Even though it is vivid
that the international trade is a win-win situation for all the countries
involved, often some scholars claim that the best rarely goes to the least
developed countries (LCD). The LCDs are the countries which are signified with
low per capita incomes, higher population growth rate, lower economic growth
rate and higher unemployment rate. These economic and social parameters which
are inevitably crucial for the standard of living are unfavorable, and this
vicious circle of poverty is creating sectarian strife, political cult,
obstacles in the flow of resources (primary) and is directly or indirectly
impacting their participation in the global trade.
Is it due to fate and
chance, LDCs are generally endowed with the high amount of primary resources
and the economy is labor intensive, this abundance of resources after
amalgamating with international trade platform could better off the LCD's.
Though the transfer of technology helps to upgrade the technical know-how and
even specialization from its vent of the surplus of the resources but due to
the existence of inelastic market supplies and demand they often are not able
to move the resources (factors of production) across the industries to reap the
benefit. Further, LDC’s could not maintain their comparative advantage in the
same industry for a longer period, they need to shift resources across the
industries but due to lack of skilled human resources and technological
advancement, they lack enough incentive to do so and are ultimately engulfed by
other LDC’s or even developing or IC’s.
Further, the integration
of the LCD’s into global trade platform has provided LCD’s opportunities in
achieving economies of scales. This dynamic concept of the trades help in the
development of infant industries into internationally competitive ones as trade
helps them and provide with bigger market size, advanced technologies, and
processes. By virtue of which the East Asian countries, which were merely the
suppliers of primary/fundamental raw materials to industrial countries, have
now become the suppliers of the finished products in the global market. But
still, the majority of the LCD’s are not able to reap the benefits of trade as
gained by China. Due to imperfect market, high transactions cost, inefficient
government policies and dependency with developed countries and ICs. Due to
internal structural imbalance, deficit budget, higher trade deficit LCD’s are
found not to be able of reaping the benefits of international trade
Similarly, the higher
value of tariff imposed by developed countries in manufactured goods in
comparison to the raw materials (inputs); an empirical situation where
effective rate of protection(ERP) is less than the Annual rate of Protection(
APR), has negatively impacted the LCD’s. Due to the higher amount of
protectionism adopted by the developed countries in the export of manufactured
products from LCD’s, it has become difficult for the latter to upgrade in the
trade horizon. The dependency in the production of primary products or concentration
in the raw materials has drastically increased the susceptibility of LCD’s to
jeopardize even in the occurrence of small global shock (for example reduction
in the agriculture output of Nepal due to slow monsoon rains as the country
lacks effective irrigation system for agriculture )
Additionally, the
concentration of the trading/specialization in the single product has also
increased the volatility of LDC’s. Due to the homogeneity of the product
concentration, they are not able to diversify their trading portfolio. The
relative low barging power in the global politics, lack of technological
up-gradation, exploitation of the resources by multinational companies (MNC)
and lack of strong foreign currency has also been the reasons for LCD’s not being
able to the reap the benefit from international trade.
Moreover, multinational
companies (MNC) which have their corporate office in developed or
industrialized countries through their subsidiaries companies across the globes
have been using the tax haven facilities; actually, they are manipulating their
profits and transferring them to the country that has the lowest level of
corporate tax. In doing so, on the one hand, the LDC’s are losing corporate tax
revenue, on the other hand, their local resources are being depleted making
them economically unstable.
LDCs generally enjoy the
economics of scales in their defined product facilities. Typically, these
labor-intensive primary products are so weakly calibrated by the LDCs that they
can hardly bear the competitive strikes from other countries. With time, they
go on losing their comparative advantage; the products start to be either
imitated by other countries or substituted with competitive price products,
these ultimately lead to deteriorating their terms of trade (TOT).
Additionally, lack of
harmonization between LCDs, ineffective co-operation among trade facilitation
regional blocks like SAARC, BIMSTECH for mutual benefits has also demotivated
them. A political war between Indian and Pakistan, a blame game has ultimately
worsened off the people of Pakistan; similarly, the concerns of refugees and
asylum are also creating extra economic and social burdens to LDC’s. (For
example, Rohingya exodus to Bangladesh)
With the globe having
billions of impoverished people in hundreds of least developed countries, the
international organizations like World Trade Organization (WTO), International
Monetary Fund (IMF) are constantly unequivocally raising the serious question
about the global development and interdependence as the factors are climate,
greenhouse effects have pervasive implications. To come across economic,
political and social malfunctions LCDs are often funded with billions in dollar
from IC’s or any other international organization through bilateral or
multilateral trade facilitation mechanism These mechanisms of funding shall not
only help the LCD’s to enhance the trading platform through integration in the
global economy but will also glamorize the developed countries as it assures
them with greater market for their manufactured products as well as safe and
secure place to bring in their primary raw materials. But due to LDCs weak
economic structure and fragile adaptive capacity, they are not even able to
play these financial obligations (loans), further degrading their credit rating
and increasing the cost of capital of the country as a whole, these create a
vicious circle of debt and the whole industry of LDC’s become globally
uncompetitive (as in the case of Greece) degrading the life of general citizens
through stringent austerity policies.
LDC’s have been hardly
able to maintain and achieve the growth phase that they have expected. It is
not so that no development has been achieved, but the vision with which
international watchdogs like WTO was established is not still met. Still,
inequality prevails in LCDs; capacity enhancement has been a perennial issue
and the ideological war between developed and least develops countries over
various tariffs, resources and NTB are as persistent as it was in the days of
GATT.
Bibliography
Appleyard, D. R., &
Field, A. J. (2014). International Economics. Irwin: McGraw-Hill.
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