Is Free Trade Equally Beneficial For Developed And Developing Countries?

2417 words - 10 pages

It is essential to trade between or among the countries. Free trade area is a huge market which deals with consumers from different countries. A market provides grounds for the exchange to satisfy one's desire and enriches both buying and selling parties under the agreed terms and conditions. If market is no longer demonstrate this core function the merit of exchange for both parties is significantly diminished or unbalanced.Free trade between two or more countries practically signifies that those countries are bound to multilateral contracts called free trade agreement. Its principle term is eliminating all tariff and non-tariff barriers (Ravenhill 2011:483).The classic regulations of free trade system are well manifested in World Trade Organization's the two main principles which are non-discrimination among trading partners and equal treatment between imported and local goods (WTO 2014).Free trade is more economically beneficial to developed countries.It is impossible to compare the developed countries and developing countries in the perspectives of the number and scale of specialised fields of industry. Developing countries' specialised field of industry is tended to be small and narrow which is vulnerable to those of developed countries. For example there are ten major industries in United States from basic materials to technology however in Kenya one third of its GDP is from agricultural sectors which shows heavy dependence on that industry (Our Africa 2014). The GDP of Kenya in 2010 is US$ 42,449 million (Global finance 2014) where as US's largest manufacturing industries' revenue which is petroleum and coal product is US$ 1,027,938 million. The whole country's GDP cannot even compete with the revenue of one industrial sector (Perry 2011). According to comparative advantage theory if less efficient country focuses on producing relatively more efficient products both countries can be better off even one country has absolute advantage over another. In this theory, it overlooked the vulnerability of industries in less efficient countries when accessibility of developed countries' industry is liberalised. It is ideal that US only specialised manufacturing industries and Kenya only specialised in agricultural sector however in free trade system there is no barrier that could prohibit entering agricultural produces. Inevitably US's products would be cheaper and diverse compare to those of Kenyan's. The decline of agricultural industries would have huge impact on the Kenya's economy due to its massive proportion in the GDP. It could shake their economy to its very foundation.Developed countries are tended to focus on a higher value-added business. For instance China is specialised in making the actual shoes in the factory according to the orders of US companies (Locke 2013). A shoe making factories is classified as labour-intensive industry whereas design team in NIKE only requires a few experts. To make a profit in the factory the factory has to...

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