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.
Preserve cost competitiveness in your domestic market and increase efficiency – Because of global competition, the manufacturers in a country try to produce superior quality goods and at the least possible cost. This upsurges the efficiency and benefits to the customers all over the world. 3. Develops the domestic competitiveness – exporting or importing your products develops your competitiveness in local markets. If you can manage to get imported goods at a lower prices than those you get from domestic markets, then unquestionably you will receive additional profits that will improve your competence
Exports can improve a country’s position in the balance of trade (Barrett, 1990). When a country exports, they gain access to foreign exchange resources. Additionally, exports enable a county to sell the excess production capacity. This will enhance the economy and will promote global expansion for the local businesses. Exports will also potentially bring stability to otherwise fluctuating market demands.
The importance of FDI and trade openness was the notorious features trend toward globalization in recent years and has emerged as one of the talking points by the economist when explaining the growth of developing countries. As this two component is assumed to have a parallel relation, the positive trade openness contributes to nation growth by improving productivity and export capability. Trade openness also provides a greater efficiency, It is found that the countries with more openness relatively outperformed their economy than less opened countries because they indirectly promoting the FDI to their countries thus enjoying the benefits of
Answer 3. Economies of scale can help you reduce your fixed cost and increase your reach to potential customers. So when the quantity of the product being manufactured increases it reduces the average cost. Furthermore it leads to specialization of labor and better capital utilization. This will help you to stay profitable (as you have better margins) and expand with ease.
Social globalization describes an exchange of values, ideas and it has facilitated the promotion of equality, dignity and human rights. Finally, the major effect of globalization is produced in the world economy. The aim of globalization is the growth of the global economy by giving firms a superior competitive position with lower cost through free trade and by increasing the number of consumers, products and services. Some people said it helps developing nation-states to “catch up” the industrialized ones and it improves the overall standard of living. Nonetheless, there is a risk for smaller companies that cannot compete in an international market and world governments should promote international investments and try to eliminate barriers to trade even if it causes them some
2. Equality of prices- Prices can be stabilised by foreign trade. It helps to keep the demand and supply position stable, which in turn stabilises the prices, making allowances for transport and other marketing expenses. 3. Availability of multiple choices - Foreign trade helps in providing a better choice to the consumers.
Firstly, the improvement of economic growth is affected by the removal of tariff and non-tariff barriers in trading. This will then enhance the exporting activities of these countries, allowing better access between these nations and the markets of the Pacific Rim. If TPP is approved, the companies in the involved countries will be able to provide better job opportunities with higher wages for their people, making their citizen’s lives better. From the humanity aspect, we can say that this situation is good for it improves the prosperity of the people in the nation; it enables people to live with a better living condition. Secondly, the pact also includes a set of rules along with the sanctions regarding environmental standards that will prevent abusive actions towards the environment, which involves the reduction of wildlife trafficking.
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.
a) Export subsidies – a payment made by a government to local producers which enables the latter to sell their goods more cheaply or more profitably abroad, thus stimulating a country’s exports. Advantages: Export subsidies aid a country in achieving an export expansion and diversifies the national economy towards the manufacturing of goods. Export subsidies provide agricultural support to local producers because they can sell their goods more cheaply to overseas markets. Export subsidies help alleviate poverty amongst local producers. The government provides these subsidies to increase their foreign exchange reserves Disadvantages: Because every country wants what is best for itself, if the domestic country imposes export subsidies, the foreign country counteracts that action by imposing its own set of subsidies which further complicates trade and leads to trade disputes amongst countries.