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 …show more content…
The Doha Development Agenda in 2001 stated it would make development the focus of multilateral trade negotiations, but there has been no subsequent progress, only rhetorical statements about the inclusion of Africa in global trade deals (Drieghe, 2009). Series of rounds of trade negotiations have merely created unbalanced rules, benefitting the developed countries but disadvantaging Africa. In this instance, it would perversely, seem preferable for the developed countries to give aid to Africa (Ilorah, …show more content…
The main causes of impoverishment in SSA are internal, and would not, as popularly debated, be holistically alleviated if the developed world abandoned protectionism (Tupy, 2005). Albeit not the main reason, developed countries protectionist trade policies do cause harm to African exports (Llorah, 2008). The European Union have virtually no tariffs for African cocoa beans, but they increase to between ten and fifty percent for semi-processed cocoa or final product chocolate (Nankani, 2005). These tariffs penalise African businesses/producers for adding value to their product, highlighting that even when trying to raise capital through exports developing countries are still able to dictate to what extent; exposing African exporters to export earning instabilities (World Bank,
Patel’s first two chapters focus on international trade agreements. He argues that free trade may not have any real benefits when weighed against the drawbacks it causes, specifically, the inescapable poverty and the sense of hopelessness it establishes for farmers. A large focus of Patel’s book is on the very high, and still ris...
Regardless of the way that the standard of living is measured, there is clear evidence that economies that adopt free trade policies outperform their counterparts that maintain protective trade barriers. This economic performance has lead to clear increases in the standard of living in these countries, providing clear examples that free trade can be used to help underdeveloped economies catch up to more developed nations.
Ng, F., Yeats, A. and Er. (1997) Open economies work better! did Africa's protectionist policies cause its marginalization in world trade?. World Development, 25 (6), pp. 889--904.
Even in a world focused on the benefits free trade and aimed at achieving the goal of free trade, states are protectionist by nature. Unfortunately, the design of the international system allows for stronger nations to be more protectionist, leaving the weaker states even more vulnerable. A study that is more intensive than a critical commentary should be devoted to analyzing the impact of free trade on developing nations. I was limited to the readings and prior knowledge, and thus couldn’t provide a sufficient analysis on the fair treatment of developing nations. I was skeptical of the one reading that focused on fairness of international institutions because of the statistics that indicate these nations have not done well in recent decades. I would like to look into this more given more time and resources.
In the 1970’s and 1980’s trade openness and economics reform towards market mechanism flourished in many developing countries. This trend is much different as compared to those in the early 1950’s and 1960’s when many less developed countries favored protection policy, inward orientation, and import substitution. As a result of this change, there are substantial developments in world economy after applying outward orientation. According to Thilrwall (2011 p. 514), the implementation of trade openness has managed world output trade relative to world output gain a considerable growth in the period of 1960-2006. The volume of world trade has risen 25 times or nearly 8 percent per annum (at annual compound rate). In the meantime world’s GDP has multiplied seven times during that period. However, some evidences on the development indicators in developing countries, such as poverty, inequality, unemployment, environment and health, show that they are more affected by trade liberalization. This paper aims to argue that even though trade openness shows successful indicators, some problems still exist when developing countries are more prone to get harm rather than gain. Trade openness per se is not the only solution for stimulating development at developing countries.
International trade of developing countries is the classic weak vs. strong dichotomy, and underdeveloped or developing countries cannot make it solely on their own efforts; the have nots need help from the haves. Developed nations trumpet the claim that the answer to developing nations’ international trade issues is untrammeled or open market activity as opposed to government intervention by developed nations’ governments. This begs the question as to what extent the governments of developed nations are or should be responsible for supporting developing countries’ growth in international trading markets. Often the protectionist actions of developed nations’ governments to enhance their own international trading activities are the very hindrances faced by the developing countries, so much so that the developed nations are morally obligated to support the developing countries to offset the roadblocks created by these same developed countries with tariffs, quotas and other trade barriers.
According to two former parts, both free trade and fair trade perspectives expect to help developing countries overcome poverty. Free trade tends to promote industrializations and economic growth. Although free trade will bring technology and progress into developing countries and increase their economic growth but there are still have a number of poor people and an inequality problem between urban and rural areas. Opening markets of developing countries also affects domestic producers adversely because a competition with foreign nations will reduce prices of their products. Additionally, Yanke (2014) mentions that farmers in developing countries suffer a huge loss of revenues when market prices plummet since there are no government safety
In 2002, a study was done called the Human Development Report concluded that the countries with the lowest levels of Human Development Index scores were all landlocked countries. Trade is the biggest reason why these countries has a continually battle to grow their economy. Landlocked countries have to travel long distances to be able to reach ports for international trading. As a result, many landlocked countries would have to go through either one or two neighboring countries. These relationships always favor coastal countries because they will place high transportation costs on landlocked countries in order to gain a distant advantage over them. If we look at the statistics from, Human Development Report 2002 the ratio of transportation and insurance to value of exports for Mali is 35% compared to South Africa which is 8%. This is nearly 4 times the amount which is a costly disadvantage for Mali. Growth of an econo...
Trade is opportunity for growth. Liberates economy. It Earns on Assets, and will make developers self sufficient and pave way to explore their potential. Aid is an instant remedy. Not cure. Trade is better than aid because trade improves the efficiency of a country since there are some products which may be being found in the developed countries but not in the developing ones therefore I will go for trade and not aid. Definitely trade is better than aid as the aids given in form of funds are not utilized properly for development and large sum of money goes inside the pocket of ministers. But with the trade any developing country can be benifited in two ways one it will get money for growth and development and secondly it will abridge the gap between a...
Globalisation has been one of the most significant developments of the last half century, and issues such as trade and international commerce have become increasingly important. In consequence, problems such as poverty, unfair wages and poor working conditions in third world countries have been drawn to the attention of consumers (Hayes and Moore, 2007). This is a growing global issue which cannot be ignored by anyone concerned about the problems in developing countries. Free trade and Fair Trade have both been offered as solutions to these issues.
“…increasing international trade and financial flows since the Second World War have fostered sustained economic growth over the long term in the world’s high-income states. Some with idle incomes have prospered as well, but low-income economies generally have not made significant gains. The growing world economy has not produced balanced, healthy economic growth in the poorer states. Instead, the cycle of underdevelopment more aptly describes their plight. In the context of weak economies, the negative effects of international trade and foreign investments have been devastating. Issues of trade and currency values preoccupy the economic policies of states with low-income economies even more than those with high incomes because the downturns are far more debilitating.1”
The main trade barrier to regional trade in Africa is that of a poor transport network. According to a study done by the United Nations Economic Commission for Africa (ECA) it was discovered that the highest transport costs are in African countries. High transport costs are due to poorly maintained roads and infrastructure and the fact that not all countries have harbours, makes transport
Economic growth is one of the most important fields in economics. In current generation economic is developing well. Economic growth is really important to country and for the world as well. Economic are one of the identity for country because it shows a country development and attraction for other countries (F, Peter. 2014). For example well economic develop such as Singapore, Dubai, New York, and Japan. These countries are well develop and maintaining their economic growths. Economic growths are really important because higher average incomes enables consumers to enjoy more goods and services. Then, lower unemployment with higher output and positive economic growth firms tend to utilize more workers creating more employment. Enhanced public
Economists have known that international trade is one of the most important ways in which societies can increase their standard of living, since the time of Adam Smith and David Ricardo, with their work on specialization and comparative advantage. There is a strong connection between international trade and economic growth which is known since long time ago. The Roman Empire is a good example; it got rich because it was able to trade over long distances. Another example is the spice trade which was between Europe and Asia; it was the first and a very good example of how trade between the two continents enriched both of them. The nineteenth century saw a very high rise in trade, big reduction in piracy, and huge improvements in the quality and speed of shipping. This was also the period in which modern economic growth first became established. However, during the wars, the international trade decreased which brought misery to millions of people. After the world war, the trade increased dramatically. International trade increased the standard of living for those in developed and developing countries.
USTR. (2014, July 24th). Africa. Retrieved from Office of the United States Trade Represenaitives: http://www.ustr.gov/countries-regions/africa