Question

Why are some developing nations skeptical of free trade?

Answer 1

Answer.) The theory of comparative advantage maintains that all nations can enjoy the benefits of free trade if they specialize in production of those goods in which they have acomparative advantage and exchange some of these goods for goods produced by other nations. In addition, advanced nations claim that the existing international trading systemhas provided widespread benefits and the trading interests of all the nations are bestserved by pragmatic, incremental changes in the existing system and thus, to achievetrading success, they must administer their own domestic and international economic policies. However, on the basis of their trading experience with the advanced nations,many developing nations have become skeptical of the distribution of trade benefits between them and the advanced nations and these nations generally maintain that the benefits of international trade accrue dis-proporationately to the advanced nations. Also,the developing nations have argued that the protectionist trading policies of advanced nations hinder the industrializaton of many developing nations. Among the alleged problems plaguing the developing nations have been unstable export markets,worsening terms of trade, and limited access to markets of industrial countries.

It has been noted that many developing nations’ exports are concentrated in only one or a few primary products and thus unstable export markets, worsening terms of trade, and limited access to world markets for the products can significantly reduce export revenues and seriously disrupt domestic income and employment level. In addition,many developing nations feel that developed nations tend to insist that developing nations open their markets to industrial products from the developed world, yet refuse to open their markets to agricultural goods from the developing world. For example, United States have used aggressive anti-dumping and countervailing duties to limit access to their markets. Furthermore, the current concept of free trade supports the free movement of products and employers,which favors the developed nations, but not the free movement of employees(i.e., labor), which would favor the people of developing nations.