Question

In: Economics

how developing countries benefit from trade, personal insights only.

how developing countries benefit from trade, personal insights only.

Solutions

Expert Solution

Developing countries benefit from trade in the following ways:

Developing countries can increase their production efficiency as developing countries usually have a low amount of resources to produce goods and services. By engaging in trade, the countries can produce and trade those goods in which they have specialization and import those goods in which they are lagging behind.

Developing countries can increase their production capacity by trade as trade helps in transfer of technology and machinery from the developed nations which can help the developing counties to improve their productivity in the short term. This helps them in improving their infrastructure and innovate the process to be able to utilize the resources more efficiently.

Trade helps the developing countries to improve the standard of living of its citizens and generates jobs and setting up their manufacturing sector as we see in the case of China and India. The trade helps them in transition from mainly agricultural based economy to manufacturing and service-based economy which increases their GDP growth rate and makes them able to compete with the developed nations.


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