(a) 'Liberalization of foreign trade involves policy framework at National and International level. 'Explain the statement.

(i) Removing barriers or restrictions set by government is what is known as liberalization.

(ii)With liberalization of trade, businesses are allowed to make decisions freely about what they wish to import or export.

(iii) The government imposes less restriction on businesses.

(iv) Starting around $\displaystyle 1991$, some far-reaching changes in policy were made in India. The barriers on foreign trade and foreign investment were removed to a large extent.

(v)World Trade Organisation (WTO) is one such organization whose aim is to liberalise international trade.

(vi)WTO establishes rules regarding international trade, and sees that these are obeyed.

(vii) Governments are taking special steps to attract foreign companies through Special Economic Zones (SEZs).

(viii)Government also allows flexibility in the labour laws to attract foreign investment.

(ix)Exchange of technology and production methods are common in collaboration with foreign companies.

(x)Foreign direct investment, Privatisation, deregulation, disinvestment, working of MNCs etc. are the policies for the liberalization of foreign trade.

(b) Explain any five steps taken by the developing countries to attract Foreign investment.

(i) Industrial zones called Special Economic Zones (SEZs) are being set up.

(ii) SEZs are to have world class facilities: electricity, water, roads, transport, storage, recreational and educational facilities.

(iii) Companies who set up production units in the SEZs do not have to pay taxes for an initial period of five years.

(iv)Government has also allowed flexibility in the labour laws to attract foreign investment.

(v)Instead of hiring workers on a regular basis, companies hire workers ‘flexibly’ for short periods.