Impact of free trade on developing economies
Impact of free trade on developing economies
Introduction
Free trade refers to the purchase and sale of goods between countries without any taxes, tariffs, or any other trade barriers. The features of free trade include:
• Trade of goods and services without trade barriers,
• Unregulated access to market, and trade information,
• Removal of policies that can give monopoly advantage to some firms, etc.
Pros and cons of free trade
According to most economists, free trade has several advantages for the economy of developing countries. Free trade gives countries the option of focusing on those products and services in which they have suitable expertise. This in turn, should earn them enough revenue to purchase those goods that they cannot produce.
Dr. Manmohan Singh pioneered the policy of free trade in India, during his tenure as finance minister (1991 to 1996). He introduced the policies of Liberalization, Privatization, and Globalization. This led to a drastic improvement in the Indian economy, breaking new paths in India’s economic journey.
Benefits of free trade include:
• Newer trade and market opportunities-Local traders have a wider audience in different foreign markets.
• Generation of more employment opportunities-With increased production, and greater profits to local traders, automatically employment opportunities will go up, and more among the local population will benefit from this.
• Increased foreign investment-When there is greater sale of local products, there is also an increase in foreign investment.
Disadvantages of free trade include:
• Poor working conditions-Companies can exert greater pressure on employees to meet client needs.
• Unnecessary waste of natural resources-In order to increase profits, natural resources can be abused.
Conclusion
Economists are of the opinion that free trade policy is in the best interests of all countries, both developed and developing. Some might argue that it favors one party, that it more beneficial to one side. However, another side is of the opinion that even if one party stands to gain more, the other party also stands to gain more than earlier (without free trade policies). Therefore, going by expert opinion, free trade policies would be to the benefit of developing countries.
Discussion
- Impact of free trade on developing economies -Nupur Bhargava (04/04/14)
Impact of free trade on economies of developing countries
A country in which the government does not restrict import and exports is called a free trade policy. The trivial practice observed in free trade is the rebate of commercial barricades between the countries. The free trade permits plethora of labour and goods between the members countries indentured in a trade treaty. The Free Trade covenants are more or less the same across the world, the positive impact on developing countries has been flaunted as one of their great accomplishments.
There are several benefits of free trade, such as the developed countries can outsource their operations to developing countries, and hence improving the employment ratio in developing countries by giving more and more job to the residents of a developing country. Usually in developing countries, there are a lot of children being used for laborious works mainly because they are a cheap substitute for the works which either involve high technological machines as well as experts to utilise the machines; When you have free trade in a developing country it provides the latest technology machines to the country while they are outsourcing the work and as well as allows higher salaries through which an adult can be hired for the work to be done. When companies are under the trade treaty, foreign companies or multi – national companies are established and vice versa local companies can sell their products in foreign market hence increasing the market for the companies and also innovate new products as per the market requirement. With new investment and investors entering a developing country, it brings an increasing productivity cycle that motivates the whole frugality. An influx of foreign capital can also arouse the banking system, leading to additional investment and loan system in a developing country.
When you have enough income coming in the family not only does your standard of living rises but also you are able to accomplish the medical needs of the family and hence increasing the life span of the residents of a developing country. Free trade often improves the economic condition of the developing country by opening more and more job opportunities and extended foreign investment in the company. It also increases the purchasing power of the country.
Free Trade is indeed beneficial for any developing company provided if it is practiced throughout the country uniformly. It should not be this that there are certain countries that are following the free trade and some are not. The rules and regulation of free trade should also be uniform across the globe. Maximum let-downs in free trade have been for countries which have comprised in it, or have been mandatory told to do so, and were forced to open the market under unfavourable marketing conditions.
