INTERNATIONAL TRADE & ECONOMIC DEVELOPMENT DEVELOPMENT ECONOMICS

BARRIERS TO ECONOMIC
DEVELOPMENT
Economic Development

A qualita)ve concept which encompasses an improvement in living

standards, access to basic ameni)es and freedom of choice.

Examples: •

Improvement in living standards

•

• Increase in real incomes, availability in jobs or housing Access to basic ameniBes

•

• Water, electricity, access to public/merit goods Freedom of choice •

The right to vote, religious freedom, get out of poverty and free educaFon

BARRIERS TO ECONOMIC
DEVELOPMENT
♣ Over-­‐specializaBon on narrow range of products Great vulnerability and uncertainty •
•
•
•

Developing countries dependent on primary goods for export revenue If prices fall, countries experience deterioraFon in terms of trade Current account deficits will increase Countries that were dependent on the export of a small range of low-­‐ skill manufactured goods such as texFles were damaged when China joined the WTO and sharply increased the supply of texFles on world markets, driving down their prices.

BARRIERS TO ECONOMIC
DEVELOPMENT
♦ Price volaBlity of primary products Price elasBcity of demand and supply tend to be inelasBc on world market • Any change in price in demand or supply condiFons will lead to large price fluctuaFons • Thus, having a marked impact on export revenue of countries selling commodiFes • Very difficult for producers and governments in developing countries to plan ahead • Thus has an impact on investment and on government planning for educaFon, healthcare and infrastructure.

BARRIERS TO ECONOMIC
DEVELOPMENT
♥ Inability to access internaBonal markets ProtecBonism may prevent developing countries from uBlizing their comparaBve advantage and exporBng to developed countries • Developing countries will be limited in ability to earn foreign exchange • Low world prices severely damage markets and local suppliers in developing countries • Small scale farmers are deprived of earning a steady income and provide families

BARRIERS TO ECONOMIC
DEVELOPMENT
♠ Long term changes in the ‘Terms of Trade’ (HL only) Effect on developing countries to trade internaBonally • Developing countries are primarily an exporter of primary products • If export prices fall over a period of Fme, export revenue decreases, as well as ability to buy imports

TRADE STRATEGIES FOR ECONOMIC
GROWTH AND ECONOMIC DEVELOPMENT
1. Import subsBtuBon

2. Export promoBon 3. Trade LiberalizaBon 4. Bilateral and regional preferenBal