Question

15. Why might it be rational for a developing country to choose protectionism rather than specialize in its area of comparative advantage?

16. Why do developing countries argue that they are hurt by stringent protection of intellectual property? Why do developed countries argue that provisions for intellectual property are an important concern for multilateral trade agreements?

17. Provide an argument as to why increased trade would improve the environment. Then provide one argument as to why increased trade might worsen the environment.

Answer 1

A developing country may have most of the industries in nascent stage of growth also called infant industry argument. These industries can not compete with giant multi national enterprises. Therefore, it may be rational for a deveoping country to choose protectionism at least in its initial years of development.

Even specializing in its area of comparative advantage would require development of basic and ancillary industries which could take place along with protectionism.

For example, if a developing country in Africa doesn't use protectionism, large MNCs from developed countries may dump cheap products in the African country leading to permanent deindustrialization of the poor developing countries.

Developing countries do not have the technological innovation which is present in developed countries. If these technologies are not shared with developing countries, it may take them years to reach the same level of productivity and competitiveness. This is the main reason why developing countries argue against stringent enforecement of intellectual property rights. Also the developing countries neither have the resources, nor presence of strong institutions for enforcement of the intellectual property laws. Therefore, stringent enforcement of IPR is protested by developing countries.

Likewise, developed countries in order to incentivise innovation provide protection as well as incentives to the firms with new innovations. Not providing stringent protection to these firms may disincentivise innovation as well as impersonation of new technologies in trading partner countries, leading to fall in overall economic growth and productivity of the economy. This is why developed countries argue that provisions for intellectual property are an important concern for multilateral trade agreements.

Increasing trade may bring such goods that have pollution as byproduct in its manufacturing to the countries without capability to manufacture such goods thereby helping save environement in the importing country.

Increasing trade uses many modes of transportation, such as by road, rail and ship. Movement of goods from one country to another leads to pollution in the form of carbon emissions in transporting these goods.