Question

What are the pros and cons of developing countries' economic policies on free trade and openness during the process of "catch-up"?

Answer 1

During the process of convergence when the developing countries are normally growing faster that developed countries, both the openness policies as well as free trade policies has positive as well as negative impact on it. The pros is the increasing the amount of economic resources which required to stay competitive in the long run. Basically, resources are limited in developing nation but free trade economic policies are helped to acquire required resources that assisted to improve economic condition by increasing the product and reducing cost of the countries. On the other hand, it enhances the urbanization trend which has the potential to create a gap between agricultural industry as well as urban industry. This increasing gap can increase cost of the necessity products due to   a huge imbalance between the demand and supply market (high demand and lower supply situation).

For developing countries, trade openness polices are responsible to resolve the issue of child labour and poverty that indirectly helped to increase economic growth. It is not only responsible to increase wage level of the unskilled labour but also generated employment level for the unskilled labour market. On the contrary, the increase demand for low skilled market is responsible to reduce demand for high tech products that ultimately reduced the real wage level of the skilled labour in the developing economics that ultimately deteriorate the overall growth rate of the economy.