Willfree trade benefit third world countries? Does free trade harm developedcountries?Thebenefit of free trade to third world countriesInour opinion free trade is beneficial to the third world countries (developingcountries). It is also called as a less-developed country where country withlow living standards, less developed industrial base and the Human DevelopmentIndex (HDI) are lower than other countries. Generally, developing countries arehave not achieved significant industrial levels compared to their population. Firstly,benefit of free trade is acts as pacifier for weaker and developing countries.This act allowing free trade in developing countries makes the economy moreattractive.
As we know, free trade is an economic practice whereby countriescan import and export goods without fear of government intervention. Forexample, there is no government intervention through the quotas or duties thatpeople can buy from other countries or what they can produce and sell to othercountries. This can be a key in creating a stimulus that allows a new countriesand declining economies to grow not to stagnate and collapse. Where, developingcountries are can access to enter a new markets since companies do not have toworry about absorbing tariffs and other obstacles to enter market and theyfreely can sell products.
Hence, in this way we believe that free trade willbecomes a benefit to developing countries.Furthermore,nations can increase the quality of life for their citizens when engaging infree trade. The European Union actively encourages developing countries to usetrade to build up their own economies and improves living standards. Free tradeallowed them bringing the goods (import) might be less expensive for developingcountries than trying to produce consumer goods or services within theirborders which it can helps to boosting their standards of living. Purchasingpower of individuals will increase if they implement low consumer prices. Thehigher of purchasing power allows consumer to purchase more. It will be effectto national economic growth through the number of consumer purchases.
There aremany of developing countries does not have process of production accessible toconvert raw materials into valuable consumer goods. Thereby, with friendlyneighbors usually the developing countries are often doing import of goods eachother. For instance, in 1971 European Union were help developing countriesexport to enhance them generates export earnings and promoting their economicdiversity of commodities and raw materials.
Therefore, importing fromneighboring countries is ensuring a stable flow of goods available for use. Otherthan that, free trade is beneficial to developing countries in better foreignrelations. A good relationship with foreign country is usually the result ofunintended free trade. The developing countries are always subject tointernational threats. Build a strategic free trade relationship with morepowerful and effective countries can help guarantee that developing countrieshave additional protection against international threats. For instance, developingcountries are become steadier, more straightforward and more open whendeveloping countries under the rules-based international trading system in theWorld Trade Organization (WTO).
Developing countries can likewise utilize freetrade agreements to enhance their military quality and their internalinfrastructure and additionally to enhance politically. Hence, these unintendedbenefits allow developing countries to learn and create how they should governtheir economy and what kind of government policy can benefit the people. Freetrade harm developed countriesItis also harm to developed country. Developed country is known as industrializedcountry where the country has a developed economy and advanced in technologyinfrastructure compared to other less developed countries. In developedcountry, they have low poverty rate which is they living in high standard wheremany of people have enough money to buy what they want and need compared todeveloping countries. Insteadof developed country free trade also has disadvantages besides the advantages.Firstly, the union opposition among them.
The North American Free Trade (NAFTA)between Union States, Mexico and Canada has criticized by unions as they areharmful to workers and the U.S economy. Since workers paid in Mexico is cheaperthan U.S, many manufacturing industries produce of their production at there.AFL-CIO contented NAFTA had ravaged workers and consumers in all threecountries, contributing to job loss and salary decline while reinforcingmultinational corporate. Unions argue that when the increasing of capitalmobility facilitated by free trade, it is can hurt the undermined governmentregulations and the surroundings.
Next,disadvantages of free trade can harm the developed countries are the increasingnumber of job outsourcing. According to James Bucki (2017), outsourcing is abusiness practice used by companies to reduce costs or improve efficiency byshifting tasks, operations, jobs or processes to an external contracted thirdparty for a significant period of time. It can happen when tariffs werereducing on imports it will allows companies to expand to others country.Without tariffs, the imports from other countries with low cost of living costless such as when U.S companies in same industries they will be difficult tocompeting. Therefore, the unemployment rate will be increase because countrywill import the human resources where country has paid salary more cheaply thantheir country. Hence, they might be to reduce their workforce in company.
Forinstance, many of U.S manufacturing industries actually removed workers due toNAFTA. Lastbut not least, the difference among economists. The Council on ForeignRelations (CFR), is an independent think tank based in New York, were reportedthat many of economists agree where NAFTA has led to some overall improvementin U.S occupations, but deep inside of that there was a painful side effectsoccur. Free trade can affect the turbulence in the domestic economic sectorsuch as the old manufacturing segments that has been exposed to the globalcompetition. As indicated by Edward Alden, a senior officer CFR, salaries arenot defended with labor productivity and rising income inequality-trends havebeen hastily diminished by free trade.Toconclude that, generally, free trade can give the benefits to the third worldcountry (developing countries) in the process of growing economy and others tobe the better life like the developed country.
Where as we know the developedcountry have low rate of poverty which is their society living in better lifecompare to developing countries. Hence, with the existing of free trade developingcountries will become and improving their life to be better. Other than that, behindof advantages of free trade, there will have disadvantages. The free trade canbe harmful and it will be affect the growth of country especially to theeconomy. Theprospect of free trading in Asia and AmericaAsiaprospect of free tradingGenerally,free trade is a situation where a government does not interfere to influencethrough quotas or duties what its citizens can buy from another country or whatthey can produce and sell to another country. Nowadays, Asia has become the”global factory”. The region with the largest economies such as Peoples’ Republicof China, India and Japan and the Association of Southeast Asian Nations'(ASEAN) economies have become key players in Free Trade Agreement activity. Theimportance of FTAs to trade at the economy level has also increase asreflecting the growth of FTAs.
Inaddition, with Free Trade Agreements (FTAs) ASEAN companies have greatopportunities. Agreeing FTAs will give a company advantage to pay lower dutyfees. This is because of management in the supply chain and transactioncomplexity. In fact, using FTAs will give more opportunities to businesses butat the same time it also gives pressure. At the same time, all trade agreementsshare one similarity which is they expose a company to potential tradecompliance issues. If companies cannot pay for penalties, they will face thedelays or reputational damages. These are just a few effects of violations oftrade regulations.
Companiesare turning into automation of FTA Rule of Origin analysis as one way to ensurecompliance of trade regulation and maintain fully auditable records of everytransaction. These business processes are also proactive and gives “right firsttime” information. Compliance professionals focus on looking for new FTAbenefit opportunities in new trade lanes, rather than addressing issues with currentproduct or trade lane shipments.
Besides,Asia Pacific region led by the ten members of the Association of SoutheastAsian Nations (ASEAN) is one part of the world looking to take a leadershiprole. In 2014, its total GDP reached US$2.6tr and that positioning it theseventh largest economy in the word, while its total trade was US$2.5tr and themajority of it was intra-ASEAN trade. In the near future, Asia has a few numberof new and existing trade deals in the works to increase imports and exports. Allof the trade deals are created to increase further growth and cooperationacross the region. As example, China’s One Belt, One Road (OBOR), is aneconomic and diplomatic initiative that could improve trade. China’s OBORinitiative objective is to improve trade relationship with ASEAN, Middle Eastern,and European countries.
By building high-speed trains and highways through internationalgeographic corridors, it can connect China to the world.Accordingto Reuters, when talking about trade deals, China, Japan and South Korea arealready discussing a trilateral trade agreed to refuse all forms ofprotectionism, and they are taking a stronger stand than G20 major economiesagainst any US protectionist policies. Although TPP (excluded China) wasnegotiated, one more extensive trade agreement has been under discussion. Since2012, the Regional Comprehensive Economic Partnership (RCEP) agreement has beennegotiated by China and 15 other Asia Pacific Rim countries. RCEP consist often members of ASEAN. They are Vietnam, Thailand, Singapore, Philippines,Myanmar, Malaysia, Laos, Indonesia, Cambodia and Brunei.
It’s also includes China,India, Japan, South Korea, Australia and New Zealand, who are their tradingpartner. Total trade with China amounted to US$345billion in 2015, showing 15.2per cent share of total ASEAN trade in that year, according to data provided bythe ASEAN website. RCEP could transform the region into a market representingUS$22tr in economic activities and of the world’s population if it is implemented.Asia’strade will continue to expand and grow if they are in the right trends. Topromote international trade and create a region that is a true global tradeleader, this region has a number of new and existing trade agreements in right place.
By getting the basics right in an easy and timely manner to maximize the costbenefits of FTA usage, companies will get advantages from modernization oftheir own trade processes. Americaprospect of free tradingAsthere are many fans of NAFTA, there must be a lot of critics on it too. Thosewho are agreeing with the agreement would say that issues like an establishmentof trade standards, protection of intellectual property rights, and opening upof new opportunities.
Those who are against the agreement in the U.S. have pointedout that jobs opportunity have actually been lost and been moved especially toMexico.14free trade agreements have been made by United States with 20 countries. It isincluding Canada and Mexico with NAFTA and the others include individualcountry agreements and a collective one with six Latin American countries:- Asia Pacific Region which are Australia,South Korea and Singapore- Middle East And North Africa which areJordan, Bahrain Morocco and Oman- South America which are Chile, Colombiaand Peru- Central America with Dominican RepublicFree Trade Agreement (CAFTA-DR) which is includes Costa Rica, the DominicanRepublic, El Salvador, and Guatemala.Withall the 14 different free trade agreements, all of them have a common goal tobe reached. All the agreement created is to reduce trade barriers and create amore stable and transparent trading and investment environment.
This will giveopportunity to American companies to export their goods and services to the 20trading partners with reduced trade barriers. At the same time it is makingAmerican as exporters competitive in those markets. In 2015, nearly half whichis 47 per cent of United States goods exports went to the 20 free tradeagreement countries. According to the International Trade Administration’swebsite, the total of United States merchandise exports to the partnercountries is $710 billion.Intotal during 2013, South Korea is the sixth-largest goods trading partner with$104 billion in export and import trade. With regards to foreign directinvestment (FDI), South Korea in 2014 was the tenth-largest FDI country intothe United States. Many may argue on this free trade agreement or commonlyknown as KORUS FTA, but now Korea showed themselves up as a major tradingpartner with the United States.
It remains debatable if the free tradeagreement has helped or not, but, after it went into effect in 2012, there havebeen increases in trade between both nations.Thenext worth for mention is CAFTA-DR. It is represents the first free trade dealbetween the United States with smaller developing economies.
None of thecountries can be a key trading partner at the first place, but when combined, theyrepresent a major player in trading. CAFTA-DR is 16th-largest goods partner forthe United States with $53 billion import and export trade. This clearly hasmade United States as exporters and importers much more competitive in the region.Referringto the proposed of new free trade agreements the U.S. involved with, there arethree visible ones that have been showed up in media. First is there is the onewith the EU called the Transatlantic Trade & Investment Partnership (TTIP).
Second is the Trade in Services Agreement (TISA), which would liberalize tradewith the majority of economies with respect to services industries, includingthe EU, Japan, Canada and some Latin American countries which are Peru andChile, Australia, New Zealand and Pakistan. Finally, there is the TranspacificPartnership Agreement, or known as TPP/TPPA, which includes 12 countries: theU.S., Canada, Australia, Brunei, Chile, Japan, Mexico, Malaysia, New Zealand,Peru, Singapore and Vietnam.Inconclusion, Asia prospect of free trade are progressively aim for improvementin their trading and at the same time trying to protect themselves against anyUnited States protectionist policies by taking a stronger stand than G20 majoreconomies. Besides, in America they are in their line to increase their exportand import trading using FTAs with countries that have high potential level intrading. Link between free trade & economicgrowthThere was a strong interrelationship between the development of freetrade and global economic growth. To achieve successful growth, the periods offive years or more years during an average of economic growth in country riseto 4 percent or more after regulate inflation.
In today century, there was manycountries have made a great achievement towards prosperity just in a shorttime. For example, in the second half of 20th century, Republic ofKorea has made an amazing progress when they taking the advantages ofopportunity in inventing new technology and an open world market. The growth ofeconomy in Republic of Korea hit to the peak when they started to trade withother country. It same goes to China which recently was known as the mostpopulated country in the world.
The sustained growth in China was one of thefastest in the world plus China will become the second larger economy in theworld within ten years. Basically, based on free trade, a global citizen was given a freedom tomaximize their economic interests as consumers, distributors and producerswithout interference of governments. It is means that, where a countryimplement free trade it will enables consumer voluntarily buy long lasting,affordable or sustainable high quality products from manufacturers in and outof countries. It is because the products that companies produce might be lessexpensive with the existing of free trade which is consumer do not worryingabout tariffs. Hence, purchasing power of household or consumer will increaseif company implement products with low price.
A part from that, it will affectto national growth of economy through the total number of individual purchase. Thus,the globalization of economic forge entrepreneurship, economic growth andinnovation within a global society. According to the article from Baruti Libre Kafele, we can say that thearise of job created than job lost may define there’s a link between free tradeand economic growth. In United States, manufacturing output has increased by40% in the past 20 years. The economy in United States produced twice as manyproducts as they have done in any year since 1984. As Adam Smith indicated thathe is argued where the increasing of specialisation and division of work, internationaltrade would quicken economics growth of a country, the effect of the free tradeon financial development has been carefully analyzed.
In literature of theoretical,Grossman and Helpman (1991) and Chang et al (2009) examined the benefits ofissues of how free trade will affect economic growth. However, ethicaltheoretical growth is of the opinion that human capital can increase theeconomic growth after free trade is implementing. For example, the agreement oftrade between U.S – Korea, it is a historic opportunity where it can boost thenumber of exports and create employment support in America and also to boostU.S economic leadership in the Asia Pacific area. So, essentially it shows agood relationship between free trade and economic growth. Besides that, the EU free trade policy moves towards to new emerging marketeconomies brings the prospect of Union growth and trade opening possible.
In thefuture 2020, the International Monetary Fund (IMF) approximate that as much as90% the growth of economic will be collected and generated in the futureprospect outside of Europe. Free trade is enables either developing ordeveloped countries to enter market