A disagreement would arise on the statement that gains from international trade are relatively limited for smaller countries as there are numerous examples of small nations being world leaders in different products and commodities. The biggest example is likely to be of Japan, South Korea is another example as it’s evident that recently the country has seen radical growth in its trade and economy with increase in GDP of 1.1% in the April-June quarter (Seo and Kim, 2013). Similarly Vietnam also has portrayed significant growth in economy, as its major focus is on export oriented production, it is also noted that major electronics manufacturers like Samsung have constructed a chip and electronic components factory there (Bloomberg News, 2013).
International trade can bring a number of different benefits to any country regardless of its size. Firstly it contributes towards economic growth as businesses are able to access new markets that tend to open up opportunities for new production. Trade itself encourages a transfer of knowledge and this leads to a greater degree of innovation, for example trade and its related investment facilitated the deployment of mobile cellular coverage, which covered 69% of the African population in 2008 (European Commission, 2012). Furthermore, trade creates employment opportunities, and ends up creating more stable and secure jobs and ultimately creates a better standard of living, like in Chile a worker in the trade sector gains an average 1,100 euro, more per year, than a worker in any other sector (European Commission, 2012).
The stated benefits and examples portray that benefits of trade are not limited because of the size of a country, but can increase exponentially and are dependent, on a clear policy, identification of resources, and a faithful government body.
The government has to oversee the trade sector of any country. The basic and the foremost approach recommended for a low income developing nation is to identify the natural resources and once identified, a proper excavation and distribution channel needs to be established or else private investors might monopolize the resource, allowing the benefits and the purpose of trade to fail, like in Sierra Leone and Congo republic. The government will have to analyze and undertake the cost benefit analysis of refining that resource. As a low income developing nation, this is an important step due to limitations of funds. Such approach is adopted by countries like Venezuela and Brazil and Iran. If a country is generating surplus commodities, devaluing the local currency might also be an option to make the goods exported cheaper in other countries and hence benefitting from the resultant increase in demand in the foreign markets.
A small nation may negotiate with developed countries over lower tariffs or import duties to attract foreign investors and create demand of their products in the local market. Developing nations aim to attract multinational businesses in an attempt to boost the employment of their populace, however care should be taken as apart from trade policies there should be laws and regulations established to prevent the phenomenon of invasion of culture, resource exploitation and closure of local industries.
For developing nations, usually good long term trade relations are established in order to provide another nation a trade route or to obtain a certain commodity which can be sold onwards at a higher value. On a recent trend there are also arguments that developing nations should steer away from free trade arrangements as, the major organizations tend to overpower the developing nations, major cases have been observed between that of Sri Lanka and the World Trade Organization.
References
Seo, E. and Kim, C., 2013. South Korea growth surges to fastest in more than two years. Bloomberg, [online] Available at: http://www.bloomberg.com/news/2013-07-24/south-korea-growth-surges-to-fastest-in-nine-quarters.html [Accessed 15 October 2013]
Bloomberg News, 2013. Vietnam third quarter GDP growth accelerates as exports hold up. Bloomberg, [online] Available at: http://www.bloomberg.com/news/2013-09-27/vietnam-third-quarter-gdp-growth-accelerates-as-exports-hold-up.html [Accessed 15 October 2013]
European Commission, 2012. 10 benefits of trade for developing countries. [online] Available at: <http://trade.ec.europa.eu/doclib/docs/2012/january/tradoc_148991.pdf> [Accessed 15 October 2013]
