International Economics
Curtin University
Assessment 1
International trade rules and practices have worked in favour of developed countries (DCs) but against less-developed countries (LDCs) in recent decades.” Critically evaluate this statement providing real-world examples & recent evidence to support your argument.
Introduction
In recent decades International trade rules and practices have worked in favour of developed countries but against less developed countries, in recent years however this trend has declined and the future of trade rules and practice appears to be less discriminatory. Less developed countries (LDCs) have consistently been faced with challenging trade rules and practices.
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Developing countries have asserted themselves, particularly over the past 2 decades. The formulation of the G20 and the first public flexing of their muscles at the WTO conference, 2003, resulted in the breakdown of negotiations. “Most observers interpreted events at Cancun as a fiasco and a multilateral failure, but when we look a bit deeper we see developing countries forming an alliance that effectively represented their interests” (Crump, Larry & Javed, 2007, 17), this is a direct example of LDCs using international practices to their advantage and resisting DCs attempts at pushing them around. Unfortunately most developing countries have small assemblies at the WTO and therefore are often overcome by the sheer extent and the gruelling schedule while negotiating. Although LDCs are increasingly influential on the world stage, they are still often disadvantaged by the nature of international practices.
The World Trade Organization and LDCs
The
With the onset of globalization, trade barriers have diminished. This results in easier and faster transport of goods, and increase in foreign investments that create more job opportunities. In addition, the perpetuation of free trade reduces the possibility of beginning a war. However, let us be reminded that its economic pros are not universal and absolute. Although most benefit from it, unfortunate nations may still lag far behind. Furthermore, rich countries can take advantage of low wages, cause environmental damages to poor countries with limited pollution regulation and control, and impede home
There is no doubt that increasing in international trade is supporting the economic growth across the world, raising incomes and creating jobs. However, international trade can also some create economic obstacles, such as the international context and the market policy and regulations of each country, and consequently it can be said that the effects would have positive and negative sides, and it is useful to mention all of them and to take them into consideration.
The less developed countries cannot protect their infant industries under the policy of free trade and in general the terms of trade are favorable for the developed countries, and unfavorable for the poor countries. The less developed countries find it difficult to compete with the economically advanced countries. Free trade can lead workers from poorer countries to work long hours and forced to live in shanties without electricity even, just so they can work and send money back to their families.
Trade policy continues to be an important aspect in globalization at least in some of the lower income developing countries. Widespread use of computers, faxes and mobile phones, introduction of the internet and e-commerce, are quicker and cheaper means of transportation. In some cases offered in opportunities to developing countries, but in other cases between global firms and traditional industries globalization opened up other opportunities for developing countries to create jobs and expand exports. In practice, many developing countries competing for foreign investors offered longer tax holidays, costly subsidies, and various incentives for multinationals. The competition among developing nations reduced positive net effects of globalization or, furthermore, delayed them.
Over the past four decades, the economy has undoubtedly become an integral part of the whole entire world. Global GDP has almost doubled since 1975 with the assistance of new innovative technology and reductions in trade barriers. The overall global growth driven by trade openness has also reduced a significant proportion of people in poverty, the number floating just around 1 billion in 2011 and the most up to date number since. Lowering trade costs for deeper integration of markets holds the most promise out of the five areas of polices mentioned because it unlocks the economic growth needed for poverty reduction and create new trade opportunities for the poor through
Over the years, the World Trade Organization (WTO) has prided itself as the central element in the international economic management system across the world. This system incorporates other international bodies such as the World Bank, the International Monetary Fund as well as a series of other regional trade regimes that are growing. Collectively, these structures provide a mechanism that addresses international economic interdependence as well enhancing economic interactions that offer the promise of maximizing social welfare across the globe. These aspects have been brought about due to the focus given in the post-Cold War era where international relations have evolved beyond a narrow emphasis on politico-military affairs.
The Doha round of talks held in 2001 wanted to involve developing countries due to their growing importance, and hence this round was nicknamed the “Development Round.” Critics of this round suggested that nations should pursue more bilateral and regional trade agreements. This meant more Regional Trade
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.
Smaller nations tend to struggle under the tariff systems of bigger nations because they do not have the same political power to push for trade agreements or compete against the larger importers of competing goods (Carbaugh, 2013). Under the tariff system the consumer in the smaller nation ends up having to absorb the extra cost due to high prices of goods resulting in them being price takers in the world market (Carbaugh, 2013). Since the smaller less developed nations cannot impact the world price on goods they end up with a larger impact to their overall welfare making it harder for them to move into a developed industrial nation (Daniels & VanHoose, 2004).
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.
In generally, compared to less developed countries, developed countries are more abundantly endowed with at least two factors of production, hence they are more likely to be the supporters of free trade (Rogowski 2010). By creating free trade agreements with less developed countries, developed countries are able to specialize on the production of those goods which they have comparative advantages. Specialization in the production generates larger economic return to the entities (Shikher 2005). By specialized in the production and free trade, developed countries are able to ‘sourcing industry-specific skilled labour in the global arena’ (Bahn and Cameron 2013). On the other hand, free trade agreements enable developed countries to avoid environmental disruption during the production while this would be the cost of trade liberalization for less developed country which will be discussed in next section (Cate 2009). Moreover, in most situations, developed countries have greater trade surplus compared to the trade deficit of less developed countries, for example, the free trade agreement between America and Mexico (Weintraub 1993). This situation also happened between America and Australia. Tiffen (2010) claimed that although the free trade agreement existed between Australia and America, but since from 2004, the proportion of Australian exports to the imports between the two countries has been continually
International trade has brought massive gains to a number of countries around the world. It has helped spread technology, enhanced competitiveness, raised productivity, and gave consumers with a number of choices. These potential gains from trade have motivated countries to aggressively negotiate for trade relations and explore new trade opportunities. For instance, a study which was carried out by World Trade Organization (WTO) (2008), for the period 1950-2007 shows that export increased by 2.7 percent faster than gross domestic product (GDP). Obviously, regional economic integrations played a vital role in promoting world trade in terms of both quantity and quality of goods and services traded.
In the history of the WTO, it has been unusual for any developing country to win substantial concessions from the dominating EU-US block for increased market access and reduced tariffs. It is much more unusual when these concessions are granted in agricultural products, the most highly subsidized industry in the West. Starting in 2003 however and starting with the efforts of Brazil’s Pedro de Caramago, developing countries began to take a more aggressive and mobilized stance against EU and American subsidization of agricultural products.
The international trade of goods across the world accounts for approximately 60% of the world Gross Domestic Product (The World Bank, 2014). A great proportion of goods transactions occur every second. The primary question is whether international trade benefits a country as an entirety, and, if so, why would a country implement protective trade policies to restrict particular exports? To address this question, this essay aims to explore the impact of trade on various economic stakeholders, including consumers, producers, labour and government and, furthermore, will compare models and theories with reality to ascertain the true winner/ loser in the international trade market.
To comprehend the potential and actual effects of governmental intervention on the free flow of trade