Recent Decades Have Witnessed an Acceleration of Economic Globalisation, in Particular International Trade. Is Trade Openness the Key Strategy to Achieve Economic Development? What Lessons Could You Draw for Policy Making?

Topics: International trade, Economics, Free trade Pages: 12 (3265 words) Published: November 18, 2012
‘Recent decades have witnessed an acceleration of economic globalisation, in particular international trade. Is trade openness the key strategy to achieve economic development? What lessons could you draw for policymaking?

Support your arguments with economic theory and empirical evidence from developing countries’.

In this essay, I shall critically examine the statement put forward – and test whether trade openness is the key strategy to achieving economic development, and from this consider whether we can conduct further analysis upon whether there are any lessons that can be obtained from this in regards to policy making. To focus our discussion; using relevant empirical evidence, I will relate this essay primarily towards developing countries, enabling us to gain a clear understanding of the task at hand.

It is of importance that we first briefly explore how the literature define and pursue globalisation; this is done in the next section. The remainder of the essay will be dedicated on segments on economic theory of international trade, the relationship between trade openness and economic growth, we will then draw upon empirical evidence, the negatives of trade openness, and lessons for policy making. Finally I will offer my concluding remarks.

Before delving into the core aspect of the essay, it’s essential to consider the underlying reason towards trade liberalisation in international trade; globalisation and also provide a definition of trade openness.

Globalisation can be considered as an important rhetoric of contemporary international relations. The term globalisation is often invoked to describe the process of increasing interdependence and global enmeshment through a variety of economic, cultural, social and, political changes that have shaped the world over the past five decades. (Hurrell & Woods, 1995; Guttal, 2007)

Globalisation is considered a form of capitalist expansion that entails the integration of local and national economies into a global, unregulated market economy through an increase in international trade by increases in exports and imports of nations which has been widely regarded as being facilitated by international trade agreements post world-war II. The extent of integration is outlined in table 1 where we can see that there has been increase in the ratio of trade to gross domestic product (GDP) when integration had been apparent from 1870 up until 1914 the eve of World-War I. Integration was halted during the periods of the two world wars and the era of the Great Depression. During this period protectionism was rife, which saw the integration of trade and foreign asset ownership revert back close to their levels in 1870. (Dollar, 2005)

Table 1: Measures of Global integration
Adapted from Dollar (2005)
Table 1: Measures of Global integration
Adapted from Dollar (2005)

In recent decades there have been various literatures invoking continuous debate discussing whether there is positive correlation between economic growth and trade openness. Advocates thoroughly support that trade liberalisation induces an increase in economic growth; whilst critics hold that protectionism is the essence to increased economic growth.

The WTO (World Trade Organisation) and GATT (General Agreement on Tariffs and Trade) have shaped and influenced the integration of global markets through much debate, discussion and reciprocation, agreements have been established, aiming to promote the vision and objective of trade openness by lowering barriers to trade. Developing countries have been primarily on the agenda throughout the history of the GATT and WTO in order to promote development in these countries as WTO’s Mike Moore as cited in Rodrik (2001) puts it, "the surest way to do more to help the poor is to continue to open markets."

Trade Liberalisation Paradigm Vs. Protectionism Paradigm

"More open and outward-...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Essay about International Trade and Economic Development
  • Tariffs: International Trade and Tariff Essay
  • Trade Openness and Economic Growth in Nigeria Essay
  • international trade Essay
  • Essay on ECONOMICS
  • Economics trade IA Essay
  • Foreign Trade and Economic Development Essay
  • International Trade and Trade Restrictions Essay

Become a StudyMode Member

Sign Up - It's Free