What Best Explains Why International Trade Agreements Are Beneficial For Developing Economies

According to international trade theory, even if it has an absolute advantage over another, a country can still benefit from specialization. Unsurprisingly, economic theory, as it applies to trade in services, is still under development. In general, economists now believe that the fundamental theory of comparative advantage, as it applies to goods, also applies to cross-border trade in services. Geza Feketekuty says: “The theory of comparative advantage as a theoretical statement on economic relations should be as valid as the products covered by the theory are negotiable physical goods such as shoes and oranges, or tradable services such as insurance and mechanical engineering. [24] this rate of duty maximizing the net benefit resulting from the improvement in the terms of the country`s trade against the negative effect resulting from the reduction in the volume of trade. . . . As the terms of the nation`s trade, which imposes customs, improve, the conditions of the trading partner deteriorate, as they are the opposite . .

. . Given both lower trading volumes and deteriorating terms of trade, the well-being of the trading partner has declined considerably. As a result, the trading partner may retaliate. Even if the trading partner does not get retaliatory measures when a nation obtains the optimal tariff, the benefits of the nation that sign the tariffs are less than the losses suffered by its trading partner, so that the world as a whole is worse off than free trade. In this sense, free trade maximizes the well-being of the world. [9] As with all theories, there are opposing views. International trade has two opposing views on the extent of trade control between countries. The comparative advantage theory starts from a world where trade between countries is balanced or, at the very least, where countries have a trade surplus or trade deficit, whether cyclical and temporary. [29] The easing of the assumption that “international trade between nations is balanced could lead a loss-making nation to import certain raw materials in which it would have a comparative advantage and which would in fact export with balanced trade,” says Dominic Salvatore.

But he doesn`t see it as a major problem, “because most trade imbalances in relation to GNP are generally not very large.” [30] Global trade allows rich countries to use their resources more efficiently, such as labour. B, technology or capital. Different countries have different assets and natural resources: land, labour, capital and technology, etc. This allows some countries to produce the same much more efficiently – in other words, faster and cheaper. So they can sell it for less than other countries. If a country is not able to produce an item effectively, it can receive it through trade with another country that can do so. It is a specialization in international trade. Five years is barely enough time to double the share of LDCs in world exports. An earlier reference year is therefore more appropriate for SDGs 17.11.1.

However, regardless of the starting point for the past 20 years, the share of developing countries in world exports has not increased significantly and the share of LDCs has not doubled. However, at the national level, benefits vary depending on the base year chosen (see map 1).

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