When browsing the aisles at your local supermarket, what products do you see? Bananas, coffee, tobacco (well, if you’re under 18 then maybe not)... the accessibility of these kinds of exotic items is an impact of international trade on western countries. But what do the impacts of international trade look like in the developing world?
To start off, I think we should clarify what international trade is exactly. International trade is the purchase or sale of goods/services between companies in different countries. By removing trade barriers and engaging in this practice, national economies can expand their markets. This greater access to goods/services (that would be impossible to achieve domestically) creates a more competitive market, which then increases price competitiveness. Bottom line is that the average consumer can buy more things at lower prices. Due to its ability to drastically affect the prices of commodities such as food and clothing, international trade was one of the biggest drivers of globalisation: a phenomenon that drastically changed the world’s economic development.
Now, onto the developing world. Though the overall progress of the developing world has been uneven- with 75 transition economies seeing little to no economic growth, as they are still too dependent on exports/imports of traditional commodities- the countries that have embraced globalisation and properly used their comparative advantage have seen massive improvements in both GDP and quality of life.
To quote Jeffrey Sachs ( the special advisor to the UN Secretary-General and former director of the UN Millennium Project), “When countries open up to trade, they generally benefit because they can sell more, then they can buy more. And trade has a two-way gain.". This is clearly represented by developing countries such as Singapore, China, India and others in Asia. Now that the average import tariff in that region has fallen from 30% to 10% (over the past 20 years), developing countries make up ⅓ of world trade vs ¼ (1970). Not only are these growing economies trading with the western world, but also among themselves, with an average of 40% of exports going to other developing nations. As a result of all of this, the GDP (per capita) in Africa, Asia and Latin America increased by 16% over the past five years.
GDP and economic stability is only one portion of a broad range of impacts. When looking at some other aspects of society, one can see that the living standards in general have increased. The estimates of the gains these developing countries receive from eliminating trade tariffs are equal to roughly US$250 billion per year: double the amount these countries receive in aid. In addition, trade liberalisation increases efficiency in the allocation of scarce resources, once again contributing to long-term national growth.
In conclusion, embracing globalisation and international trade is in the best interest of developing countries to be properly integrated in the world economy and improve the quality of life of their citizens. What do you think of international trade? If you were the leader of a developing country would you want to engage in international trade or not?
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