INTRODUCTION:

A trading nation (also known as a trade dependent economy, or an export oriented economy) is a country where international trade makes up a large percentage of the total economy. Smaller nations (by population) tend to be more trade-dependent than larger ones. To some extent all countries rely on trade, but the importance of trade varies substantially between countries. Trading nations tend to favor free trade policies and economic integration, or at least seek market access for their products (they may also seek some form of protectionism for their own industries). The most desired markets to access are the largest ones both developed and developing countries may rely on trade. Many developing nations pursue a policy of export-oriented industrialization, which they hope will lead to export. There are three types of exporting economies: commodity exporters, manufacturing exporters, and services exporters, although most countries are not purely one or the other.

Importance of Trade

The importance of trade has long been established in the economic literature as a main driver for economic growth and development. It is also acknowledged that the relationship between trade and development is a complex one, and that there is no guarantee that trade will automatically lead to economic growth for developing countries. In order to increase the likelihood of this happening, trade and industrial policies ought to be tailored to reflect the different vulnerabilities and potential strengths of each country.

Trade Organization (WTO)

The Uruguay Round of GATT negotiations concluded on April 15, 1994 at Morocco. India, along with 123 ministers besides the EC countries signed the final act in cooperating the 8th round of multi lateral trade negotiations. The final act consists of:

• The WTO Agreement which covers the formation of the organization and the rules governing it’s working.

• The ministerial decisions and declarations which contain the important agreements covering trade in goods, services, intellectual property. They also contain dipute settlement and trade policy review system.

WTO AGREEMENT

The agreement establishing the WTO consists of following which embody the results of the Uruguay Round of multilateral trade negotiations:

• Multilateral agreement on trade and goods.

• General agreement on trade and services.

• Agreement on trade related aspects of intellectual property rights.¹

Growth of the Developing Countries

The IMF and the World Bank—each within their respective areas of expertise—have a mandate and a role to play in supporting trade liberalization and an open international trading system. There are several avenues through which the Bank and the Fund contribute to these objectives, while cooperating closely with the WTO and other partners. First, by raising awareness of the benefits of free trade for all member countries, and of the costs imposed by market access restrictions. Second, through advice to and programs with member countries, aimed at helping create policy and institutional environments conducive, inter alia, to trade. And third, by providing technical assistance and promoting complementary reforms that allow countries to make the most of the trading opportunities open to them. Protection carries a high price in both industrial and developing countries. Estimates of the welfare gains from eliminating barriers to merchandise trade—in both industrial and developing countries—range from US$250 billion to US$620 billion annually, with about one-third to one-half accruing to developing countries. According to a World Bank analysis, more rapid growth associated with a global reduction in protection could reduce the number of people living in poverty by as much as 13 percent in 2015, and make a valuable contribution to meeting the Millennium Development Goals.²

Developed Countries Reponses

The share of developing countries, which now constitutes over 50 per cent in total FDI inflows, may increase further on the back of strong growth prospects. However, currency volatility, sovereign debt problems and potential protectionist policies may pose some risks to this positive outlook. Those who are threatened within the developed world because of the growth of the developing world will naturally turn (and have turned) to protection from these adverse consequences of developing country growth and trade.

When they do, they restrict the very market access that was crucial for progress by developing countries in the first place. They include, of course, a reduction in trade. They may include a worsening of developing-country terms of trade, although this depends on the nature of the protection that is implemented. They reduce the return to capital in the poor country and thus the incentive for further growth. This is the greatest danger from a protectionist response by the developed world to developing country growth. By reducing market access, it undermines the ability of poor countries to grow.³

CONCLUSION:

It can be said that after WTO agreement and with the help of developed countries the developing countries have grown immensely. The economy of the developing countries has developed a lot especially after the WTO agreement which called for the reduction in tariffs and quotas so that there will be free trade taking place across the world. Even when the recession took place the developing countries were not affected to that extent as the developed countries. Developed countries did contribute to the growth of the developing countries but seeing the immense growth of the developing countries they are not happy. They are using many protectionist policies in order to reduce their imports by the developing countries. They are using these protectionist policies to protect their own domestic industries. As the developing countries are progressing they are becoming self reliant and hence their import activities are getting reduced which is not at all tolerable to the developed countries. In fact the WTO agreement does not support the developing countries entirely. In the WTO agreement also developing countries have to depend on full cooperation from the developed countries which they are not getting. Those who are threatened within the developed world because of the growth of the developing world will naturally turn (and have turned) to protection from these adverse consequences of developing country growth and trade. However it should be kept in mind that these protectionist policies are not beneficial in the long run.

REFERENCES:

Research and Statistics Branch, United Nations Industrial Development Organization, Growth Exports and Technological Change in Developing Countries: Contributions from Young Scholars, (August 17, 2013) www.unido.org

Department of Economic and Social Affairs, World Economic and Social Survey 2013, Sustainable Development Challenges, (August 28, 2013), www.sustainabledevelopment.un.org/content/documents/ 2843WESS2013

Alan V. Deardorff University of Michigan, Developing Country Growth and Developed Country Response, (August 16, 2013) www.fordschool.umich.edu/rsie/workingpapers/Papers451

Received on 13.02.2014 Modified on 11.03.2014

Int. J. Ad. Social Sciences 2(1): Jan. –Mar., 2014; Page 56-57