Question

Case for Free Trade

The act of opening up economies for trading is known as free trade or trade liberalization. This is done by bringing down trade barriers like tariffs. Trade liberalization allows goods and services from everywhere to compete with domestic products and services.

Globalisation along with free trade can adversely affect the economies of developing countries by not giving equal playing field by imposing conditions which are unfavorable. With the development of transport and communication systems goods and services can travel faster and farther than ever before. But free trade should not only let rich countries enter the markets, but allow the developed countries to keep their own markets protected from foreign products.

Countries also need to be cautious about dumped goods; as along with free trade dumped goods of cheaper prices can harm the domestic producers.

How have ‘globalisation’ and ‘free trade’ affected the economies of developing countries?

Hint:

Developing countries need to carefully manage the effects of globalisation to ensure their domestic markets are not overwhelmed by cheap imports, and that they can benefit from free trade.

Answer 1

Globalisation and free trade have had mixed effects on developing countries. While they provide access to global markets, they also expose local industries to foreign competition, which may be harmful to domestic producers who are not ready to compete at such a global scale. Moreover, developing countries may not always have equal bargaining power in trade negotiations, leading to unfavorable terms and conditions that could hurt their economies in the long run.