Openness and free trade are one of the vital economic practices because nations can import and export products and services without the government restrictions. These limitations include tariffs, restrictions, and bans associated with exports and imports. In developing countries there stand to befit a lot from the free trade because of their low levels in the standard of living and availability of resources. Developing nations have room for expansion in their economies through agreements involving strategic free trades. These are some of the benefits of free trade.
Improved living standards: as a result of free trade, the citizens of a nation will have their quality of life improved. The developing countries can comfortably import products that are not with their borders (Carbaugh, 2010). The importing of such goods and services will be cheaper for a developing world as opposed to when they will produce those good and services within their borders; this is because the developing countries do not have production processes that will convert the raw materials into the final consumer products. Importing from the neighboring nations will ensure a constant flow of the goods and services hence ensuring availability of such products with their borders.
Improved foreign relations: Free trade leads to better international relations observed. Developing countries have remained focus on a global threat. Free trade between a developing world and powerful nation will give it protection from global threat. As a result of free trade agreements, developing countries will improve their military power and strength, internal infrastructure and political stability. These mutual benefit as a consequence of the free trade will make it easy for the developing nations to learn and acquire skills in the governance of their economy and the government policies that will work best for its citizens.
Increased resources: This will be seen because of the ease access to economic resources as a result of free trade. Developing nations are always in short of funds. These financial resources include capital, labor, and land that represent the country’s natural resources. The developing country often has lowest quintiles of the natural resources on the market (Carbaugh, 2010). As a result of free trade, the developing nations will be in the position to acquire economic resources that help in the production of the final consumer products.
Production efficiency, most of the developing countries are in the position to produce certain products. But because of lack of proper skills and knowledge make their production inefficient and ineffective. From free trade, such gaps can be filled ensuring efficiency in their production processes. Citizens of these nations can also visit the developed countries to acquire proper education and experience in the business and manufacturing processes. As a result, these individual will come back to share the acquired knowledge that will improve their country’s production processes.
The gains from trade among nations can be categorized into, static and dynamic gains. Static gains refer increased national output as a consequence of the maximum utilization of the country’s resources leading to the improved social welfare of its citizens. Dynamic gains accelerate the economic growth of the involved nations relating much with the economic progress of the economy. As a result of the individual involved countries in trade specialize in the production of products that they can best produce in large volumes and best qualities hence, boosting their economic growth. Referring to dynamic trade theory, static gain as the result of specialization and reallocation of existing resources are smaller compared to the dynamic benefits that focus on the increased growth rate and the volume of additional resources made available to or employed to the trading country. Dynamic gains are accelerated by an accumulation of physical capital and human capital, improved technological transmission and improvement in the quality of macroeconomic policy.
In the position of Executive Director of Global Development, he should make the member of the Primarian Parliament understand that there is no necessary connection between relatively closed economy to trade i.e. protectionist and that o0f relatively open economy to buy i.e. liberal in its economic growth and trade policies. Economic growth is as a result of some factors. Some of which include:
1. Accumulation of financial and human resources that include, natural resources and land, both human and physical resources and labor.
2. Efficiency in the conversion of raw materials to final products using improved technologies
3. Creativity and innovation of products and services
4. Investments in productive and efficient public infrastructure. Noted that trade barriers got no positive impact on the growth of the economy in long-term, although it's demonstrated that it minimizes the level of income availability concerning deadweight losses of tariffs. For instance, an open economy might have a per-capita GNP of $25000 while that of the protectionist economy to have $20000. It’s, therefore, clear that open economies are likely to grow faster in closed economies because of minimized trade barriers increasing other factors that boost growth. He should put this point clear to some parliamentarians who that that growth itself isn’t necessary because it will make citizens leave their cultural traditions, which it might lead to environmental damages, contribution to income shortage. These are complex concerns that should be carefully studied. None of the mention related is right because if the growth is to have these impacts, then it must be depending on other vital factors in the economy like environmental protection policy. He should buy the argument that nations will grow faster if they open to global completion. Referring to these fundamental policies that will impact the positively economic growth of the developing countries. A good example, it’s the philosophy that the World Bank use in giving loans to facilitate restructuring and lending packages of IMF requiring macroeconomic, structural reforms.
• Accurately valued exchange rates: the exchange rate should not discriminate imports and exports. Achieved through flexible rates (as seen in Korea and Japan) or constant rates that gradually changes to accommodate inflation differences between the involved nations and the major export markets like the US. By so the exchange rates will not impose any duty or tax on the import.
Tariffs and taxes systems are made neutral across production sectors as a result of the removal of the taxes on the export production. Most countries imposed taxes on the agricultural imports to protect the domestic economy from competition. Unlike the case for the manufacturing sector that had little discrimination across many of its products. From this is noted that export promotion policies are close to open trade policies.
Appreciating that exporting is not comfortable than preventing imports because of the improved level of quality required by the exports and foldable external costs of marketing. Companies in the East Asian have emphasized the importance of avoidable terms of the foreign technologies. Many governments have supported this by putting in place efforts in public education, infrastructural investment in exports and transfer policies in technology with the aim of realizing second technology flow.
Instead of relying too much on import protection to boost infant companies, high-tech sectors and promotion of exports in manufacturing were taken including conducive loan allocation and subsidies.
Role of global organizations in economic development
Global organization is a neutral platform in which nations participate and discuss concerns that are significant to the world. Its role is to study, gather and propagate information, and set laws that are internationally accepted. It provides a platform in which negotiation deals between nations take place. Being the Executive Director, parliamentarians should know that he understands how best these practices will lower transaction costs and strengthens cooperation between countries.
Global organizations have contributed immensely to economic development. For instance, the WTO has promoted free trade among countries as well as providing the basis for negotiation among countries. The IMF has also been essential in enhancing economic development. It provides technical assistance to countries as well as lending to countries in financial crises. The IMF played a key role in mitigating the impacts of the 2008/2009 financial crisis. Besides, it has been instrumental in providing funds to countries in debt crises. The IMF bailed out Greece on many occasions since 2010 (Talley, 2016). They demanded austerity measures to enhance economic stability in the country. The bailout by the IMF was not only beneficial to Greece but also to the entire European Union (Talley, 2016).
References
Carbaugh, R. (2010). International economics (3rd ed.). Cambridge, Mass.: Winthrop Publishers.
Talley, I. (2016). The History of the IMF and Greece’s Bailout. WSJ. Retrieved 17 May 2016,
