Trade Liberalization : A Win Winning Proposition And Economic Incentives

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Introduction According to economic theory, trade is a win-win proposition and economic incentives should encourage trade and eliminate restriction to it. Probably that is the reason we observe a trade intensive global economy. Trade liberalization are not as simple as it appears. Questions such as which trading partner to choose, how much and how fast the liberalization should take place, and whether the additional trade is beneficial are still debatable for many developed and developing countries (Ciuriak, 2008 ). The international economic integration promotes a win – win situation on an aggregate national level. Nevertheless, the uneven distribution of cost and benefit in the industry level, and further to the firm and household level makes the trade liberalization controversial and politically difficult regardless of its benefits. under normal circumstances trade should lead to transfer of surplus from producer to consumer. However, some consumers may benefit more than others. Some might even lose. For instance, if the consumer’s preferred product being pushed out the market due to an intense competition. Reduction in trade barriers such as tariff and licensing requirement increases the competition for domestic industries. At the same time, it provides an access to foreign markets. This can provide advantages for some industries and drawbacks for others. Some firms will gain even in declining industries and some lose or forced to exit. The adjustment cost of

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