International Trade is an exchange involving a goods or services conducted between at least two countries. The exchange can be export or imports. It is the method of economic interaction between international entities. It mainly occurs as one country enjoys comparative advantage among others. At the Bretton Woods Conference of 1994, International Monetary Fund (IMF) and International Bank for Reconstruction (World Bank) and other participating nations comes with the need of third organization to be called as International Trade Organization (ITO). Major plan of ILO was Trade Liberalization, Trade policies, foreign investment and business practices among different nations. As the plans for ITO were derailed, GATT (General Agreement on Tariff and Trade) was formed as a temporary solution of ITO in 1947. Growing from initial 23 nations to 123 by 1994 with reduction of international tariff from 35% to 6.4%, GATT could not provide effective solutions on issues like FDI, Intellectual Property, International Trade in services etc. Due to shortcomings of GATT,1994 Uruguay round dismissed GATT and established WTO in 1995.
Why WTO over GATT??
- Dispute Settlement Understanding
- Fundamental reforms in agriculture trade
- Phasing out of quotas on developing countries export of textile and clothing
- Reduction in custom duties on industrial products
What are the tools of Trading??
What are the trade policies for developed countries??
- Trade of Manufacturing and High-Tech goods
- Absolute and Comparative Advantage
- Impose of tariff and provide high subsidy
- Unfair trade practices towards developing countries
What is the trade strategy for development??
- Dynamic Comparative Advantage
- Protection of industries by providing incentives
- Establishment of new and non-traditional industries in the country
- Domestic Investment
- Practice of fair trade
The only way to boost exports is to make trade easier overall. Governments do this by reducing tariffs and other blocks to imports. That reduces jobs in domestic industries that can’t compete on a global scale. That also leads to job outsourcing, which is when companies relocate call centres, technology offices, and manufacturing to countries with a lower cost of living. Countries with traditional economies could lose their local farming base as developed economies subsidize their agribusiness. Both the United States and European Union do this, which undercuts the prices of the local farmers in other countries.
Since economies of the world are growing interdependent, international trade is pursuing a critical element of growth promotion policy in developing countries. This article provides rigorous analyses, which explore that how international trade increases economic growth by accumulating human capital in selected developing countries. The results of this paper demonstrate three key findings. First, the empirical results lend support to the claim that international trade enhances the accumulation of human capital and contributes to economic growth positively through human capital accumulation. Second, the results also support the liberalization of technology imports as it allows importing countries to increase the innovation rate and, hence, to accelerate economic growth. Third, our findings suggest that a significant determinant of the advantages, which developing countries can extract from international trade, is the capacity to absorb technology and the level of skill of the domestic labour force.