Free trade and Developing Countries in the context of Globalization

Introduction

The decision for developing countries to liberalize their markets for free trade in the context of globalization varies and depends on the socio-economic context of individual economy. This case study is attempting to explore the reasons why most of the developing countries are moving toward economic liberalization including the role of new liberal capitalism that persuade them to follow this path. The paper will try to assess the pros and cons of joining such trade, and why some developed nations are advocating free trade to developing countries, while keeping their economies behind trade barriers.

In addition, this report will also highlight how the developing/ poor countries can make the most of what globalization has to offer, and discuss in depth the strategies through which they can strengthen their economies to face the challenges of the globalized world.

Discussion and Analysis

According to the World Bank study, developing countries can achieve socio-economic prosperity if they open the doors for trade liberalization, and institutionalize free market reforms in their economies. The statement can be fact checked by their recent survey which suggests that, the countries who initiated a free market reforms are able to increase their real per capita income (5% per year) three times faster than the countries (1.2 %per year) where centralized economic system prevailed in the 90's era (www.ustr.gov, 2008).

As stated by neo-capitalist liberals, domestic reforms and liberalization of trade go hand in hand, and shows that open markets are linked with key macroeconomics and governing polices which has the ability to increase socio-economic prosperity. However, there are opponents of free trade and globalization who suggest that, developed countries use free market polices to enhance internal growth at the cost of depriving the developing nations of taking advantage of the benefits of globalization (Stieglitz, 2002).

Majority of the developing countries believed that they would be able to experience more economic growth if they reduce trade barriers in their own countries, and persuade the developed nations to reduce economic barriers on the name of good will gesture (Stieglitz, 2002).

However, the developed countries do the contrary by manipulating the poor countries in order to safeguard their own interests. For instance, American government promotes the ideas of free trade and opening up of markets for international competition. They proposed the idea of free economic activities in global markets without any trade barriers. In their view, countries who are involved in the free market trade are more competitive, flexible to adopt changing market environments, and has the potential to bring prosperity to their people and countries (Stieglitz, 2002).

However, they protect their agricultural industry by enforcing trade barriers, which makes it difficult for multinational competitors to survive in such an environment. The same goes for European Union who advocates economic liberalism on one hand but protects its own textile industry from outside competition (Stieglitz, 2002).

According to Stieglitz, the neo-capitalist ideology of economic liberalization is very idealistic understanding of free trade and liberalization process in the context of ...