New Age History and Economics

The Day We See The Truth And Cease To Speak it, Is The Day We Begin To Die. MLK Jr.

Thursday, March 1, 2012

Who benefits more from International Trade? Developed or Developing Countries?

Whether it is developed or developing countries which benefit more from the liberalization of international trade than the developing one?

1. Whether liberalization is a good idea or bad one is essentially independent of who benefits more.

If you have a choice of gaining $5 dollars by playing a game vs. nothing if you don't, isn't it worthwhile for you to play whether or not I get $10 for playing? Why should how much I get affect your willingness to play as long as you get enough to make it worthwhile for you?

2. What is your measure for "benefitting more"? Is it total benefits in absolute dollars? total benefits per capita? benefits per capita in relative terms (i.e. percentage improvement)

Some developing countries (such as China) have benefited greatly from the liberalization of international trade, while others (such as many of those in Africa) have not.

On the other hand, it is clear that all the developed countries have benefited significantly from the liberalization of trade.
If you went back to the protectionism of the last century, the developed countries would lose more in absolute terms: total dollars and total dollars per capita. That's because they are rich and spend much more. Trade between the developed countries is much higher than trade between the developed world and the rest of the world.

Thus even though the U.S. gets about 20% of its imports from China, most of its imports come from the developed world: Canada, Germany Japan, etc.
On the other hand, if you went back to the protectionism of the last century, countries like China and India would be the biggest losers in percentage of loss. Their absolute gains aren't as high, but since they have a low base, their relative gains are very high.

But then there are developing countries such as Gabon, Cote d'Ivoire, and Chad who are not doing well at all by any measure.

So there are reasons for arguing that the developed countries benefit more:
and it is certainly true that the rules are biased in favor of the developed world (if only because they have the clout - both economic and military)
but also arguments for countering that is meaningless. For example, China is clearly powerful enough not to trade if it did not see trade as being in its benefit, yet it is committed to increasing trade, not reducing it. Ditto for India.

Just simplicitus



  1. Then I have to ask myself if these developing countries are benefiting by trade, then why is the western world still giving them 3rd world aid.

  2. the USA & Europe still subsidize their farmers. By bailing out the banks, the USA subsidized the bankers. By engaging in multiple wars, the USA subsidize their weapons industry. By allowing off-shore banking to lower taxes, the USA subsidize multi-national corporates. By allowing tax cuts for donating funds to foundations such as the Rockefeller foundation, the USA subsidizes big oil. Then the IMF and WTO demands that developing countries open their markets and economies if they want loans and foreign aid. No, clearly on this issue you need to do more research. The rape of the developing countries started under colonialism, still continues.