1. Introduction In the current era of globalization, trade liberalization emerges as one of the most serious policy concerns for governments all over the world, especially for developing countries. Trade liberalization is believed to enhance economic growth and development through specialization and technological advances (Hoque and Yusop, 2010). The role of trade policy in economic development has been a key debate in the development literature for most of the second half of the twentieth century. Whereas the prevailing wisdom in the 1950s and 1960s favored import substitution, that in the 1970s and 1980s favored export promotion/outward orientation (Greenaway et al., 2002). There are number of empirical studies linking economic growth to the openness of the trade regime (Krueger, 1978; Heitger 1987; World Bank 1987; Romer 1989; Quah and Rauch 1990; Michaely et al., 1991; Dollar, 1992; Edwards, 1992; Harrison, 1995; Savvides, 1995; Bakht, 1998; Onafowora and Owoye, 1998). On the other hand, some other studies find little empirical evidence to support a link between trade liberalization and economic growth (see Sachs, 1987; UNCTAD, 1989; Shafaeddin, 1994; Clarke and Kirkpatrick, 1992; Greenaway and Sapsford, 1994; Karunaratne, 1994; Jenkins, 1996; Greenaway et al., 1997). A possible link between openness and growth has been an important factor in stimulating an unprecedented wave of unilateral trade reforms, with over 100 countries committing to some kind of trade liberalization over the last 20 years. Many of these programmes have been voluntary; most however have been tied to the policy conditionality which is central to World Bank Structural Adjustment Loans (SALs) . Indeed, trade reforms account for a higher proportion ... ... middle of paper ... ... have a small sample size. It is well known that the Engle & Granger (1987) and Johansen (1988, 1995) methods of cointegration are not reliable for small sample sizes, such as that in the present study. Several previous studies, however, have applied the ARDL approach to relatively small sample sizes. Gounder (1999, 2002) has used the ARDL methodology to test empirically various growth hypotheses for Fiji using similar sample sizes to that in this study. Pattichis (1999), Mah (2000), Tang and Nair (2002) and Tang (2001, 2003) applied the ARDL bounds test approach to estimate the import demand function using small sample cases. Tang (2003) applied the ARDL Bounds test approach to estimate the import demand function for Japan with only 18 annual observations. We have 27 annual observations. Therefore, application of the ARDL Bounds test approach is very appropriate.
Trade is the most common form of transferring ownership of a product. The concepts are very simple, I give you something (a good or service) and you give me something (a good or service) in return, everyone is happy. However, trade is not limited to two individuals. There are trades that happen outside national borders and we refer to that as international trading. Before a country does international trading, they do research to understand the opportunity costs and marginal costs of their production versus another countries production. Doing this we can increase profit, decrease costs and improve overall trade efficiency. Currently, there are negotiations going on between 11 countries about making a trade agreement called the Trans-Pacific
Few governments will argue that the exchange of goods and services across international borders is a bad thing. However, the degree to which an international trading system is open may come into contest with a state’s ability to protect its interests. Free trade is often portrayed in a good light, with focus placed on the material benefits. Theoretically, free trade enables a distribution of resources across state lines. A country’s workforce may become more productive as it specializes in products that it has a comparative advantage. Free trade minimizes the chance that a market will have a surplus of one product and not enough of another. Arguably, comparative specialization leads to efficiency and growth.
by a world power can be felt by practically every nation of the globe involved
This economic growth continued to increase through ‘98 and ‘99, partly being attributed to the weakening Australian dollar that allowed for the opening up and increasing market shares held by Australian exports on world markets. This was the case, as the reduction in the Australian dollar’s value, triggered decreases in the prices of our exports for foreign buyers, thereby increasing demand for our products and increasing the amount of money and investments coming into Australia. This therefore resulting in the aforementioned increases economic growth when combined with the high levels of employment and consumer confidence.
While free trade has certainly changed with advances in technology and the ability to create external economies, the concept seems to be the most benign way for countries to trade with one another. Factoring in that imperfect competition and increasing returns challenge the concept of comparative advantage in modern international trade markets, the resulting introduction of government policies to regulate trade seems to result in increased tensions between countries as individual nations seek to gain advantages at the cost of others. While classical trade optimism may be somewhat naïve, the alternatives are risky and potentially harmful.
Haddad, M., Shepherd, B., & World Bank. (2011). Managing openness: Trade and outward-oriented growth after the crisis. Washington, D.C: World Bank.
The political force moved away from the painstakingly and time-consuming technique of multilateral tariff negotiations to smaller regional and bilateral provisions - the Regional Trade Agreement. In these arrangements; members accord preferential treatment , basically agreeing to liberalize the exchange of goods and services amongst each another giving regard to certain trade barriers. RTA is not the first-hand way of trade liberalization though. Initially, when multilateral trade discussions used to happen, two-sided and multiparty FTA”s filled the vacuum. There were restrictions from stringent and premeditated trade arrangements earlier, thus a lot of states are now moving towards freer trade for their own benefits.
”Free trade policies have created a level of competition in today's open market that engenders continual innovation and leads to better products, better-paying jobs, new markets, and increased savings and investment” (Denise Froning). Though Free trade plays a huge role in the economy today because of what and where it is used. Free trade allows for traders to trade across national boundaries and other countries without government interference. Meaning that traders have very few regulations that allow for them to do this without the government intervening. Free trade makes things for traders much easier and also allows for many more jobs in the US, such as exporting jobs, or jobs in the auto industry and plants. Though there are many other types of trade policies, none give more benefits than that of free trade. Free trade is not determined by artificial prices that may or may not reflect the true environment of supply and demand.
Trade is more than the exchange of goods and services; it sows the seeds for growth, development and provides the knowledge and experience that makes development possible (Cho, 1995). Trade is considered one of the main driving forces behind economic growth and poverty reduction, especially in Africa (Fosu and Mold, 2008). Adam Smith’s 1776 theory of absolute advantage states that a trading nation can gain by specialising in the production of the commodity of its absolute advantage and exchanging part of this output with other trading partners for the commodities of its absolute disadvantage (Llorah, 2008). This process enables countries to extend beyond their borders, allowing greater specialisation in production, enhanced effectiveness in use of thin resources, the growth of national income, the capacity to accumulate independent wealth and enhances the growth of the economy (Cho, 1995). According to DFID’s report, Trade Matters, other positive derivatives include raised employment, increased household income and the chance for people to earn their way out of poverty, independent of aid (DFID, 2005). The role of trade, while strongly advocated, is still highly debated (Collins and Graham, 2004; Madeley, 2000) and many recent studies question the positive role of economic growth on open trade (Bene, 2009). The extensive arguments surrounding this controversial discussion empirically highlight the difficulty in isolating the effect of trade liberalisation on economic growth, although it is clear that it does, and will continue to have, an important role in poverty alleviation.
Stallings, B. (2000), pp. 7-8, ‘Globalization and Liberalization: A View from the Developing Countries, U.N. Economic Commission for Latin America and the Caribbean.’ Available at: http://www.mtholyoke.edu/acad/econ/stallings.pdf. Accessed: 30th November, 2011.
time. As time progresses, countries seem to be able to grow at a much more rapid
In order for any country to survive in comparison to another developed country they must be able to grow and sustain a healthy and flourishing economy. This paper is designed to give a detailed insight of economic growth and the sectors that influence economic growth. Economic growth in a country is essential to the reduction of poverty, without such reduction; poverty would continue to increase therefore economic growth is inevitable. Through economic growth, it is also an aid in the reduction of the unemployment rate and it also helps to reduce the budget deficit of the government. Economic growth can also encourage better living standards for all it is citizens because with economic growth there are improvements in the public sectors, educational and healthcare facilities. Through economic growth social spending can also be increased without an increase of taxes.
Salehzedah, Zohre and Henneberry, Shida Restagari "The Economic Impacts of Trade Liberalization and Factor the Case of the Philippines." Journal of Policy Modeling v24.
Moreover, international trade can be more effective in reducing poverty than outright aid in which trade can help any country become self-sufficient, rather than relying on foreign assistance. However, there are, many disparities within the present global trade system that work against poor countries. That is regulated by a set of rules created by governments over the years. In general, poor countries don't have access to developed countries’ markets because of the barriers of trade and agricultural. It’s difficult for poor countries, because of trade barriers, to sell their products abroad and develop their living conditions. While free trade benefits everyone, governments sometimes aim to protect their goods and markets by providing subsidies to local rules and producers, or creating barriers like tariffs and quotas. This particular practice is known as Protectionism; which can be identified as the economic policies and procedures of controlling trade between states...
Trade creation occurs when low cost producers within free trade area replace high cost domestic producers. These agreements create more opportunities for countries to trade with one another by removing the trade barriers and investment. Trade creation allows member countries for a wider selection of goods and services not previously available. They can acquire goods and services at a lower cost after trade barriers due to lowered tariffs or removal of tariffs which will encourage more trade between member countries the balance of money spend from cheaper goods and services, can be used to buy more products and services. Regional economic integration significantly contributes to the relatively high growth rates in the nation. By removing trade barriers between members countries the factor of production can be move