Question:

State how multilateral trade is different from bilateral trade.

Hide Solution
collegedunia
Verified By Collegedunia

Solution and Explanation

Definition

Multilateral Trade involves trade agreements or negotiations among three or more countries, typically through international organizations like the World Trade Organization (WTO), aimed at promoting free trade and reducing trade barriers across multiple nations. Bilateral Trade involves trade agreements between two countries, focusing on mutual trade benefits and concessions tailored to their specific needs.

Key Differences

AspectMultilateral TradeBilateral Trade
Number of CountriesInvolves three or more countries (e.g., WTO agreements, regional trade blocs like ASEAN).Involves only two countries (e.g., India-USA Free Trade Agreement).
ScopeBroad, aiming for global or regional trade liberalization with standardized rules.Narrow, focusing on specific trade terms between the two nations.
Negotiation ComplexityMore complex due to multiple stakeholders with diverse interests.Simpler, as it involves only two parties with clearer objectives.
Trade BarriersReduces barriers across multiple countries, promoting wider market access.Reduces barriers only between the two countries, limiting market scope.
ExamplesWTO agreements, Regional Comprehensive Economic Partnership (RCEP).India-Japan Comprehensive Economic Partnership Agreement (CEPA).
BenefitsGreater market access, economies of scale, and harmonized trade rules.Customized agreements, faster negotiations, and targeted trade benefits.
ChallengesConsensus-building is difficult; benefits may be diluted across many nations.Limited scope; may lead to trade diversion from non-partner countries.

Example

Multilateral Trade: India participates in the RCEP, involving 15 Asia-Pacific countries, to reduce tariffs and enhance trade. Bilateral Trade: India and Australia sign the Economic Cooperation and Trade Agreement (ECTA) in 2022 to boost trade in goods like textiles and agriculture.

Was this answer helpful?
0
0

Questions Asked in CBSE CLASS XII exam

View More Questions