ECONOMICS

Essay on why many developing countries seem, contrary to what the traditional theories suggest, not fully benefiting from international trade; and what trade policies they might follow to improve their performance

Essay on why many developing countries seem, contrary to what the traditional theories suggest, not fully benefiting from international trade; and what trade policies they might follow to improve their performance

Introduction

When one talks about the way some of the traditional works, it is perceived that is must be benefiting the developing countries. Looking at all the relevant theories, it is pretty clear that trade is always perceived as something that is good for the welfare of the economy. What it does is that increases the production. But when one looks at most of the countries, it can be seen that they are actually worst off as a result of the free trade. There are many reasons, for this apparent failure of trade when it comes to developing countries. In this paper, one will look at some of the reasons why trade actually might be not helping certain economies. And what sort of structural reforms do they need before they actually go for trading agreements (Peters et al., 2011, pp. 8903-8908).

Discussion

Increase in the Structural Unemployment

The biggest problem with most of the developing countries is that structural unemployment is always on the higher side when it comes to these economies. There are many apparent reasons for this, the most obvious reason is that even though the youth and the population is educated when it comes to the technical skills, the economy is not really inn that good shape that it might support such youth. So this is one thing that is needed to be taken into the consideration (Gordon & Li, 2009, pp. 855-866). The trade also plays its part in creating this imbalance. With the advent of trade, the large number of workers and their families incomes can actually decline. The outside industries and products start to dominate the market and due to that. The need for government support is eminent in such countries. When one looks at most of the developing countries, it is pretty evident that they rely on government's infrastructural support (Harrison & Rodriguez, 2009, n.p).

Domestic Instability due to Fluctuation in International market

When any country is involved in trading agreements, most of the times they are relying on the way demand forecast is in the international market. But this is not always the safe bet, as due to the fact that not they are more reliant on the fluctuations in the international market. Businesses and the employees and consumers are the more vulnerable due to the fact that there is international market (Panagariya, 2009). This is something that is needed to be taken into the consideration. For instance, the recession in the international market and USA had an impact on the Australian exports. This has also declined their domestic incomes as well. Thus the lower GDP, the lower income level and decline in the ...