Grade 9 Business IGCSE
____________________________________________________Cambridge University____________________
- 8.1.1: Discuss the extent to which international trade is helpful in
- achieving the higher economic growthin a developing country.
Last date for Submission:
May 4th, 2014
Please Write Your Response in 750 Words
Note:
Marks allocation for this article is 20.
Rubrics for Marks.
A. Theoretical Explanation 5 Marks
B. References. 5 Marks [Use Harvard referencing style]
C. Use of Key words. 5 Marks
D. Evidences in the support of explanations 5 Marks
International Trade is the exchange of goods and services towards other countries. Trading globally gives consumers and countries the opportunity to be exposed to goods and services not available in their own countries, or in higher quality than the locally produced goods. With the help of international trade, this can really help develop and strengthen an economy of a country in terms of globalization, comparative advantage, competition, variety of goods and services, efficiency and market size of an economy.
ReplyDeleteWith international trade, great bonds between countries may be formed, such as the ASEAN community in Southeast Asia that has contributed into better globalization between southeast asian countries and more competition.
As other countries are able to produce certain goods and services more efficiently in terms of cost and supply, this can provide a comparative advantage than if the country made their own certain goods and services. Because of this, there becomes higher efficiency in the market allocation of labour, land, enterprise and capital (factors of production) in a country.
Also, as there is free trade between countries, the competition gets fierce between the domestic companies and multinationals. This can cause domestic firms to grow and develop to compete with foreign firms, increasing the level of employment and advancement in technology to compete with the level of machinery in foreign industries. As competition grows, more businesses will open, which forms a wider variety of goods and services to choose from, causing higher purchasing power for consumers and increased spending as more goods are available in the market.
Another benefit from international trade is that the population of workforce increases as more people are imported into the country as expats, making it possible for the local economy to grow through their help. An example of a country that employs expats is Singapore, with 38.6% of the population in the MEDC are foreigners. Without the international intelligence and help, the country would not have enough of a workforce to build their economy.
Overall, with the ease of importing workforce, technology and goods and services from other countries, there becomes a larger workforce, more resources available and a more technologically advanced country.
**CONT'D**
ReplyDeleteAlthough there are many benefits of international trade, the limitations due to it can be long-lasting. In many developing countries, international trade has made it a struggle for infant industries to develop as the market is dominated by foreign companies. There becomes an overdependence on foreign multinational companies as consumers would prefer buying from multinationals than goods produced by local companies. With higher demand for foreign goods, the profits made by the firm will therefore be “imported”, causing the balance of payment of exports to be lower than it could’ve been, and imports higher, causing trade deficit.
Also, as a multinational company produces its goods in a certain country which is not their own, these companies may exploit the natural resources and workers. In some developing countries, results of multinational companies may be even more serious, as local workers may be working under poor environmental conditions, paid very little (“cheap labour”) and have illegaly hired child labour to work. Because of this, the nominal GDP becomes low, as well as the living standards.
“Nevertheless, children under 15 make up 20% of Mexico's migrant farmworkers, the Mexican Labor Secretariat says. They tend to be less educated and less healthy than the population at large. Less than 10% of these children attend school, and 42% suffer from some form of malnutrition, government studies show.
The company sells tomatoes, bell peppers and eggplant in the USA under the SPV, Chelita and Paris brands.”
In Mexico for instance, many children work as farmworkers in multinational US brands such as SPV, Chelita and Paris, and have resulted into health problems and educational problems probably due to the low amount of wages paid to them, as well as the fact that they should not be working at such a young age, giving up their education for their job.
Another limitation is that, as more and more expats are employed, job vacancies for local people will become less as the locals are replaced by expats. This can create problems of unemployment towards the country, which leads to high inflation rates, lower literacy rates, etc. if not solved immediately.
Harmful goods such as alcohol, illegal drugs, etc. will also be easier to find as they are imported freely between countries. This can cause major influences in crime rates, DUI charges, etc.
In conclusion, although international trade provides many benefits towards a country, in developing countries the government should keep in mind that this ‘free flow’ of goods and services has to be controlled with the use of trade barriers to protect local industries to an extent. This means that international trade is allowed, yet have certain restrictions in the local economy.
References:
- http://therealsingapore.com/content/foreigners-singapore-now-make-39-population
- http://www.investopedia.com/articles/03/112503.asp
- http://www.asean.org/media-gallery/video/item/asean-building-an-economic-community-together
- http://usatoday30.usatoday.com/news/world/2008-05-08-mexicolabor_N.htm