Emerging Trends and Patterns of Trade, Essay Example

To What Extent Can Free Trade Be Viewed as Beneficial to Economic Development?

Abstract

This paper specifically aims at determining and evaluating some of the major contribution of free trade towards economic development of various developing and developed global countries. The major contributions of free trade towards economic development include provision of foreign investment and exchange, promotion of living standards and creation of employment opportunities in various countries globally.

Introduction

According to IMF and the World Bank reports and publications, the provision of free trade, liberalization of trade, finance as well as provision of effective investment forms the procedures of reducing global poverty through employment opportunities and enhancing economic and sustainable development especially in developing countries.[1] Furthermore, the provision of self-reliance, need-oriented and structurally based transformation practices form some of the activities and political policies applicable in various countries to promote economic development since early 1970s (Kar, Osman, and Muhittin, 2008, pp. 25). This paper will evaluate and determine how free trade can promote economic development and growth of various countries globally.

Free trade Contribution to Economic Development

Free trade mainly involves various government based policies that aim at reducing discrimination against import and export systems thus allows trading partners and countries to gain mutual benefits from their trading activities.[2]According to the European Union (2014), free trade promotes globalization especially in the international business environment through promotion of foreign investment activities and operations in various countries globally.[3] Free trade also promotes free movement of goods and services in global countries and this usually create job opportunities for individuals in the society (Read and Kevin, 2009, p.567). Furthermore, free trade mostly provides an opportunity for countries to specialize in the type of goods and products that they produce, thus promoting innovation, creativity and provision of high-quality goods and services at cost effective prices.[4] Free trade also reduces and control trade tariffs and policies that usually restrict trade between various countries (Yenokyan, John and Maryam, 2014, p.223).

In Mexico, trade liberalization can be used in stimulating and promoting economic growth and efficiency in the business operations of individuals in the country by allowing them to expand their business activities in various countries globally. This usually creates comparative advantage and economic growth in the country. For example, in the united States do not have produced enough oil to sustain its economic growth and free trade allows the country to import oil from various countries in the Middle East (Singh, 2010, p.1517).  however, free trade promotes economic development in China by reducing costs, increasing the labor and finance used to produce goods and services in the country (Sharif and Fatima, 2013, pp.569). For example, the United States of America mostly invest in China and Mexico with good manufacturing operations at cost effective prices in order to promote their economic development.[5]Moreover, free trade policies usually involve international trade systems and practices including the exchange of exports and imports in China and Mexico which consequently promotes the GDP of both countries thus contributes to economic development globally.[6] China and Mexico have particularly benefited from free trade.

Free trade promotes the living standards of individuals in the country (Solís and Urata, 2007, p.227). For example, according to the United Nations reports and publications the per capita income of China and Mexico grew by around five point six percent in early 2010 mainly due to the provision of effective free trade policies (Kim, Shu-Chin, and Yu-Bo, 2012, p.523). This was mainly due to the growth of export systems in these countries due to free trade procedures. For example, in Mexico the provision of free trade policies with other global countries has improved its economic growth and development to a large extent (Sanjeev, 2013, p.52).

According to the World Trade Organization (WTO), provision of free trade stimulates economic growth and development, and this usually creates more employment opportunities in the country.[7] This is because free trade creates low trade barriers and restrictions thus allowing more foreign investment in various countries globally. It also clear that the provision of free trade policies and procedures can promote technological advancements in a number of countries globally thus improves economic development and productivity in the country (Tai, and Jenn-Jaw, 2014, p.23). This also boosts the country national income and positively influences the economic development in the various countries globally. The provision of free trade also provides mutual benefits between different countries globally by providing them with opportunities to learn from each other. For example, a number of developed countries such as United States provide educational opportunities to individuals from countries that involve in foreign exchange activities with it (Fisman, and Inessa, 2003, p.354). The European Union reports and publications also indicate that the provision of free trade policies among various countries globally usually results in the creation of more than nine hundred thousand jobs annually.[8]This cannot be created using single market policies; thus free trade contributes to economic development of various countries globally. The majority of job opportunities in a number of developing countries are also mostly due to foreign investment practices. In that sense, governments in various countries should aim at promoting their free trade policies in order to promote foreign trading practices and economic development of the country.

Countries that are more open to free trade policies are more likely to improve their technological advancement at lower costs than countries that do not support free trade policies.[9] This is because free trade allows global countries including developing countries to learn and adopt innovative ideas and values from their trading partners (Meyn, 2008, p.515). However, economists and political experts argue that the provision of free trade policies majorly depends on the political conditions, macroeconomic stability and property rights and freedom in the country.[10] Developing countries should also involve in creating free trade agreement and policies with developed countries in order to improve their economic development (Tîmbur, 2012, p.77). in a nutshell, it is justified to posit that, Free trade is responsible for enhancing availability of higher-quality, reduced priced goods, accelerated growth,  enhancing efficiency along with innovation, driving competitiveness and promoting fairness.

There are also other types of free trade practices such as unilateral and bilateral trade policies (Lloyd, 2011, p. 91).  In most cases, bilateral trade policies are usually important between a developed country and a developing country in order to increase, promote and improve the economic development of the developing country (Aidukien?, and Vilma, 2012, p. 1315).

There are various government activities and operations that are usually imperative in the promotion of free trade policies including provision of effective trade tariffs and other proper trade quotas in the country.[11] Furthermore, according to economic theories the provision of free trade mostly promotes and provides proper use of the country’s materials and resources including its human labor and natural resources thus promotes national income in the country.[12]

Conclusion

There are various challenges and problems such as high poverty levels that are currently facing a number of developing countries globally.[13]There are various practices and policies that have been proposed to solve such global problems and challenges including the promotion of development aid, population control systems and other capital accumulation policies especially in developing countries. Free trade policies promote a high standard of living of individuals in the country, increase innovative and technological advancement in a number of countries globally thus promotes economic development.

However, political stability, macroeconomic stability as well as creating favorable trade environment are very imperative towards the promotion of free trade and markets in various countries globally. Global countries that are open to free markets and trade usually increase the GDP and trade competitions by providing their firms with the opportunity to access foreign business operations including the use of new technologies in their operations. The adoption of free trade systems can help developing countries to promote their export promotion systems by reducing trade discrimination against their exports in the world market. Free trade can effectively improve economic development of both developing and developed countries by promoting foreign investment, creating employment opportunities, providing trade liberalizations as well as increasing economic freedom and per capita income in the country.

References List

Aidukien?, L, & Kazlauskien?, V. (2012) ‘International Trade in Services: Development Trends and Possibilities’, Economics & Management, 17, 4, pp. 1315-1320,

Fisman, R, & Love, I. (2003) ‘Trade Credit, Financial Intermediary Development, and Industry Growth’, Journal of Finance, 58, 1, pp. 353-374,

Kar, M, Peker, O, & Kaplan, M. (2008) ‘Trade Liberalization, Financial Development and Economic Growth in the Long Term: The Case of Turkey’, South East European Journal of Economics & Business (1840118X), 3, 2, pp. 25-38,

Kim, D, Lin, S, & Suen, Y. (2012) ‘The simultaneous evolution of economic growth, financial development, and trade openness’, Journal of International Trade & Economic Development, 21, 4, pp. 513-537,

Kumar, S. (2013) ‘Emerging Trends and Patterns of Trade: An Economic Analysis of SAARC’, Journal of International Economics (0976-0792), 4, 1, pp. 51-62,

Lloyd, P. (2011) ‘Free Trade and Growth in the World Economy’, Singapore Economic Review, 56, 3, pp. 291-306,

Meyn, M. (2008) ‘Economic Partnership Agreements: A ‘Historic Step’ Towards a ‘Partnership of Equals’?’, Development Policy Review, 26, 5, pp. 515-528,

Mendoza, R, & Bahadur, C. (2002) ‘Toward Free and Fair Trade’, Challenge (05775132), 45, 5, p. 21,

Read, D, & Parton, K. (2009) ‘Economic Deregulation and Trade Liberalization in Kenya, Tanzania and Uganda: Growth and Poverty’, Journal of Economic Issues (M.E. Sharpe Inc.), 43, 3, pp. 567-586,

Sharif Chaudhry, I, & Imran, F. (2013) ‘Does Trade Liberalization Reduce Poverty and Inequality? Empirical Evidence from Pakistan’, Pakistan Journal of Commerce & Social Sciences, 7, 3, pp. 569-587,

Singh, T. (2010) ‘Does International Trade Cause Economic Growth? A Survey’, World Economy, 33, 11, pp. 1517-1564,

Solís, M, & Urata, S. (2007) ‘Japan’s New Foreign Economic Policy: A Shift toward a Strategic and Activist Model?’ Asian Economic Policy Review, 2, 2, pp. 227-245,

Tîmbur, M. (2012) ‘The Necessity of Environmental Goods Trade Liberalization’, USV Annals of Economics & Public Administration, 12, 2, pp. 77-86,

Tai, W, & Soong, J. (2014) ‘Trade Relations between China and Southeast’, Chinese Economy, 47, 3, pp. 23-39,

Yenokyan, K, Seater, J, & Arabshahi, M. (2014) ‘Economic Growth with Trade in Factors of Production’, International Economic Review, 55, 1, pp. 223-254,

[1] Muhsin Kar, Peker Osman, and Kaplan Muhittin. “Trade Liberalization, Financial Development and Economic Growth in the Long Term: The Case of Turkey.” South East European Journal of Economics & Business (1840118X) 3, no. 2 (2008): 25-38.

[2] Donna Read and Parton Kevin. “Economic Deregulation and Trade Liberalization in Kenya, Tanzania and Uganda: Growth and Poverty.” Journal of Economic Issues (M.E. Sharpe Inc.) 43, no. 3 (2009): 567-586.

[3] Karine Yenokyan, Seater John and Arabshahi Maryam.”Economic Growth with Trade in Factors of Production.” International Economic Review 55, no. 1 (2014): 223-254.

[4] Tarlok Singh. “Does International Trade Cause Economic Growth? A Survey.” World Economy 33, no. 11 (2010): 1517-1564.

[5]Dong-HyeonKim, LinShu-Chin, and SuenYu-Bo.”The simultaneous evolution of economic growth, financial development, and trade openness.” Journal of International Trade & Economic Development 21, no. 4 (2012): 513-537.

[6]Kumar, Sanjeev. “Emerging Trends and Patterns of Trade: An Economic Analysis of SAARC.” Journal of International Economics (0976-0792) 4, no. 1 (2013): 51-62.

[7]Raymond Fisman and Love Inessa.”Trade Credit, Financial Intermediary Development, and Industry Growth.” Journal of Finance 58, no. 1 (2003): 353-374.

[8] Mareike Meyn. “Economic Partnership Agreements: A ‘Historic Step’ Towards a ‘Partnership of Equals’?” Development Policy Review 26, no. 5 (2008): 515-528.

[9] Margareta Tîmbur. “The Necessity of Environmental Goods Trade Liberalization.” USV Annals of Economics & Public Administration 12, no. 2 (2012): 77-86.

[10] Peter Lloyd. “Free Trade and Growth in the World Economy.” Singapore Economic Review 56, no. 3 (2011): 291-306.

[11] Laura Aidukien? and Kazlauskien? Vilma. “International Trade in Services: Development Trends and Possibilities.” Economics & Management 17, no. 4 (2012): 1315-1320.

[12] Wan-Ping Tai, and Soong Jenn-Jaw. “Trade Relations between China and Southeast.” Chinese Economy 47, no. 3 (2014): 23-39

[13] Ronald Mendoza and Bahadur Chandrika. “Toward Free and Fair Trade.” Challenge (05775132) 45, no. 5 (2002): 21.