Trade strategy

The case for trade liberalization: INTRODUCTION

The main point stated in this chapter is that some developing countries have obtained favorable economic growth by adopting more export and importoriented policies (which is the trade liberalization policy)

WHAT CAN BE GAINED FROM TRADE LIBERALIZATION? – SLIDE 1

There is an improvement in resource allocation:
With trade liberalizationthere’ll be more access to a variety of goods/services that it will be possible for firms’ world wide to access these varieties of goods which can help them improve their productivity.

Access totechnology and inputs:
A developing country with access to this factors can improve their productivity and evolve from exporting low value added goods to exporting higher value added goods.

(Economiesof scale and scope):
Economies under free trade policy are compelled to improve productivity if they want to compete with developed country’s firms. So, in some cases they have to become exportoriented in order to achieve a scale that can help them become competitive and hence stay in business.

Know-how:
With the exposure of lots of information through the internet, it’s easy for developingcountry firms to learn from experiences and know-how of more sophisticated firms.

It helps create an environment of growth:
With trade liberalization, developing countries can access: NEWTECHNOLOGY, NEW WAYS TO PRODUCE, AND NEW MARKETS that can push their economy towards a rapid growth direction.

WHAT CAN GO WRONG? – SLIDE 2

There could be 2 problems: First: when protection (likesafeguards for goods/services) have been applied for too long for people than can be very affected by free trade policy, because this could cause an immediate rejection of the policy.

And the Secondproblem relates to “Exchange rates” they state that without a real depreciation, exports will not help to cover the expenses of imports. (they have to establish an exchange rate that will be balanced to...