Does Trade Liberalisation Promote Long Run Economic Growth?

Trade liberalization inspires economic growth, and ensures sustainable prosperity for everyone. The reduction and removing of tariffs has made materialistic goods like food and clothes more available and affordable to countries that are developing and have low GDP per person. For example, the average Kenyan

While this may be detrimental to a smaller country, it is a casual sacrifice for the developed nation encouraging said liberalization. Due to their economic size and power, their cost of closure-the cost incurred on a nation by the termination of a trade partnership, measurable through direct income loss and adjustment costs of reallocating factors of production-is much smaller than that of the developing nation (Krasner, 21). Ideally, the smaller market is opened to a point of maximum advantageous trade, at whatever internal cost, and held there. The chances of the resultant instability overwhelming the capabilities of the nation are low, but if it does occur, the cost of closure for the larger nation is small. Thus, the instability is a worthwhile risk if it increases relative power. As a result, today large powers ubiquitously push economic liberalization upon smaller nations across the world in the name of the globalization

First of all, Globalisation helps to promote international division of labour. According to Heckscher-Ohlin theory (Gerber, 2014, pp.72-76), nations are endowed with different levels of each production factors which have determined their comparative advantage. When trade open, a country will specialise in producing its comparative advantage products and choose to import comparative disadvantage products from other countries. By specialising in the production of comparative advantage product, it can achieve economies of scale. Then the cost of production will decrease. One of the most intuitive senses will be the less expensive product because people can purchase imported comparative disadvantage product and indigenous comparative advantage product both at lower prices than in the past.

Think about how important mass produced goods are to an American consumer, or one in another first world country. The biggest benefit to a company is the ability to maximize profits though outsourcing. They are able to outsource labor to low-wage areas in poor countries. They get their wealth by exploiting resources of other countries workers. Global markets have made it possible for countries to have impressive growth rates through trade. For a developing country like Mexico, the North American Free Trade Agreement allowed them to reach more trade agreements with other countries than any other nation. (Sernau, 2017, p. 77) It has allowed them to develop greatly economically by increasing their exports. Global markets are responsible for lower market costs because of the mass production of goods for exports. Developing countries have become much more important in world trade because

Evidence also shows that free trade stimulates a chain of growth in the economy because as economy becomes better as an effect of free trade, spending in the market increases, increasing demand. This results

For small developing countries unable to manufacture necessary items the world market presents an opportunity to obtain those items. Even being able to subsidize a country's food resources or modernize a country's food production can change an entire nation's economy. For countries who have an abundance of certain resources being able to trade them

Those economically disadvantaged (poor) within a country generally gain from a loose trade. A loose trade is generally a strong positive contributor to poverty reduction. This allows people to exploit their productive potential, assists economic growth, restrains illogical policy interventions and helps to insulate against shocks. This corresponds with a new World Bank study which, used data from 80 countries over four decades, confirmed that openness boosts economic growth and that the incomes of the poor rose one-for-one with overall growth.

The process of globalization has numerous significant effects on countries, organizations, and individuals. These effects can be observed in the quality of products, in their prices, but also in their availability. Because of globalization, numerous companies prefer to expand their business on international level. Some of them outsource some of their processes and activities to cheaper destinations that allow them to reduce their investments.

It will be difficult for Britain to find such a large market that it could conveniently access anywhere else. Likewise, opening up other countries’ markets have increased competition between businesses, therefore lowering prices of services like internet and air travel, which has allowed customers to spend more on other goods and stimulate growth.

Countries are enabled by free international trade to specialise or to focus in the production of the goods in which they have a comparative advantage. Specialisation countries can take the benefit of efficiencies generated from increased output and economies of trade. The size of the firm’s market are increased by the international trade which results in lower average costs and increasing in productivity, as it ultimately leads to increase in production.

The liberal approach to free trade is heavily associated with the fundamentals of capitalism. Free trade is therefore beneficial to the minority who are capable of manufacturing their goods in societies that have more unskilled labourers and in turn can be compensated less. The labourers in the nations that have the technology to do something better but not necessarily cheaper are at the greatest disadvantage within a liberal free trade political economy.

The theory of comparative advantage explains the benefit of free trade. According to this theory by David Ricardo in the early 19th century, “Both countries will be better off if each specializes in the industry where it has a comparative advantage, and if the two trade with one another.” (Citation) International trade opens up markets to foreign supplier, and domestic companies need to improve their efficiency, boost productivity, and lower cost to increase competitiveness instead of enjoying monopolies or oligopolies that enabled them to keep prices well above marginal costs. On the other hand, international trade also offers domestic companies bigger demands and broader markets; therefore more jobs relevant to export have been created. Furthermore, jobs in the US supported by goods exports pay 13-18 percent more than the US national average (ustr.gov).

Free trade has long be seen by economists as being essential in promoting effective use of natural resources, employment, reduction of poverty and diversity of products for consumers. But the concept of free trade has had many barriers to over come. Including government practices by developed countries, under public and corporate pressures, to protect domestic firms from cheap foreign products. But as history has shown us time and time again is that protectionist measures imposed by governments has almost always had negative effects on the local and world economies. These protectionist measures also hurt developing countries trying to inter into the international trade markets.

Globalization offers industries many ways to increase their profits. Since businesses and corporations have access to a wider range of potential clients, they have a chance to increase profits. Global competition also

Throughout the years, there has been a constant controversy over whether the World Trade Organization should enforce global free trade. The primary idea is to establish in which all are happy. Although there are many advocates for trade liberalization, as well as many who oppose. I believe free trade may be advantageous for both large and small-industrialized countries, but it does not favor the smaller developing countries needs primarily.