Question

With trade there are winners and losers. Restriction of trade creates the same result. Globalization is either what will save the poor countries of the world or condemn them to third world status. What do you think about trade and globalization.

Answer 1

Countries have over the time considered them to be self sufficient which has led to losses in their trade . With limited resources and capabilities, countries are bound to benefit from trade. The theory of one country gaining at the cost is other is not valid these days. Countries trade based on their comparative advantage and not on absolute advantage. So even the countries with lower productivity but having a comparative advantage can produce and trade those goods.

Globalisation has its own advantages and disadvantages. With the comimg of globalisation, several trade pacts have been formed and these have reduced tariffs and import duties largely even though some of them still exist.

Globalisation has led to reduction in the overall prices of traded goods because the countries produce specialised good and this leads to economies of scale.

Also consumers now due to globalisation have choices from a wide variety of products.

But globalisation is not always accepted by all the countries of the world. Many developing countries tend to remain close in an aim to protect their domestic producers from the competition. But most of these don't end well.

Eg: India around the 1990s had very little trade and was protecting its domestic producers from international competition. But this could not go long. With the increases current account deficit and less of foreign exchange, the country was moving towards crisis. So in 1991, the country opened for the world trade with liberalisation, privatisation and globalisation.

So though trade and globalisation are beneficial for the world as a whole by increasing the size of world pie but developing countries are hurt sometimes due to lower wages and competition from international markets.

(You can comment for doubts)