Scientific Essay, 2012, 18 Pages
Earlier development stages of trade policy amongst developing countries were character- by protectionism and an orientation towards a domestic market which consequently led to a weak internationalization of these countries. It was not possible to decrease the distance between the classical industrial states since the industrial states themselves, in the context of the first phase of globalization, were able to significantly advance on a global scale.
As a result of the rejection of protectionism by means of changing political structures and the accompanying liberalization, it was therefore possible, in the early phases of globaliza-
The share in the world good’s market; the volumes in direct investments and the inflows of portfolio capital were able to increase amongst these groups of countries, albeit not for all countries to the same extent.
As a result, the majority of developing countries today are tightly embedded in world trade.
Moreover, these countries were capable of registering export quotas 1 of 20% and 30%. The gap between the so-called OECD 2 countries could be largely made up for. In the course of early globalization, the OECD countries also dynamically developed with the consequence that many developing countries were, in turn, able to benefit from these global economic interactions. Today, the export revenue of OECD countries with developing countries represents 25%. This is a 40% increase within the last 20 years. The foreign trade of developing countries with OECD countries, on the other hand, accounts for merely 60% of the total foreign trade of developing countries in our present day. At the same time, there has been an emergence of foreign trade diversification in favor of
exporting industrial goods by courtesy of developing countries which amounted to as much
as 84% in 1996 which in 1996 accounted for as much as 84% 3 .
In the context of this essay, the development of trade policy in developing countries in its differing phases should be illustrated and explained and particularly in comparison to the OECD countries. In doing so, the trade policy in question will be analyzed. It is preliminarily necessary to firstly find a definition and classification for developing countries. Furthermore, it is important to discover, what the future consequences of a newly orientated trade policy in developing countries can have upon the continued internationalization of markets and whether this can and should be viewed and analyzed as a predominantly isolated case.
A recognized definition of developing countries and emerging economies does not exist in economic parlance. In ordinary language usage, one assumes that a developing country, in regard to its economic, social and political development, boasts a relatively low position in comparison with developed countries.
People also pinpoint such countries as ‚poor‘. This is essentially the rating for a country to be benchmarked against as a developing country. In international language use, terms like ‚third world‘ or ‚fourth world‘ are also applicable as synonyms for the characterization of a developing country.
In order to be able to classify developing countries in the economic sense, the following
features are practically used as a means of measurement 4 . Low per capita income
Extreme discrepancies in the distribution of income and wealth (see also Gini co- Low saving and investment activity Significant role of primary and informal economic sectors Passive balance of trade One sided export
Foreign economic bias towards industrial nations Poor quality terms of trade High levels of foreign debt Capital flight
Strong regional disparities between the centre and periphery High rates of unemployment Insufficient Infrastructure A further possibility for economic evaluation can be found in the measurement of net value added amongst developing countries. In the majority of developing countries, the bulk of the actively working population comprises of the primary sector and also the primary production 5 . Even in the primary sector, the proportion of net value added is very low which
means that there is barely any economic increase in value. For the most part, primary sec- products are exported to rich industrial states (agricultural products, natural resources), where they are then refined and treated with the aim of dramatically increasing their net added value. In doing so, the value added from developing countries is permanently shifted to the industrial state which has a deleterious effect upon the creation of wealth in developing countries 6 .
Alongside the evaluation of developing countries on the basis of economic characteristics, there also exists a classification which focuses upon ecological, demographic, national health, socio-cultural and political features. For the most part, the aforementioned features of classification of developing countries appear together in differing forms. A possibility of creating a distinction between developing countries and other countries can be found in the evaluation of the human development levels. However, with this classification, economic scaling is mostly left aside to ensure that the analysis of trade policy on behalf of developing countries yields rational results. For countries with low or medium levels of development, the United Nations Development Programme has currently statistically ranked these countries 120 out of 175 7 on the human development index 8 (HDI). The human development index distinguishes between: Countries with high levels of human development 9 , Countries with low levels of human development 10 , Countries with even lower levels of human development 11 .
The purely economic focus on the basis of the current gross national product of the coun- does, on the other hand, provide a valid foundation for evaluating the trade policy of developing countries.
Essential statistical data is supplied here by the United Nations 12 during designated intervals. According to this, countries possessing a yearly per capita income of under 500 US Dollars, are deemed to be developing countries. To this end, around 120 of 190 countries in the world are characterized thus and in which two thirds of the population resides. In terms of the world gross product, they account for only 1 out of 8. A grading between the developing countries can be separated in to „late/last/less developed countries“ (LDC), „least/developed countries“ (LLDC) and finally in to a yearly pro capita income of under 100 US Dollars. Further features of developing countries are: predominantly agricultural, high unemployment, high rates of illiteracy, high birth rate, low life expectancy, poor quality infrastructure 13 .
A further strong economic assessment for the categorization of countries was undertaken by the World Bank. While the United Nations undertakes a classification in LDC and LLDC, the World Bank grades exclusively according to the per capita income and respectively in line with the gross national income per capita. Thus, they are divided in to „Low Income Countries” LIC and „Middle Income Countries” MIC, whereby the Middle Income Countries are divided further in to a lower and higher income group. As per the classification from 2004, there are 61 Low Income Countries and 93 Middle Income Countries including some countries from Eastern Europe, the Caucus and Central Asia. In principle, the World Bank uses this classification as an analytical basis of data for its bank lending practices. The Bretton Woods Institutions use of language commonly incorporates the term „developing countries“. The World Bank, however, makes it clear that the classification in this group according to per capita income does not automatically convey
the respective level of development in a country 14 .
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