nations have fallen, and despite the resulting escape from poverty by hundreds of millions of people in those places that have joined the world economy, it is still hard to convince publics and politicians of the merits of openness. Now, once again, a queue is forming to denounce openness—i.e, globalisation. It is putting at risk the next big advance in trade liberalisation and the next big reduction in poverty in the developing countries. The world will find out, to some extent, next month when ministers from the 148 countries in the WTO meet in Hong Kong. The last time they gathered for such a crucial meeting was in September 2003 in Cancun, and the result was a shambles. There was a bitter row between rich countries and poor ones, and the meeting broke up in acrimony. At that stage, however, there was still plenty of time to repair the damage. For in effect, the deadline for the Doha round comes in June 2007, when the trade-negotiating authority granted by Congress to President Bush expires. But, although that leaves more than a year and a half after Hong Kong, the complexity of a negotiation involving 148 countries and scores of highly technical issues means that the deal really needs to be done during 2006, with the political framework for it set early on—which essentially means in Hong Kong. The case for selfish generosity Trade- liberalisation rounds are arcane affairs about which free-traders are often thought to cry wolf. The previous talks, known as the Uruguay round, went through lots of brinkmanship and delays before they were completed. The result was still disappointing in many ways, especially to developing countries, and yet, since the round's completion in 1993, the world economy has grown lustily and the biggest developing countries, China, India and Brazil, have all burst on to the global trading scene. Would the world really be hurt if the EU merely refuses to expose its farmers to more competition? The likeliest outcome both from the Hong Kong meeting and the eventual Doha agreement is a compromise—as always. The European position is feeble but not risible, for it has offered an overall average cut in its farm tariffs of 39%, up from 25% only a month ago, though with rather a lot of loop holes that could severely limit the benefits. France, and other European farm protectionists, may prove more flexible than they currently imply: this is hardly the first time they have promised to man the barricades shortly before striking a deal. Yet though some sort of fudge in Hong Kong must be likely, with the Americans lowering their ambition and the Europeans raising theirs a little, such an outcome would still represent both a missed opportunity and a risk. The missed opportunity is that Doha has offered the first proper chance to involve developing countries in trade negotiations—they now make up two- thirds of the WTO members—but also thereby to use a full exchange of agricultural, industrial and service liberalisations to make a big advance in free trade that could benefit a wide range of countries. Some of that progress may still be made, even in a fudged deal: Brazil, for example, stands to benefit hugely from freer trade in agriculture, so it should be willing to promote other concessions in return. India is reluctant to cut its own farm tariffs but has a big interest in liberalising trade in services, wanting more freedom in everything from finance to health care to entertainment But if the rich world could gird itself to be more ambitious on agriculture, the gains would be even greater: help for the poorest countries, making the rich look generous; better access to the biggest and richest developing countries for western companies; and a rise in global income in a decade's time of $300 billion a year (says the World Bank), which would thus help everyone. The risk is that failure to agree on a new wave of openness during a period [the past two years) in which the world economy has been growing at its fastest for three decades, with more countries sharing in that grth than ever before, will set a sour political note for what may well be tougher times ahead. A turn away from trade liberalisation just ahead of an American recession, say, or a Chinese economic slowdown, could open up a chance not just for a slowdown in progress but for a rollback Currently, for example, the Schumer bill to put a penal tariff on Chinese goods looks unlikely to pass. If American unemployment were rising and world trade talks had turned acrimonious, that might change. So might the political wind in many developing countries. If so, that would be a tragedy for the whole world. Although the case for reducing poverty by sending more aid to the poorest countries has some merit, the experience of China, South Korea, Chile and India shows that the much better and more powerful way to deal with poverty is to use the solution that worked in the past in America, western Europe and japan: open, trading economies, exploiting the full infrastructure of capitalism (including financial services) amid a rule of law provided by government In other words, globalisation. To paraphrase Samuel Johnson, anyone who is tired of that, is tired of life.

For the following questions answer them individually