The aim of this paper is to understand whether the EU's trade policy position is fostering economic development. According to International Monetary Fund's World Economic Outlook Report, on April 2015 the Developing Countries in the world are 151, this number emphasises the importance of the topic.
The first part gives an overview on the trade theories, in particular the comparative advantage theory. The main analysis of this paper is concentrated on the trade policies used in the Developing Countries (DC) and the EU trade policy and its instruments and their effects. Before getting to the conclusion this paper will highlight the main critics and problems of the EU trade policy.
Table of Contents
1. Introduction
2. Comparative Advantage Theory and Trade
3. Trade Policy in Developing Countries
4. EU Trade Policy
4.1.EU Instruments
5. Conclusion
6. Bibliography
Research Objectives and Core Themes
This paper investigates the effectiveness of the European Union's current trade policy position in fostering genuine economic development within developing countries, contrasting historical protectionist strategies with contemporary trade liberalization efforts.
- Comparative advantage theory in international trade.
- Historical analysis of import-substituting industrialization in developing economies.
- Evaluation of EU trade policy instruments and Free Trade Agreements (FTAs).
- The role of external aid and official development assistance (ODA) in economic growth.
- Critical examination of the asymmetric nature of current trade liberalization processes.
Excerpt from the Book
3. Trade Policy in Developing Countries
The aim of this paper is to better understand which role EU has in the economic development of DC. This section is dedicated to the study of the past economic policies adopted by the DC.
For two decades after the Second World War the most used strategy for DC was the import-substituting industrialization, the so-called infant industry argument supported this strategy. The idea behind the infant industry argument is that new industries are not able to compete with well-established firms of the rest of the world and for this reason, governments use quotas or tariffs to protect those industries at the beginning. (Krugman et al., 2015) Scholars agree that this argument has actually validity only in two cases of market failure: appropriability (when firms in a new industry generate social benefits for which they are not compensated) and imperfect capital markets (growth of new industries will be restricted). (Krugman et al., 2015)
The general idea behind these protectionist policies, was that economic growth is characterized by improvements of domestic production, rather than increased exports. One of the extreme cases of import substituting was India in the early 70s. Scholars and economists agree that in reality this strategy did not work, it resulted in a complete defeat, and the negative effects outbalanced the positive. (Krugman et al., 2015) Critics of the import-substitute claim that it increases unemployment and income inequality. By the late 80s, this strategy was openly recognized as a failure and was soon abandoned.
Chapter Summary
1. Introduction: This chapter outlines the global role of the EU in trade and sets the research objective to determine if current policies genuinely support economic development in developing nations.
2. Comparative Advantage Theory and Trade: This section explains the classical economic theory of comparative advantage and how specialization impacts international trade performance.
3. Trade Policy in Developing Countries: This chapter examines the failures of past protectionist strategies like import-substituting industrialization and the specific structural challenges faced by developing nations.
4. EU Trade Policy: This section details the historical evolution of EU trade strategies, from the Treaty of Rome to modern multi-level approaches and Free Trade Agreements.
4.1.EU Instruments: This subsection analyzes specific tools like GSP, the Lomé Convention, Cotonou Agreement, and current Aid for Trade initiatives.
5. Conclusion: This chapter synthesizes the findings, arguing that while trade can stimulate GDP growth, it is insufficient for broad economic development and may result in asymmetric social costs.
6. Bibliography: This section lists all academic sources, reports, and official documents utilized in the research.
Keywords
European Union, Trade Policy, Developing Countries, Comparative Advantage, Free Trade Agreements, Economic Development, Import-Substituting Industrialization, Protectionism, Sustainability, Aid for Trade, Market Access, Asymmetric Liberalization, Globalization, Economic Growth, Global Europe.
Frequently Asked Questions
What is the primary focus of this academic paper?
The paper evaluates whether the trade policy of the European Union effectively fosters economic development in developing countries or if it primarily serves the EU's own market access agenda.
Which theoretical framework is used to explain international trade?
The research relies on the theory of comparative advantage, specifically referencing the work of Krugman et al., to explain the dynamics of international specialization and trade.
What central development strategies are discussed?
The paper discusses historical import-substituting industrialization and modern trade liberalization, evaluating the outcomes and common criticisms of both approaches.
What is the main research question?
The research seeks to answer: Is the EU's trade policy position fostering economic development?
What role does the EU's Aid for Trade (AfT) play?
Aid for Trade is presented as a support mechanism designed to help developing countries increase their trading capacity, although its efficacy and potential colonial undertones are critically examined.
What are the identified criticisms of current EU trade policy?
Critics point to the asymmetric nature of liberalization, the focus on self-interested market access, the centralization of decision-making, and the failure of past schemes like the Lomé Convention.
How did the EU's trade strategy change in 2006?
The EU introduced the "Global Europe" strategy, shifting towards a multi-level approach that prioritizes bilateral Free Trade Agreements (FTAs) and incorporates topics such as labor rights and environmental standards.
What is the significance of the "Singapore issues"?
The paper highlights that the EU's push for agreements on investment, government procurement, and competition policy—collectively known as the "Singapore issues"—suggests a priority for market access over the developmental needs of partner nations.
- Quote paper
- Amelia Martha Matera (Author), 2018, North-South Trade. Is the EU's trade policy position fostering economic development?, Munich, GRIN Verlag, https://www.grin.com/document/442600
