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Is free trade good for developing countries/other development alternatives watch

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    What are your views on free trade for developing countries. Does it hinder them or does it help them? There are many opinions with the use of theoretical models that says otherwise like Raul Prebisch and soforth and if free trade is not a viable growth opportunity what alternative would you suggest?
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    (Original post by GeorgeAndLennie)
    What are your views on free trade for developing countries. Does it hinder them or does it help them? There are many opinions with the use of theoretical models that says otherwise like Raul Prebisch and soforth and if free trade is not a viable growth opportunity what alternative would you suggest?
    I expect it has pros and cons. In theory its nice because world trade opens up and you get efficient markets plus people wanting your exotic goods plus willing to provide employment. the flip side is that its not a world of equals and free trade can favour one party over another in a big way if you have financial muscle. That means you own economy could be overrun and dominated before its able to get off the ground. I think thats why a lot of governments only allow joint ventures, so that some money stays in the country.
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    (Original post by 999tigger)
    I expect it has pros and cons. In theory its nice because world trade opens up and you get efficient markets plus people wanting your exotic goods plus willing to provide employment. the flip side is that its not a world of equals and free trade can favour one party over another in a big way if you have financial muscle. That means you own economy could be overrun and dominated before its able to get off the ground. I think thats why a lot of governments only allow joint ventures, so that some money stays in the country.

    Yeah I agree and if you think about theoretically I think the gunder frank model about the whole underdeveloped countries losing out and the developed countries always getting the better of trades and so-on.

    I think there needs to be different alternatives for developing countries rather than free trade as that has been put into practice for ages now and many years, there must be something else that can be done or another strategy to free trade
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    Free trade and a freer market is always a system that benefits many in society, and can easily allow for the help needed to lift people within these countries out of poverty. The downside is that you’ll find less open governments in charge of these developing countries and thus are not allowing for the nature fluctuations inherent in a free market system. Such a system is better for these countries to advance and indeed more protectionist like policies may appear unfair to be imposed on a developing country by its respective government
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    (Original post by CountBrandenburg)
    Free trade and a freer market is always a system that benefits many in society, and can easily allow for the help needed to lift people within these countries out of poverty. The downside is that you’ll find less open governments in charge of these developing countries and thus are not allowing for the nature fluctuations inherent in a free market system. Such a system is better for these countries to advance and indeed more protectionist like policies may appear unfair to be imposed on a developing country by its respective government
    True. I still feel there needs to be an alternative.
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    bump - any other thoughts ?
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    (Original post by 999tigger)
    I expect it has pros and cons. In theory its nice because world trade opens up and you get efficient markets plus people wanting your exotic goods plus willing to provide employment. the flip side is that its not a world of equals and free trade can favour one party over another in a big way if you have financial muscle. That means you own economy could be overrun and dominated before its able to get off the ground. I think thats why a lot of governments only allow joint ventures, so that some money stays in the country.
    In a similar way to colonialism though those better and more effective markets exist almost entirely top facilitate moving wealth out of the nation.

    I think there is also a deeply held falsehood at the core of this idea. Western nations didn't become financial power houses by opening their markets to foreign companies, they did quite the opposite, protected their key industries and then went looking for customers.
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    bump;p
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    bump any other opinion
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    (Original post by mojojojo101)
    In a similar way to colonialism though those better and more effective markets exist almost entirely top facilitate moving wealth out of the nation.

    I think there is also a deeply held falsehood at the core of this idea. Western nations didn't become financial power houses by opening their markets to foreign companies, they did quite the opposite, protected their key industries and then went looking for customers.
    This is true, i assume you're for protectionism?
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    the ways of trade are very much set, and free trade makes poorer developing nations richer because it attaches them to becoming part of this pattern of trade. However only if they are geographically well positioned and politically stable.

    It can make life for very advanced economies more difficult because it causes competition between producers and manufacturers that cant really compete fairly.

    ie.. Germany and UK in auto production.....
    US and France aerospace/planes engineering...

    In a world where previously nations could dominate local and region markets there is much more cross competition...

    Boeing/Airbus

    This causes lower prices for consumers/contractors but presses on standards of living and can cause alot of job losses or cause alot of fringe firms to stop existing that supplying a failing multinational.

    To illustrate if Samsungs orders were down on materials and apple started producing more then smartphones this would adversely affect GDP in both nations.

    Increased competition also makes profit and pricing more difficult.

    However it also advances the global economy and creates the best products and rewards innovation..

    Such as Tesla vertically integrating.... (though thats failing for other reasons now).

    Causes firms like Uber to wipe out traditional taxis etc.

    All these changes and innovations would be harder to implement in a less connected (economically and socially) world.
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    (Original post by Realitysreflexx)
    the ways of trade are very much set, and free trade makes poorer developing nations richer because it attaches them to becoming part of this pattern of trade. However only if they are geographically well positioned and politically stable.

    It can make life for very advanced economies more difficult because it causes competition between producers and manufacturers that cant really compete fairly.

    ie.. Germany and UK in auto production.....
    US and France aerospace/planes engineering...

    In a world where previously nations could dominate local and region markets there is much more cross competition...

    Boeing/Airbus

    This causes lower prices for consumers/contractors but presses on standards of living and can cause alot of job losses or cause alot of fringe firms to stop existing that supplying a failing multinational.

    To illustrate if Samsungs orders were down on materials and apple started producing more then smartphones this would adversely affect GDP in both nations.

    Increased competition also makes profit and pricing more difficult.

    However it also advances the global economy and creates the best products and rewards innovation..

    Such as Tesla vertically integrating.... (though thats failing for other reasons now).

    Causes firms like Uber to wipe out traditional taxis etc.

    All these changes and innovations would be harder to implement in a less connected (economically and socially) world.
    When a developing nation opens up their markets though, there is not a fair playing field upon which local producers can dominate as large TNCs have the capital and resources to massively out compete locals as they can share risk across the whole world. Large TNCs may even choose to operate certain regions at a loss to crush their competition before then hiking up prices. There is a reason that developing nations have become flooded by for example, McDonald's, yet there has been no suggestion of a similar business making the opposite move.

    Interesting you bring up the Samsung/Apple dynamic because it highlights what having one huge producer can do to a market place. Samsung has a near monopoly on various computer parts, hence why are the biggest supplier to Apple iPhones. One of the most obvious components is OLED screens, Samsung are pretty much the only company big enough to provide these screens for Apple, no one else can do it. In essence if you are buying an OLED screen, Samsung almost certainly wins, so much for increased competition.

    (Original post by GeorgeAndLennie)
    This is true, i assume you're for protectionism?
    Not at all, I just think it is important to challenge the myriad hypocracies in free market capitalist dogma.
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    (Original post by mojojojo101)
    When a developing nation opens up their markets though, there is not a fair playing field upon which local producers can dominate as large TNCs have the capital and resources to massively out compete locals as they can share risk across the whole world. Large TNCs may even choose to operate certain regions at a loss to crush their competition before then hiking up prices. There is a reason that developing nations have become flooded by for example, McDonald's, yet there has been no suggestion of a similar business making the opposite move.

    Interesting you bring up the Samsung/Apple dynamic because it highlights what having one huge producer can do to a market place. Samsung has a near monopoly on various computer parts, hence why are the biggest supplier to Apple iPhones. One of the most obvious components is OLED screens, Samsung are pretty much the only company big enough to provide these screens for Apple, no one else can do it. In essence if you are buying an OLED screen, Samsung almost certainly wins, so much for increased competition.



    Not at all, I just think it is important to challenge the myriad hypocracies in free market capitalist dogma.
    I do agree though, I took the side of protectionism and intervention across free trade rather than free markets and trade being supreme to development for underdeveloped countries.
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    (Original post by mojojojo101)
    When a developing nation opens up their markets though, there is not a fair playing field upon which local producers can dominate as large TNCs have the capital and resources to massively out compete locals as they can share risk across the whole world. Large TNCs may even choose to operate certain regions at a loss to crush their competition before then hiking up prices. There is a reason that developing nations have become flooded by for example, McDonald's, yet there has been no suggestion of a similar business making the opposite move.
    Why is this necessarily a bad thing? It helps employment and it helps the economy. Simply saying that local businesses are strongarmed out through completely fair means is not in and of itself a bad thing.


    (Original post by mojojojo101)
    Interesting you bring up the Samsung/Apple dynamic because it highlights what having one huge producer can do to a market place. Samsung has a near monopoly on various computer parts, hence why are the biggest supplier to Apple iPhones. One of the most obvious components is OLED screens, Samsung are pretty much the only company big enough to provide these screens for Apple, no one else can do it. In essence if you are buying an OLED screen, Samsung almost certainly wins, so much for increased competition.
    Well, it's not a monopoly because of free markets, they're a monopoly because they have the ear of almost every single government through which they operate. They lobby and fill the pockets of politicians, and in return, they receive fat subsidies and tax breaks. In fact, allowing a free market to occur without governments skewing the playing field is the BEST way a monopoly can be torn apart.
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    Genuine free trade yes; managed trade (as most "free trade" agreements are) would be more of a "it depends".
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    (Original post by mojojojo101)
    Not at all, I just think it is important to challenge the myriad hypocracies in free market capitalist dogma.
    Yes, even though it's nowhere near being the dominant paradigm, or present in world trade as it stands. Very important indeed to attack some strawman everyone likes dogging on. I don't even get your point about OLEDs. They are the result of market competition. If a particular firm like Samsung has a strong advantage in producing them, where's the problem? Other firms will simply divert their resources into ventures they're better at.



    Also, colonialism was not a case of simple wealth extraction, as it resulted in increased investment in the colonised territories, too. There is in fact no systematic evidence to show that colonial empires were any better off than European powers without colonies, or with only a very few.
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    (Original post by GeorgeAndLennie)
    I do agree though, I took the side of protectionism and intervention across free trade rather than free markets and trade being supreme to development for underdeveloped countries.
    Why? If you're making the "Infant industries" argument, Japan is a pretty good example of why this approach does not work: the government is absolutely terrible at picking winners and losers in the market and all you end up with is protected cronies shielded from having to become efficient.
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    (Original post by TCA2b)
    Why? If you're making the "Infant industries" argument, Japan is a pretty good example of why this approach does not work: the government is absolutely terrible at picking winners and losers in the market and all you end up with is protected cronies shielded from having to become efficient.
    I think it has its pros and cons. Therr are so many reasons why it could work and why free trade cannot work. I just have to simply choose one and elaborate why I believe that. Places like Brazil in 1970s or so achieved higher growth without free trade and just by mear higher productivity. So many different arguments. So many different answers lol. But I hope my path is okay too...
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    (Original post by GeorgeAndLennie)
    I think it has its pros and cons. Therr are so many reasons why it could work and why free trade cannot work. I just have to simply choose one and elaborate why I believe that. Places like Brazil in 1970s or so achieved higher growth without free trade and just by mear higher productivity. So many different arguments. So many different answers lol. But I hope my path is okay too...
    Well free trade is working where it is being practised. The worst off countries are those where the domestic governments keep the country walled off from the exterior world, and continue to exercise heavy control of the economy. In practice, most economies fall in the category of somewhat free trade in tandem with somewhat heavy-handed control over the economy, which tends to mean corruption in terms of which businesses are favoured.

    Growth rates by themselves don't tell much, particularly if we're talking about GDP growth, because 1) that metric simply measures spending activity (not necessarily economic well being) and 2) if the baseline is pretty bad, it doesn't take much to achieve pretty impressive rates of growth. The other issue is that you are comparing apples and oranges largely in the global economy. The real comparison is not Brazil vs some country with free trade but Brazil with free trade vs Brazil without it, all else being held equal. I would say GDP/capita (PPP) is at least a decent measure to use, but again, there's so many facets to an economy that if e.g. Brazil internally reduced a factor weighing down on growth, this in turn could help realise higher growth rates without selling to the rest of the world.
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    The large disparity in economic development between developed and developing nations, means that pursuit of 100% free trade has effectively resulted in a form of "economic colonization" in some instances, where Western firms take over the local market by buying up the businesses.

    I don't think that is necessarily good for local residents. Local firms are more likely to serve local interests, it's that simple. Because the money is more likely to get reinvested locally instead of getting passed up the corporate ladder and spent in another country. But same is also true vice versa at the same time.

    China has been doing this sort of business all over Africa. Germany has been doing it to Poland I'm told. etc.

    It's the same principle as paying £10 for a single-course meal in the UK, and £5 for a 6-course meal in India. Assuming (relatively) finite resources to go around, that are at the very least limited by the available rate of production... foreign investors end up buying up the majority of the local produce and labor, which pushes prices up for the locals beyond what they can afford.

    Wait long enough and the situation will usually stabilize and even be of benefit to most people involved on average, but locals may not be patient enough to wait that long and throw a tantrum instead. And they might be right.

    I'm not suggesting stop it altogether. Needs to be monitored though. A fair trade is one which both sides feel they benefit from, including 3rd parties and stakeholders that are affected collaterally. Triggering riots with irresponsible trade deals... that's a spanner in the works.
 
 
 
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