Free Trade and Poor Countries Essay Example | Topics and Well Written Essays - 1500 words

Free Trade and Poor Countries - Essay ExampleThis is an ideal situation where each country would be able to trade those goods at flash rates which argon difficult to be manufactured there. However, when taxes are levied, a country A aptitude import goods from country B and make them on hand(predicate) in the topical anaesthetic markets at cheap rates but country A cannot export any goods to country B as B might fork up levied high tariffs for export. When high taxes are in practice, the cultivation of one country might prosper who have the ability to produce more and export it around but do not need any imports. On the other hand, trade of developing countries looking for trade outside gets hampered. It has been observed that the bonnie income of developing countries has been more for countries with lower trade barriers.Even though free trade gives trading opportunities to developing countries, it is not alone sufficient for development. The Department for multinational Deve lopment (DIFD) in UK believes that the least developed countries (LDCs) should even reform their internal trade institutions and develop stable economic situation. Also, if free trade is allowed then the local manufactures of developing countries suffer loss as their goods do not find a marker due to imported good being available at same prices. Therefore, LDCs need to create market incentives so as to gain the local market space in their home markets.Let us come to to a case study related to free trade. In January 1994, Mexico and US entered North American Free Trade Agreement (NAFTA). Mexico did not benefit at all from this agreement as its markets went into the hands of US without any gains falling in Mexicos hands. This happened because US did not open their markets as it would lead to more contr all oversy and less profit for US. They preferred to buy into nations in the form of investment. Similarly, Canada also signed FTA with US in 1988. Since then more than 10,000 companie s have been taken over by US corporations. Over 85 per cent of Canadas exports now go to the US, and about 70 per cent of Canadas international trade is handled by US corporations, was utter by David Orchard of Canada. As a result, Canada is the around foreign-owned developed nation. Thus we can say that free trade is alone not sufficient for development of any nation.At present what the poor countries want is not foreign goods in their market only. More than that, they need opportunities to export their products in the outside market. Since most poor countries have abundance of labor-intensive products and agricultural products, they need markets where they can export these without facing too much competition and high tariffs.The developing or least developed countries find it difficult to expand their world trade mainly because of the tariffs applicable in most parts of the world. Average tariffs on LDCs have been reduced marginally. However, still the average tariff on agricult ural products is as high as 40%. With such tariffs applicable in most countries, LDCs are finding it difficult to expand their trade in these countries. Apart from tariffs, there are also non-tariff barriers which affect LDCs more. There might be quotas which can condition a country to trade in a developed country. Health and safety hazards also play a role. Since LDCs have labor oriented products, the products