TRADE LIBERALISATION

Critical Analysis of Trade Liberalisation in Developing Countries

Critical Analysis of Trade Liberalisation in Developing Countries

Introduction

In times of low growth and fiscal austerity amid the ongoing recovery from the sovereign debt crisis, free trade agreements (FTAs) are an increasingly important tool for generating new sources of dynamism in Europe (Thirlwall & Pacheco-Lopez, 2008). Despite the high profile economic challenges of recent years, the European Union (EU) remains the world's largest exporter, importer, foreign direct investor and recipient of foreign direct investment. In 2012, the contribution of trade to the gross domestic product (GDP) helped to reduce the depth of the EU recession by a factor of four and offset sharp declines in domestic demand (Papageorgiou & Michaely, 1991).

As the EU and Japan embark on FTA negotiations, both parties share the belief that with deregulation, enhanced competition and the opening-up of home markets, trade agreements can act as catalysts to reduce inefficiencies in domestic economic structures. Indeed, it is often overlooked that trade liberalisation is itself a major structural reform that creates new opportunities for innovation and stronger productivity growth (Santos-Paulino & Thirlwall,. 2004). For this reason, trade policy is a key component of the EU's growth compact. Recent European research shows that trade deals with key partners could boost the EU's GDP by 2% or by more than €250 billion, the equivalent of adding an economy the size of Denmark to the EU (Papageorgiou & Michaely, 1991). It must be noted that more than two-thirds of predicted gains would come from trade agreements with the United States and Japan (Salvatore, 2010). According to the European Commission reports, 30 million jobs in the EU depend on sales to the rest of the world, and an ambitious free trade agenda could create more than two million new jobs (Pritchett, 1991).

Discussion Analysis

This study considers the following scenarios: a) the effects of trade liberalization resulting from the Uruguay Round Agreement, b) effects of full liberalization of world trade, c) effects of partial trade liberalization, d) effects full liberalization of trade in industrialized countries, e) effects of partial liberalization of trade in industrialized countries, f) the effects of full liberalization of trade in major developing countries (Brazil, China, Indonesia, Republic of Korea), g ) effects of partial liberalization of trade in key developing countries (Pack, 1988).

A non-spatial multi-regional balance in the world sugar market model has been established to make projections of current production, consumption, changes in inventories and net trade of sugar in the different scenarios . We got the elasticity of supply, demand and inventory changes by direct estimation or from previous studies. Information on the real per capita gross domestic product (GDP), population and tariff changes were collected in specialized publications (Papageorgiou & Michaely, 1991).

World sugar prices (assuming the full implementation of the Uruguay Round agreement) should go according to projections, the baseline of 0,119 U.S. Dollars in 1993-95 to 0,123 dollars per pound (Pack. 1988). Compared to the case of no rate change until 2000, the agreement of the Uruguay ...