The Impact of Free Trade on Developing Nations

Topics: International trade, Developed country, Developing country Pages: 5 (1998 words) Published: April 17, 2012
Free trade has long been considered important for countries for hundreds of years as it opens up billions of dollars for nations, as well as new resources and technology. (Economy Watch 2010, P.1) Countries trade when on their own; they do not have the resources or ability to satisfy their wants and needs. They produce a surplus of a certain resource and trade it for something they need. (Heakel 2003, P.1) Countries have different resources from which they can trade and this is why there is a divide between trade being beneficial for countries or not. Free trade should guarantee the most efficient allocation of resources and the cheapest prices for consumers. It is believed that some countries have more of an advantage to free trade than others based on climate, natural resources and geographical features. (Dixit, Norman 2002, P.5-6) Free Trade allows everyone equal access to all markets, countries who are involved should experience rising living standards, increased incomes and higher rates of economic growth. (Hill 2011, P.168)Free trade virtues have been praised for three hundred years. But can such a theory work in practise? Specifically, could it help the least developed countries of the world provide themselves with a better quality of life? Increasing poverty and unemployment figures reveal that free trade is not always beneficial. Therefore I will pay special attention to the victims of free trade, in this case many developing countries. For most part these are particular groups of countries that are handicapped by free trade and who have not had the opportunity to rise above economic ills due to factors such as the ones mention above and weak governments. The aim of this essay is to argue the good and bad and the theory behind the impact of free trade on developing nations, but before doing so it is important to define what free trade actually is. DISCUSSION

From a normal person’s perspective, free trade involves the reduction of barriers in the international trade of various goods and services. It is thought that by removing barriers to trade, the economy will be stimulated, job opportunities will be created, competition will enhance, there will be an increase in investments and as a result an increased flow of capital into a country. (Peterson 2007, P.3) As free trade agreements become more common around the globe, the positive impact on developing countries has been praised as one of their greatest successes. There are higher employment rates as developed countries are able to move their operations into developing countries, creating new job opportunities for local workers. Increased levels of employment lead to a higher standard of living and more consumers purchasing. This ultimately sparks the country’s economy and may help to further develop locally owned business. (Vitez 2010, P.1) Child labour occurs in developing countries because of lack of technology. Children are used as a cheap substitute for manufacturing equipment. Free trade allows companies to invest in equipment and pay higher wages to adult workers, increasing family incomes and therefore children are able to attend school rather than work. (Vitez 2010, P.1) Furthermore, not only does free trade allow foreign owned companies to establish themselves in developing countries, it also allows native companies to sell to foreign markets. These companies no longer have to worry about absorbing the costs of tariffs and other barriers to market entry and can sell their products freely. An increase in employment levels, incomes and the general standard of living relieves hunger and lack of medical care. Preventative medical care including check-ups and vaccinations are available to more of the population. The number of children attending school increases and the ultimate result is an increase in the average life span and a reduction in infant deaths. The Chinese economic miracle has been the classic example used to hail the success of...
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