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How can international trade aid development? In what ways does the international...

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armyof32000 | Salutatorian

Posted August 1, 2013 at 5:39 AM via web

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How can international trade aid development? In what ways does the international economy impose problems on developing countries?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted August 1, 2013 at 5:54 AM (Answer #1)

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International trade can be something of a two-edged sword from the point of view of developing countries.  It can promote economic development, but it can retard it and other kinds of development as well.

International trade can be a major boon for developing countries.  It can allow those countries to focus on producing goods that will be exported to richer countries.  This allows them to make money in ways that would not be possible if they were producing only for their own domestic markets which are still relatively underdeveloped.  We have seen trade help such countries as Japan, China, and South Korea over the last half-century or so.

However, international trade can also be harmful.  The companies that use the developing countries as suppliers do not really care about developing those countries.  They are happy enough to exploit cheap labor rather than helping the economies diversify.  As we know from the case of Bangladesh, the companies can also allow conditions that are very unsafe for the local workers.  In addition, the money that comes in from the multinational firms can often go disproportionately to well-connected elites.  This can cause a great deal of inequality and can exacerbate things like government corruption. 

In these ways and others, international trade can both help and harm developing countries.

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