Advantages And Disadvantages Of International Trade

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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,

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