2016 · Q29
Whenever countries set up a free trade area they abolish all restrictions on trade among themselves and
Indian EconomyInflation and external sector
- AThey establish a common external tariff on imports from outside countries
- BThey abolish all restrictions on imports from outside countries
- CThey abolish all restrictions on imports from other free trade areas
- DEach country maintains on quotas on imports from outside countries
Explanation
A free trade area removes tariffs and quotas on trade among members, but unlike a customs union it sets no common external tariff — each member keeps its own tariffs and quotas on imports from outside countries. Options (A), (B), and (C) describe a customs union or full liberalization, which an FTA is not. Hence (D).