Impact Of Global Trade On Developing Countries

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Global (international) trade is one of the most common norms happening all around the world today. This is one of the core factors that have, over the years, lead the world to becoming more and more globalized. Globalization is what our society has come to – there is always interdependence with one another. A nation on its own cannot possibly provide for, and meet all their citizen’s desires, especially now with a greater number of immigrants, hence a growing multicultural population. Take for instance this example: you enter into a supermarket anywhere in the world today, and what you will find are products and goods from just about every part of the globe; whether it be Greece, China, Italy, India – you name it. However, that said, what…show more content…
They each specialize in something or the other. For instance, Canada is a resource rich economy; it exports many of their natural resources to other countries whose economy doesn’t have a strong sector in natural resources, and likewise imports other goods/services from them. Therefore, Global trade, to some extent, is very crucial for all countries – regardless of developmental status. It makes greater sense to always trade with other nations. International trade allows each nation to specialize in a good or service that they produce best. Two economic concepts are needed to understand the issue fully: Comparative advantage and absolute advantage (Frank, Bernanke & Osberg, 2012, P. 31). Comparative advantage is when each country concentrates on the activities for which their opportunity cost is lowest, and their overall output is maximized (more productive than the other nation in that particular good/service) (Frank et al, 2012, P. 32). These depend on a country’s accumulated physical and human capital, difference in cultures & social institutions, as well as many other factors (Frank et al, 2012, P. 34). This concept encourages countries to specialize in the production of goods and services in which they have a comparative (also called as competitive) advantage in. On the other hand, Absolute advantage is when one country as a whole can produce more of a certain good/service faster than the other (takes relatively less time to produce) (Frank et al, 2012, P.
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