It is important for developing nations to be
involved in trade to benefit a countries economy by developing exports of
primary products. These developing countries often to fail short to advanced
nations because of their infrastructure and economic standing compared to the
rest of the world and the need to survive is dependent upon breaking into
global markets. Now to have a competitive advantage over advanced nations is a
tough task at hand where developing nations might only export a certain product
and a disruption in the market will cripple the economy. Many of the poorest
countries have not been able to make use of the opening markets or, for
instance, compensate the loss of tariff revenue by means of developing
taxation, because of deficiencies in their economic stability and structures,
societal institutions and infrastructure. A desire to perpetuate the existing
internal power structures may also have favoured the maintenance of trade
barriers and other protective mechanisms.
Most developing countries are also dependent on
agriculture, where the growth of productivity is slow and trade barriers are
higher than in industrial goods. The emerging economies have invested in the
growth of industrial production, and their exports have grown almost twice as fast
as the exports of agricultural products, reaching 80 per cent of the total
exports of developing countries. The special and differential treatment of
developing countries enables them to have extra economic and industrial policy
latitude. The developing countries are geographically dispersed and cannot be
regarded as one group in the trade policy context. Differentiation among them
has taken the form of extra benefits to the least developed countries.
In practice this means that developing countries are
not expected full reciprocity when trade policy commitments are made. This is
most visible in the WTO, but also evident in regional and bilateral
arrangements and when autonomous measures are applied. There are a variety of
ways in which the WTO provides assistance to build trade capacity in developing
countries, but instructing developing country delegates on how their countries
can gain through the trading system is the central focus of the organization's
efforts.
Import substitution policies adopted by most nations
in Latin America were largely attributed to the impact of the Great Depression
of the 1930s. During this period, Latin American countries that exported
primary products and imported almost all of the industrialized goods they
consumed, were prevented from importing due to a sharp decline in their foreign
sales. This served as an incentive for the domestic production of the goods
they needed. They believed that their developing countries needed to create
local vertical linkages, and they could only succeed by creating industries
that used the primary products that were already being produced domestically.
As a result, their tariffs were designed to allow domestic infant industries to
prosper.
Import Substitution Policies was most successful in
countries with large populations and income levels which allowed for the
consumption of locally produced products. Latin American countries such as
Brazil, Mexico, Chile, Uruguay and Venezuela, had the most success with import
substitution policies. This is so because while the investment to produce cheap
consumer products may have paid off at the time in a small consumer market, it
was not the same for capital-intensive industries, such as automobiles and
heavy machinery, which depended on larger consumer markets to survive.
In the past few years, attention has been given to
the growth prospects of BRIC; Brazil, Russia, India and China for different
reasons. With each of these nations having different strategies for growth,
they also have different backgrounds, areas of advantage and growth, and
challenges for each of their countries as their economies have gathered
momentum in the global economy.
The reason
the trade capacity is important.
Because many countries simply don't have the human, institutional and
infrastructural capacity to participate effectively in international trade.
Without that, these countries won't be able to expand the quantity and quality
of goods and services they can supply to world markets at competitive prices.
Human capacity refers to the professionals
governments rely on for advice on WTO matters: trade lawyers, economists,
skilled negotiators. A country that lacks these professionals is clearly at a
disadvantage when implementing existing trade agreements, when negotiating new
ones, and when handling trade disputes.
Institutional capacity refers to the institutions
businesses and governments rely upon for trade, such as customs, national
standards authorities, and the delegation representing the country at the WTO.
Trade ultimately suffers if these institutions are inadequate.
Infrastructure refers to the physical setup required
for trade to happen: roads, ports, telecommunications. Again, countries lacking
infrastructure will find it difficult to develop trade.
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