Assess the Effect of Three Factors Which May Limit Economic Development in Developing Countries

ISI was a trade policy adopted by many developing countries before the 1980s. Two background of ISI implementation: first, the argument that there is a secular deterioration in the international relative prices of the principal exports of developing countries (primary commodities) and second, is infant industry argument that aimed to encourage domestic industries by protecting them from competing imports (Duncan and Quang, 2012). It was assume that domestic industry initially could not compete with the competitors from developed countries. Thus, import limitation was conducted through

Economic development has to occur after a period of sustained economic growth. It is therefore the growth in total economic output accompanied by changes in the structure of the economy.

Trade also leads to competition, a driving force in increasing the “pie.” Although competition with foreign producers might be perceived as a bad thing, it actually facilitates economic growth in the world. Competition forces producers to constantly update and improve their products. Without competition, a state becomes stagnant and simply stays at the status quo for years to come. Thus, competition helps the global economy evolve with new ideas and innovations. The instrumental role of competition and trade can be seen when comparing the fate of

There are 2 purposes in this report. The first one is to determine whether developing nations are suffered from competitive disadvantages in the global market, and to find out whether the less developed countries taking any benefits from the free trade policy.

Chenery and Strout (1994) asserted that for a long time, there was hardly any country which exhibited sustained growth rate higher than its growth of exports. They also claim that growth rates of individual developing countries since 1950 correlate better with their export performance than with any other single economic indicator. Thirlwall (1997) in his work, explained the possibility that export growth may set up a vicious cycle of growth such that once a country is launched on the path, it maintains its competitive position in world trade and performs continually better relative to other countries. He also contended that export growth relieves a country of balance of payments constraints so that the faster exports grow, the faster output growth can be without running into balance of payments difficulties. His findings suggest that an export based strategy of development offers the best prospects for economic growth. Although theoretical links between trade and economic growth have been extensively discussed for over two centuries, a lot of controversies still abound concerning their real effects. The arguments in favour of trade can be traced to the classical school of economic thought that started with Adam Smith (Medina–Smith, 2001). Since then, the justification for free trade

Some of the countries with surplus commodities may dumb them on international markets at a low price. Under such conditions, some of the efficient industries can might find difficulties in competing for long period. Furthermore, countries whose economies are mostly rural will face unfavourable terms of trade. For example, ration of export prices to import prices. Which means that their export income is more smaller than their import payments the make for high value added imports, as it leads to subsequently large foreign debt levels.

A satisfactory understanding of economic growth also requires an appreciation of how countries interact with each other, because countries income levels are interdependent. Trade policies help foster these interactions between countries (and businesses). The question of how trade policies affect economic growth and development has become a controversial topic.

To avoid the situation- just as Edwards (1993) discusses- put too much emphasis on exports, we include exports shares as well as import shares in GDP to do case study and believe that this is an important step to understand the association between international trade and economic growth. In addition to that, since most of the countries started with a significant degree of anti-export and anti-import prejudice, tariff reductions will also be mentioned in this section.

With the development of the manufacturing sector, consumption of manufactured goods would increase, resulting in a decrease of imported manufactured goods. This will reduce an economy’s dependency on trade. Furthermore, if the phenomenon has any affect on world markets, it will improve the terms of trade (TOT).

Harrod domar – assumed closed economy, no foreign trade – infer that growth for an economy should come from within the economy’s resources making full utilization of the country’s resources for its benefit. Growth/development a function of Savings and investment in an economy. The reason why poor countries are poor is due to a fundamental savings gap/lack of capital accumulation which is then not enough to capitalise on investment opportunities and low productivity. So the way out is to increase savings, investment and its productivity – by tech changes. Savings gap facilitated by foreign aid, private foreign investment. Similar to Marshall Plan rationalisation – American financial support to European countries post WWII – discourage Soviet Union communist expansion and capitalism promotion.

Developing countries is a term that has been used loosely and can be formally defined as any country with limited economic resources and a very poor standard of living. Since the 1960’s, international trade has changed quite a bit and has come to influence global economic concepts. The role of government intervention has taken a turn in less developed countries and is moving toward the partial transfer of control and ownership, adding value domestically, bringing more host nationals into the equation to enhance the buy-in to domestic benefits. “Markets need sure and stable government laws and policies in order to properly price assets (Miller, Terry, 2009).” It can be said that an increase in regulation could lead to a decrease in financial and credit markets and a reduction of available credit to individuals and business with an increase cost. Any policies that squash the flow of goods and services internationally have a most negative

Staring from this general perception of economists on liberalization of trade, the purpose of this article is to put more thoughts on “The Importance of Trade in Stimulating the Economies of Developing Nations”

Another factor influencing growth is the significance of international trade. In countries that don’t participate in international trade, such as , there is very slow or no economic growth. This is because it is very hard for one economy to produce all goods which people require. It is better to specialise in a few goods, use them, sell the

According to U nited Nations Conference on Trade and Development(2004), international trade can play a positive and important role in reducing poverty in developing countires.Therefore, poverty alleviation has strong correlation with economic development and international trade.Even though other political, social and cultural problems arethe causes of poverty, it is believed that the various causes are so complicated that no simple soultion is universially applicable.Also, although there were many strategies and international aid for developing countries, the majority of countries thar were underdeveloped fifty years ago still remain poor. (Lee,2006) Thus,

An excessive development problem is facing numerous nations around the world; these problems are directly related to the developing countries increasing stages of poverty and income inequality. In the 1960s and the 1970s, economic growth was understood for decreasing poverty. The different governments have the ability to further the process towards a “free market type economy” accomplishing economic growth. According to “The woes of economic reform: poverty and income inequality in Fiji” the influences of “economic structural adjustment policies (SAPs)” are the controversy of society today involving poverty and inequality. The poverty level has gone up severely in countless developing countries including Fiji. The process of free market