Trade Liberalization is the removal or reduction of restrictions or barriers on the free exchange of goods between nations. This includes the removal or reduction of both tariff (duties and surcharges) and non-tariff obstacles (like licensing rules, quotas and other requirements). Free trade encourages countries to interact with each other and help them benefit from the idea of comparative advantage. In addition, it is efficient in many ways such as lowering costs and transferring technologies. This paper will be discussing the effects of trade liberalization on economic growth.
Research Question: Does the current Economic Globalization and Interdependence process help or hinder the development of all nations? Theory/Hypothesis/Abstract: Economic globalization is reinforced by the idea that states which integrate with the international economic exchange system will become a more progressive and modernized as a consequence. However this paper will argue that this general perception about development does not take into account that globalization may in fact keep poorer nations weak for the purpose of exploitation. There is a need for the current approach to be adjusted. The international division of labour, class distinction, and the domination of liberal economic theory under the current approach to globalization all serve the interests of the wealthy nations, promoting and supporting dominance and exploitation.
Economics is the study of how the economy functions and how the economy would function differently with government policies. “Economics is a social science, what makes it different is its use of mathematics and statistics to prove theories and concepts while still incorporating other subjects, such as politics, philosophy, and geography” (Maths Help for Econnomics Students). In order words, what is economics.com explains Economics as “how people interact within markets to get what they want or accomplish certain goals. Since economics is a driving force of human interaction, studying it often reveals a lot like why people and governments behave in particular ways” (what is economics). Economists frequently use numerical approaches when reviewing specific information in an economy.
Dynamic effect refers to anything that can affect a country’s rate of growth over a period of time, albeit, it can slightly differ from study to study. Balassa (1961) came up with a list of dynamic effects of economic integration that have to be considered when analyzing welfare effects of integration. When countries enter into a certain kind of integration, there will be economies of scale and technological changes. This in turn widens the investment opportunity and reduces risk and uncertainty. Furthermore, integration alters the market structure of member countries and makes it more competitive, this further leads to productivity growth.
It is easier, to understand and it takes a concept as complex as globalization and make it easier to comprehend when it is compared to something we are not just accustomed to but know. In his article, he compared multinational corporations with global cooperation’s by using a story named the hedgehog and the fox. He simply stated the difference by saying what a fox knew and what a hedgehog knew. But that explanation, the reader could understand the difference between anyhow both of them are different in conducting business and other affairs. By this comparison, he is able to favor globalization by writing "seeks constantly to drive down prices by standardizing”(Levitt,1983), as opposed to multi-national.
Trade protection is an economic policy that limits trade between countries by enforcing trade barriers. Despite the arguments in favor of free trade market and increase the freedom of international trade, protectionism is still widely implemented. Since post world war II era, the economy has strived significantly in the world. The market development becomes prioritized by many countries. They drive the vision and trade policy orientation into liberalism, including Free Trade Area, because trading provides many benefits, such as providing job vacancies that could reduce the number of unemployment.
Through these, it helps to have more international trading and increasing employment rate. By embracing globalization and international finance, it will make any countries across the globe to be better and allowing more trading and investments from foreigners to help the economy of any country. In real life, businesses faces increasing competition, because of this, its workers may also be discouraged because of such. There are reasons according to Tverberg (2013), why globalization can be a huge problem. Globalization quickly uses limited resources.
Trade including export and import is very important for a country’s economy. There have been many famous scholars defending their theories about the importance of trade for a country. David Ricardo, a British political economist as well as one of the influential classical economists, introduced the concept of comparative advantage. He suggested that a country shall concentrate or allocate its resource in industries where it is most internationally competitive and trade with other countries to get the goods which are not locally produced. He also claimed that if one country is more competitive in every area than its trading partner, there is mutual national benefit.
Forecasting is another important scope of business economics. It makes research and conducts market survey with a view to know the tastes and fashions of the consumer. Business economics analyze the demand behavior and forecasts the quantity demanded by the costumers. COST AND PRODUCTION ANALYSIS A study of economic costs, combined with the data from the firm’s accounting records, can yield significant cost estimates which are useful for management decisions. An element of cost uncertainty exists because all the factors determining costs are not known and controllable.
Hong et. al (2008) Added that by entering into trade liberalization agreements, exporting industries could increase their marketing expenditure to the exporting country as they had lower tax rates to pay. Fosu (1990) found that trade agreements enabled the home country to concentrate investment on the sectors that had a higher competitive advantage. Trade liberalization has is known to bring benefits to the financial sector as well. By increasing exports, a nation is able to accumulate additional foreign exchange (Kemal et al 2002), promote additional saving and investment (Todaro, 2000) which may lead to an additional growth of exports thus creating a virtuous cycle.