Synthesis Analysis Paper

Trade openness is called the capacity of a country of trading goods and services with the rest of the world, which depends greatly on the level of so-called para-tariff and tariff set by the country. In economic literature, we find those who argue that more open economies grow faster, while others argue that protectionist measures can contribute to good economic performance of countries.

For instance, Bhagwati and Srinivasan (2002) argued that among the benefits linked to the opening include more efficient use of resources, increased competition, increased flow of knowledge and productivity (which brings the rate of capital accumulation and technical progress and rising higher the variety of goods), reduction of rent seeking, and the improvement of institutions and policies. Greater openness is also a useful tool against inflation by stimulating investment. Therefore, a greater degree of openness increases the production, exchange and consumption possibilities, and can achieve a higher standard of living than any other form. Also, one can see that in reality not all countries have the necessary elements to maximize the benefits that trade liberalization can offer. There are certain patterns of development in the growth process vary according to level of income of nations.

On the front of the empirical bound arises a drawback that there is no consensus as trade liberalization and how to measure barriers to trade. In turn, the opening affects economic growth through different channels, which vary by income level countries. Among the major channels published in the literature include access to technology, the cost of imitation, the market size, domestic competition, exports, investment, government policy and price distortions.

Between the late 1970s and late 1990s almost all studies empirical concluded on the existence of a positive causal relationship between trade openness and economic growth. The importance of trade liberalization is that this allows increased flow of trade; companies gain competitiveness, increase employment levels and produced higher rates of growth and welfare in the country. To achieve this are generating countries preferential trade agreements, including the Free Trade Agreements have a more comprehensive scheme. In this new orientation in our country has been pushing an agenda of international negotiations which aims to ensure, through tariff preferences major markets for our products.

Open economies grow faster trade: empirical evidence shows this and the latest evidences are China and India. Trade liberalization promotes growth in several ways: employers are forced to be efficient to compete against the world and also the opening giving access to the latest technology and allows for specialization. Obviously, the opening must be accompanied by other conditions such as macroeconomic and political stability.

Dollar (2001) argued that free trade reduces poverty. Historically, countries that have experienced greater reductions in poverty are those that have achieved rapid growth driven largely by trade liberalization. Taiwan, Singapore, South Korea and Hong Kong are clear examples that do not register today at any level of extreme poverty.

The role of foreign direct investment is also highlighted in some work, either because it directly promotes regional growth, as well as ...