Liberalization of Trade

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Project Outline:

1) Importance of the topic

2) Meaning of Liberalization of Trade

3) Examples of Liberalization of Trade

a. North American Free Trade Agreement

b. European Union

c. General Agreement on Tariffs and Trade

4) Advantages and Disadvantages of Liberalization of Trade

5) What lead to Liberalization of trade

6) Impact on LDCs

7) Examples for the impact of LDCs

a. Syria

b. Tunisia

c. Ethiopia

d. Egypt

8) References

1) Importance of the topic

This paper is about Liberalization of trade and its impact on LDCs.

First of all Liberalization of trade is important nowadays since it represents the global direction of trade. As International Trade reaches its peak, Liberalization of trade seems like the most natural thing to do. A reduction of trade restrictions and the emergence of trade blocks and other forms of economic integration makes Liberalization of trade a very important topic, if not the most important one to discuss.

Liberalization of trade has been increasing day by day and is quite apparent now with all the forms of economic integration.

This leads us to our second point which is the impact of Liberalization of trade on Less Developed Countries.

Less developed Countries are affected by this trend due to its tight relation with Economic Development.

Trade is an engine of Growth, and has numerous contributions to the development of a country.

Haberler has pointed out some very important benefits that international trade can have on Economic Development, which will be discussed later on.

Critics on international trade also have a list of harmful effects of trade on Economic development which we will also see later on.

Since Liberalization of trade has an impact on International Trade it, in return, also has an impact on LDCs.

In the rest of the paper we will see what kind of impact liberalization of Trade has on less developed countries and we will also see several examples on developing countries.

2) Meaning of Liberalization of Trade:

A fundamental shift is occurring in the world economy. We are moving rapidly away from a world in which national economies were relatively self-contained entities, isolated from each other by barriers to cross-border trade and investment; by distance, time zones, and language; and by national differences in government regulation, culture, and business system. And we are moving toward a world in which barriers to cross-border trade and investment are tumbling; perceived distance is shrinking due to advances in transportation and telecommunications technology; material culture is starting to look similar the world over; and national economies are merging into an interdependent global economic system

Trade Liberalization revisits the empirical evidence on the relationship between economic integration and economic growth. First, there are several openness indicators and trade liberalization dates for a wide cross-section of countries in the 1990s. Second, the extent of the Sachs and Warner (1995) study of the relationship between trade openness and economic growth to the 1990s, discusses recent criticisms of their measurement and estimation framework. In particular, an updated version of their dichotomous trade policy openness indicator does not enter significantly in growth regressions for the 1990s. Third, and most importantly, there is new evidence on the time paths of economic growth, physical capital investment and openness around episodes of trade policy liberalization. In sharp contrast to the results, we find that liberalization has, on average, robust positive effects on growth, openness and investment rates within countries. We have some examples of Trade Liberalization.

3) Examples of Liberalization of Trade:

a. The North American Free Trade Agreement

The North American Free Trade Agreement (NAFTA), which went into effect in 1994, effectively merged Canada, Mexico, and the United...
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