Does Free Trade Retard Or Improve Development In Developing Countries

2278 words - 9 pages

Introduction
The 19th century international system was a very significant era of the doctrine and practice of free trade. This key date in the 19th century was 1846, the year England repealed the corn law. The corn laws had protected British aristocrats and farmers from imported corn. Corn at this time was used to make bread. This dispute pitted industrialists and many workers against landowners and farmers. The industrialist wanted cheap corn so that the cost of bread would be lowered and they could reduce or reduce workers wages. This would give their products a competitive advantage in international markets over products from nations where the cost of food and wages were expensive. The workers in Britain also supported this law because they wanted to buy cheap bread. David Ricardo, a stock trader and member of parliament, articulated the liberal theory of comparative advantage which made intellectual case for free trade. Today this theory of comparative advantage has remained the bedrock of arguments for economic integration and free trade. The broad purpose of this paper is to try and answer these questions;
• Does Free Trade Improve or Retard Development in Developing Countries
• Is Free Trade really Free.

Free trade is the trade among two or more countries without any limitations imposed by the governments or other regulators; thus the free movement of goods and services across national frontiers (O’Brien and Williams, 2007 p.139). (Vander .W, 2005 p.24). It points to the liberalisation of the markets of nations through the elimination of tariffs, quotas and other form of restrictions to allow the free flow of products beyond national borders.
Benefits of Free Trade
Trade Openness. Free Trade has remained a fundamental element of successful growth and development Strategies for developed and developing nations. No country has ever sustained long-term growth without participating into the world economy. Access to markets abroad facilitates larger economies of scale and specialisation, while access to low priced and more various inputs, including more efficient services, releases production possibilities. FDI has also become an crucial contributor to economic growth and export performance (for example foreign affiliate’s today account for 75% of China's trade). Openness for movement of people can contribute to the transfers of skills as well as reserves to less industrialized countries, especially bearing in mind the role of diaspora societies.
Increased Competition. Robert Solow has assisted in resolving the Schumpeter mystery by Pointing out that there are two components to production growth: technical change and efficiency change (Ten Raa and Mohnen, 2006). The Schumpeterian argument relates more to technical change (and capital) component of production improvement, while the neo-Classical case for improved competition relates more to efficiency change and labour component. Furthermore, the rents needed to fund technical...

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