Assess the Impact of Free and Fair Trade on Less Developed Countries

Assess the Impact of Free and Fair Trade on Less Developed Countries

Trade is one of the ultimate deciding factors in determining the success of a nation from many different perspectives. Without it we have seen the worldwide devastation which can occur, through wars and conflicts, mass poverty, hunger and economic stagnation.

Trade has become intrinsic to the life we as Irish citizens can now enjoy. Relations between the Irish and trading partners in the US and Europe have brought Ireland from a poverty stricken nation with no economic credibility to rise to the heights of being one of the largest per capita economies in Europe and the world. In 2006 Ireland was ranked 4th in the world based on GDP per capita.

The removal of barriers to trade has clearly benefited the Irish economy, as evidenced by the GDP growth for Ireland since EEC membership in 1973.

Trade allowed Ireland to excel in goods where it had a comparative advantage and export them worldwide and on a large scale. This brought in wealth to Ireland and its citizens and lifted us out of a poverty trap that we won't enter again in the foreseeable future even with the current stresses on the economy. Our very own Irish example shows how trade can, seemingly easily, lift a country up and let it grow and prosper. Free and Fair trade helped us to export to our neighbours in markets which were free of barriers and with fair prices for our goods. Markets which fuelled the Celtic Tiger and helped line our pockets.

However, it was not simply the lowering of barriers and the assurance of a fair price which allowed us to prosper. There are many, many problems which can affect the outcomes of nation's economies. Problems which leave a country in a state that it cannot possibly hope to take advantage of trade. However, as lucky as Ireland and many others were in getting the right mix to be able to take advantage of the opportunities free and fair trade gave us there are many, who can take little or no advantage. There are both external and internal forces are to blame for this. Both equally damaging to nations that have weak economies, which is a basic characteristic of Less Developed Countries (LDCs)

We have never known a system of truly free or fair trade in international trade (Stiglitz 2007). There has always been some form of protection by developed countries within any agreements through subsidies, environmental regulations etc. These are non tariff barriers cleverly prevent less developed countries from entering foreign markets by making them un-competitive to trade in. LDCs on the other hand are prevented from applying tariffs to foreign imports. This does not seem like either a free nor fair system. This is the system we live in, a system that is creating divergence between LDCs and the rest of the world as it continues to suppress through fear of competition.

We can see that with over one fifth of the world's population left behind the ability of globalization and trade leading everyone out of poverty, with Adam Smith's "invisible hand", is somewhat limited. Sub-Saharan Africa's population who live in extreme poverty has nearly doubled since 1981. (www.worldbank.org, 2005). This has happened in a time of great global increase in wealth and also at a time when a lot of countries outside Africa grew out of abject poverty.

Trade barriers imposed on LDCs can make life very difficult and can restrict their power to diversify and identify their comparative or absolute advantages over other countries. Trade embargoes are implemented by developed nations as a means of sanction against developing countries. It has been the success of the growing economies in doing this that has led them to be able to cut out economic inefficiencies and concentrate on sectors that they can be efficient in. These inefficiencies are what cost the LDCs dearly and deepen the rut in which they find themselves in.

Organisations such as GATT and the WTO aim to provide ground rules for international trade but have many failings due to the input of the various governments involved and the aims that each one are trying to achieve.

Theses orgs also only have limited ability and are often undermined by preferential trade agreements between nations. There are now more regional trade agreements than there are countries. The average African nation is part of four different agreements. These can often be conflicting and can cause more harm than good. As with a lot of scenarios in LDCs these agreements may be nothing more than a simple publicity opportunity for leaders to be seen to be doing something for the people.

Governments enter negotiations having conducted in depth research about issues arising and the effects that they will have on them. Here we see the difference between Nash economic theories, in which participants within a system act in accordance to find the maximum benefit to the