Question

Why do developed countries want developing countries to liberalise their trade and investment? What do you think should the developing countries demand in return?

Answer 1

There are many reasons behind the demand for liberalization of trade and investment by developed countries. Developed countries want to make the best use of reduced trade barriers. The below points give a better understanding of the advantage of liberalization :

• Developed countries have well established Multinational companies (MNCs).
• Many of the top MNCs have more wealth than the budget of many developing countries.
• Developed countries believed that goods could be exported easily and goods could be imported easily if there was liberalization.
• Developed countries believed that with liberalisation of trade, many MNCs could set up offices, factories and invest more in developing countries.
• With liberalization, there will be lesser restrictions on the trade imposed by the Governments, hence MNCs of developed countries can sell more goods, they can have access to larger markets of developing countries and thereby increase their profits.
• With liberalization, the MNCs of developed countries found opportunities of reducing the production costs by making utilization of abundant cheap labour available in the developing countries.
• Developed countries created many powerful international organizations which would help in liberalization of global trade, one such organization is the World Trade Organization (WTO).

Developing Countries – Demands in Return for Liberalization

• At WTO, to prevent the domination of developed countries, Governments of developing countries can cooperate with each other.
• For rules which are fair, Governments can negotiate with WTO and even use investment and trade barriers.
• Governments can assure workers of their rights by making sure that labour laws are implemented.
• Till the time small producers can grow and compete, Governments can think about supporting them through various measures.
• To have a uniform impact of globalization, the governments can play a major role.
• At WTO many important decisions regarding investment and trade have been influenced by massive campaigns and presentations by people’s organisations. Hence even people can play a positive role.