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Do developing countries profit from international exchange?

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  1. Introduction
  2. Market reforms create the conditions for the penetration of foreign companies
  3. The United Fruit Company against dictatorial regimes
  4. The emergence of a labor movement
  5. The 1929 crisis has affected the monopoly of the United Fruit Company
  6. Expectancy from 1944 to the coup of 1954
  7. Conclusion

Developing countries (developing countries), the term for countries whose economies are still developing, is a very heterogeneous group of countries that have not yet reached the level of development of three major economic regions that form the Triad namely North America, Japan and Western Europe.

We distinguish in this category, certain groups of countries such as the newly industrialized countries (NICs) or Least Developed Countries (LDCs). International trade is deemed to increase wellbeing globally, but the problem arises from the distribution of welfare. Are the benefits of trade shared by all?

We can therefore ask whether or not developing countries really benefit from international exchange. Thus in the first part, we see that international trade can be beneficial to developing countries, and in the second part, we will show the limits of the integration of developing countries in international trade.

International trade has experienced very strong growth. And he even grew faster than world output. We can ask ourselves about the role of developing countries in international trade. Developing countries really gain to participate in this international trade?

Classical and neoclassical theories of international trade have demonstrated the interest of international exchange. International trade can be beneficial to developing countries. Ricardo shows and with his theory of comparative advantage that countries have an incentive to specialize in the productions in which they have a comparative advantage over their competitors, that is to say where they are the best or least bad.

This allows each country to access more product and increase global real income. And as stated by P. Krugman, international trade is not a zero sum game, but positive-sum. All participating countries reap a benefit. Free trade improves the position of countries that share compared to autarky.

Exports and imports produce positive effects. For example, imports can help fill a shortage of supply, which allows a better satisfaction of consumer needs through diversification of the goods offered. In addition, they provide access to new technologies and to stimulate investment and to push domestic firms to improve their competitiveness in order to face foreign competition. In turn, exports for growth.

Indeed they allow local companies to expand their market beyond the limits of the national economy. These companies will have additional opportunities, which will push firms to expand output. The average cost of their products will decrease and so these firms will benefit from economies of scale and thus improve their competitiveness. And participation in trade can enjoy the positive effects of competition.

Trade can thus help to improve production efficiency and cost of DCs. Indeed, the exchanges provide a gain in productivity for the participating countries through specialization.
We can see that the logic of Ricardo has enabled some developing countries to integrate into international trade and development. The case of Asian NICs is clearly shown. Their strategy, based on the development extrovert, has proved effective.

Indeed, the four "dragons" (Hong Kong, South Korea, Taiwan and Singapore) sought to specialize in the production of simple manufactures such as textiles, household appliances etc. And they go back gradually technological processes increasingly developed. That is to reinvest the profits from one sector to other sectors even more carriers. By specializing in manufactured goods and the NICs have challenged the old international division of labor (DIT), in which poor countries specialize in primary products and the rich countries in manufactured goods.

Tags: developing countries; international exchange; profitability

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