Econ4018 International Trade- Developing Countries Assessment Answers

Write an Essay on Free Trade benefits developing countries much more than developed countries.

Answer

Introduction 

The report presents a brief overview of the international trade and development. It explains the theories, policies, and approaches to the international trade. The report analyzes that how international trade affects the business and economic growth. It also explains the various tool of trade and investment promotion.

International trade in Developing countries 

It is the exchange of goods, service, and capital from one country to another country. International trade plays a significant role in developing countries because it provides helps for the growth of the countries. India and China are the best examples of international trade in developing countries (Krugman, 2008). Some other countries like France, Japan, Greece, Netherland, Denmark, and Northway, Italy also taking benefits of international trade. International trade provides various benefits in developing countries, they are such as:

• It provides growth and development as well as employment opportunities in developing countries and it also provides an excellent market for the agriculture sector. Agriculture sector plays a significant role in the removal of poverty in developing countries.
• It provides excellent technologies and investment opportunities through foreign direct investment. International trade provides goods and services at lower prices, in such way consumers’ facilitates by lower prices of goods and services.
• International trade gives contribution in peace and stability of developing countries and it generates higher income in the countries. Therefore it is improving in the livelihood of people.
• Free trade improves in the quality of product and it increases resources of countries. Therefore developing countries can improve in production efficiency of employees.
• It helps to make good relations with developing countries and it also improves in life expectancy.

On the other side developed countries like United States, Australia, Germany, Ireland, Canada and New Zealand also take benefits of international trade. But sometimes it also creates a situation of war, friction and economic troubles which affect the growth of developed countries so it is assumed that international trade provides many benefits to developing countries compared to developed countries.

Why the countries engage in international trade

There are many countries engage in international trade to get the benefits of other countries goods and services. The significant of international trade are discussed as below.

• Effective use of productive factors:There are several benefits of international trade. The countries can take the benefits of goods, services, and commodities through the international trade among nations.
• Equality in commodity and factor prices:It maintains equality in products and services and equal factor prices are presented in all the regions through this trade. So it plays an important role among countries.

The Classical theory of international trade: It is also called comparative advantage theory. According to this theory, every country is specialized in the production of commodities and services. It exports those commodities which provide a comparative advantage,  import those goods and services which have a better comparative disadvantage. So the developing countries engage in international trade (Barbieri, Keshk & Pollins, 2008).

Instruments of trade promotion and protection 

The instruments of trade promotion and trade protection are such as promotional evaluations and export assistance, import facilities under duty exemption scheme, fiscal incentives like tax concessions and duty drawback, recognition of trading house and export house, marketing cooperation under MDA scheme and establishment of SEZs and EPZs (Micic, 2009).

Political and economic argument in favor of trade protection

There are various kinds of argument in favor of trade protection, they are discussed as follow.

• It provides support for the expansion of employment and profits and it provides diversification in work.  
• It advocates and protects the balance of payment and trade and it also protects the customers from unsafe and harmful products and services. It protects the culture and environment of the country.
• It encourages people to cultivate moral virtues and it protects the culture and human rights (Bass & Dalal-Clayton, 2012)

Approaches which is used by the firm to avoid government protective measures

The approaches are such as international law, international arbitration, bilateral investment treaties, double tax treaties, currency and foreign exchange and customs, export and imports. These approaches are used by the firms to avoid government protective measures.

Regional economic integration

It is an economic agreement between countries to reduce and eliminate trade barriers and it makes coordination in fiscal and monetary policies. There are four types of regional economic integrations such as customs union, free trade area, economic union and common market (Von Glahn & Taulbee, 2015).

WTO and anti globalization movement 

World trade organization is an agreement between nations to encourage international trade among countries. WTO plays a significant role in global issues, international trade, and global economic and political issues. Anti globalization movement also provides help to achieve social, economic and personal goals and objectives without any negative interference (Narlikar, Daunton  & Stern, 2012).

Trade exchange between geographic regions 

It is a marketplace where securities, commodities, goods, derivatives and other services are traded and it maintains the fair and clear trading procedure among nations. It is a system where goods and service are traded without the use of money. Trade plays a significant role in an increasingly interdependent and interconnected world. Trade exchange between nations reduces global poverty and prices and increase the variety of goods for consumers. It provides support to acquire and obtain new technologies. The various trade agreements have been made to increase trade in nations. Free trade agreement increases human resource and it improves the quality of work in developing countries. It maintains better foreign relations and increases in production efficiency. In this way, trade exchange is important developing countries as well as developed countries. There are many examples of trade are such as consumers deposits money using ATM, online banking web application (Scott, 2012).

There are two types of international trade agreement they are such as multilateral trade agreement and bilateral trade agreement. Multilateral trade agreement makes the rules of trade in different countries. It forms the international trade union such as NAFTA, EU, and WTO. Bilateral trade agreement only set the rules in several nations.

Countries can raise money through trade exchange. There are three approaches to evaluation of trade exchange are such as aggregate cost country evaluation, sectoral and program evaluation and project level evolution. Trade exchange facilitates the export diversification among nations and it also encourages innovation. In trade exchange, international trade provides the benefits of tariffs. Tariff is a tax which increases the prices of import goods and products. There are many benefits of the tariff are discussed as below.

• It eliminates the restrictions on import goods and it helps to increase domestic production of the country.
• Tariff provides good revenue to the government along with this it also creates employment opportunities for employees and it also improves the economy of the developing countries.

Inter firm and intra firm 

Inter firm comparison refers a comparison between two or more similar business with the object of finding a good competitive position to improve the productivity and profitability in those business units. For example, a company can use inter firm comparison to compare its financial results and operating profits. On the other side intra firm comparison refers a comparison of two or more division and departments of the same business units with the objective of improving the operational efficiency of all division and departments. It also helps in operating performance and financial results. Inter firm comparison helps to run the business in a correct way in the world. It helps the government to regulate the policies and prices of commodities. In such way, it is assumed that inter firm and intra firm plays a crucial role in international trade and development (Padgett & Powell, 2012).

Trade and investment promotion tools 

The trade and investment promotion tools are discussed as below.

• Country and project presentation tools
• Investment/ technology promotion delegate program
• Computer software
• Pre investment services (project completion facility)
• Networking
• The investment forum
• Global outsourcing

The international trade is affected by the natural resources, geographical position, political factors and economic development factors. All these factors affect the trade and development widely. The nations should control all these factors for encouraging the international trade in globally (Damodaran, 2012).

Role of the government in international trade 

International trade policies play a vital role in international trade and development. The government makes many policies for trade and development. The government focuses on the anti corruption, anti money laundering, export controls, trade defense measures, trade legislation, and policies, working effectively in the European Union. The various agreements have been signed by the government to implement trade policies. There are few reasons for implementing trade policies such as national defense, infant industries, aggressive trade practices, environmental concerns and domestic employment (Jordan, 2012).  

The rules and regulations which have been made by the government promote international trade and development. The government has made some rules for national and regional trade. In the formation of rules and regulations, a regional trade agreement and world trade organization play a crucial role. Regional trade agreements are the mutual agreements between two or more countries. World trade organization also plays a significant role in international trade. It provides forms of negotiation among the countries and it also helps in settlement of disputes among countries. It maintains good coordination and cooperation among nations. The success of world trade is measured by the volume and growth of international trade. Now it is assumed that international trade and development plays a vital role in business success and expansions. The government should also promote the international trade and development (Zarsky, 2012).

Conclusion

The report is based on the international trade and development and it also explains the effect of trade and development on developing countries. It analyzes and evaluates the tools and policies of international trade and development. The report explains that how regional trade agreements play a vital role in international trade and development.  Now it is concluded that international trade plays a crucial role among the countries. So the government should promote the export and import among nations for economic growth and development.

References 

Barbieri, K., Keshk, O. and Pollins, B., 2008. Correlates of war project trade data set codebook. Codebook Version, 2.

Bass, S. and Dalal-Clayton, B., 2012. Sustainable development strategies: a resource book. Routledge.

Damodaran, A., 2012. Investment valuation: Tools and techniques for determining the value of any asset (Vol. 666). John Wiley & Sons.

Jordan, A., 2012. Environmental policy in the European Union: actors, institutions, and processes. Earthscan.

Krugman, P.R., 2008. International economics: Theory and policy, 8/E. Pearson Education India.

Micic, V., 2009. Industrial policy and development: The political economy of capabilities accumulation. Econ. Horiz, 14, pp.53-55.

Narlikar, A., Daunton, M. and Stern, R.M. eds., 2012. The Oxford Handbook on the World Trade Organization. Oxford University Press.

Padgett, J.F. and Powell, W.W., 2012. The emergence of organizations and markets. Princeton University Press.

Scott, A.J., 2012. A world in emergence: Cities and regions in the 21st century. Edward Elgar Publishing.

Von Glahn, G. and Taulbee, J.L., 2015. Law among nations: an introduction to public international law. Routledge.

Zarsky, L., 2012. Human rights and the environment: conflicts and norms in a globalizing world. Earthscan.