free trade effect on developed and undeveloped countries
From late 20th Century, globalization has become a term that every country has concern about. Globalization helps improve productivity which create higher quality products with more reasonable price. However, beside its advantages, free trade also brings about disadvantages one of which is that the gap in income between the poor and the rich countries have continued to widen. There are also arguments about whether only the more developed countries gain from free trade. About this, in my opinion, everything has its both sides. It is true that the more developed countries gain more from trade than the less developed countries but on the other hand, the less developed ones also have numerous chances opening to develop their economies.
Firstly, the idea that only more developed countries gain from free trade is not correct. Free trade is an open market where countries sell the products that are abundant and purchase goods they can not produce or can not produce with the same price and quality offered by other countries. According to absolute advantage theory, a nation has the ability to produce a good more efficiently than any other nations. In the case of India, Indian IT engineers can provide IT supporting service with lower cost than the rest of the world. German manufacturing firms have technology which enable them to manufacture high quality machines. Consequently, each nation has its absolute advantage to compete in global market, not the more developed countries only. Moreover, comparative advantage theory points out that countries also can specialize in a target good that they have resources to produce better than other goods, due to which every economy can take take all advantages of their resources. India specializes in outsourcing IT support services, and Germany focuses on machinery industry. Then the global productivity is raised and global citizens can use better goods with lower prices than before.
But in other aspect, the less developed countries are facing more difficulties in free trade than the more developed countries. Their low technology and unimproved infrastructure unable them to produce goods in the same volume and quality as the developed economies who have great competencies. Their export structure is mainly depend on primary commodities. They export low price commodities such as agriculture products, raw materials which then will become the input for modern factories in developed countries and import finished product with much higher price which leads to their Term of Trade is always below 1. And some less developed country where they do not have natural resources, the labour force even has to do the low-paid the outsourcing. Free trade means all countries reduce the protectionism which can threat the domestic infant industries.
In conclusion, even when inequality is widening within and across nation, both poor and rich countries gain and loss in free trade. But governments have been making great efforts to reduce the gap in economic performance between the poor and the rich countries.
