Barriers Of International Trade Essay
Introduction
Over the last few decades international trade (IT) has progressed continuously due to the reduction in trade barriers. From developing countries (LDC) such as India and China, even developed countries (DC) engage in trade liberalization- the policy where the governments of international markets minimize imports or exports. The trade between developed and developing countries are of considerable interest as there have been debates as to how it influences developing countries.
Developing Countries (LDC)
Developing countries also known as LDC consists of a majority of WTO membership, where nations have high dependence on agriculture, underutilized natural resources, lack of capital and technology, lack of basic infrastructures, vicious
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The main cost is the outflow of earnings from the foreign subsidiary to the parent company when the foreign subsidary imports large amount of its inputs from abroad. Also, due to high FDI in developing countries, it can bring higher inflow of technology which will cause a demand for skilled labour from both LDC and DC. (Mamoon, 2007)
How can LDC improve their performance?
LDC have to set tactical trade policies to help their domestic industries against competition from abroad by imposing quotas and tariffs against imports of manufactured goods from DC. This will substitute away imports to domestic products. This may be costly in short run but beneficial for the economy in the long run. (Appleyard, 2010). By imposing quotas, it wou
Developing countries have more protection such as high import tariffs which makes imports more expensive than domestic goods. Therefore, benefits of cutting tariffs are mainly in long run, in the short term, it may have adjustment costs. The poor governance and corruption in the LDC will complicate the adjustment process.
By cutting high tariffs on imports, it gives LDC the chance to make the industry more competitive and efficient which encourages growth and living
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