Free Trade and Poor Countries

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Let us first discuss about what free trade is. Free trade is a trade policy which allows traders to transact without interference from government and government-imposed prices. The policy permits the trading partners to attain mutual gains with goods and services produced according to the law of comparative advantage.


This is an ideal situation where each country would be able to export those goods at cheap rates which are difficult to be manufactured there. However, when taxes are levied, a country A might import goods from country B and make them available in the local markets at cheap rates; but country A cannot export any goods to country B as B might have levied high tariffs for export. When high taxes are in practice, the development of one country might prosper who have the ability to produce more and export it around but do not need any imports. On the other hand, trade of developing countries looking for trade outside gets hampered. It has been observed that the average income of developing countries has been more for countries with lower trade barriers.
Even though free trade gives trading opportunities to developing countries, it is not alone sufficient for development. The Department for International Development (DIFD) in UK believes that the least developed countries (LDCs) should even reform their internal trade institutions and develop stable economic situation. Also, if free trade is allowed then the local manufactures of developing countries suffer loss as their goods do not find a marker due to imported good being available at same prices. ...
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