international trade and economic development

international trade and economic development

International barrier to trade	1- over-specialization on a narrow range of products Some countries are very dependent on a certain type of good usually a primary good They become dependent on it and the rise and fall of its price Thus they face vulnerabilities to it 2- price volatility of primary products Prices of commodities on the world market tend to be ineleastic Makes it hard for producers in the developing world to make plan ahead 3- inability to access international markets Protectionism in other countries harm the developing countries ability to export thus they cant make a living and get education etc. Tariff escalation Common situation where the import duties on components or raw materials are lowest, and move progressively higher on semi-finished goods upwards to the finished goods 4- long term changes in the terms of change Changes in the relative price of exports and imports can have a negative effect on their importing
Trade strategies for economic growth and economic development	1- import substitution Stragetegy in which developing countries should attempt to produce as much as they can locally so the country will economically grow and they will be able to become competitive Conditions- 1. government needs to adopt a policy of organizing the selection of goods to produce locally 2, subsidies are ready available 3. gov needs to implement aprotectionist system with trade barriers to keep out forign import Advantages- protects domestic jobs - protects the local culture and social habits Protects the economy from bad influences  of multi coporations Disadvantages- In the long run economic growth mught be lower Cannot experience the benefits of comparite advantage Leads to nnefeciancy Leads to high rate of inflation May cause other countries to take retalitatory protectionist methods 2- export promotion Increasing exports lead to increased GDP Will need to adopt certain policies 1. liberalized trade 2. liberalized capital flow 3. a floating exchange rate 4. investmant in the rovisions pf infratstucture 5. deregulation and minimal gov intervention.    Cons- protectionism in other countries becasue of cheep prices from the asian tigers - government have to intervene to build highways, infrastrucvtuere - MNCs may have to much power - income inequality 3- trade liberalization Reforms- Fiscal dicipline Spending on health and educatipn Lower tax Liberalize interst rates A competive exchange rate Trade liberalizaation Livberalization of FDI inflows Privatization Deregulatio Securer propety rights May lead to bad workign environments and inequality 4- bilateral and regional preferential trade agreements Mroe agreements made more trade can occur 5- diversification Diversigying their exports, exporting more than one thing
Development stratagies	Fairtrade organization A movement which strives for fair treatment for farmers. In a fair trade agreement, farmers, who in other situations might be more susceptible to the will of the purchaser, will negotiate with the purchasers in order to receive a fair price for their products. Farmers who engage in fair trade also aim to pay their workers a fair price, and engage in environmentally-friendly practices.