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Họ và tên: Lê Thị Thanh Hoa

Mã sinh viên: 1713310058


Lớp tín chỉ: TMA301(1-1920).3
Lớp hành chính: K56-Anh 2-TCQT
HOW BENEFICIAL IS WORLD TRADE?
International trade is the exchange of goods and services between nations.
Societies have traded for thousands of years. But the last 35 years have seen an
explosion in international trade. How the increase in global economic integration
affected the world economy and each nation? How are overall gains from trade
distributed?
Some countries are more open to trade than the others, they engaged in export-
oriented industrialization while other countries imposed heavy restrictions on
manufacturing imports. So why do countries restrict or liberlize trade?
There are 2 reasons why specialization and trade is considered beneficial for a
country. The first reason is based on the concept of comparative advantage which
emphasizes differences in countries’ resources and productivity levels. A nation
shoud export the goods for which it enjoys a comparative advantage and should
import goods which will be relatively costly for it to produce. The second reason is
based on economies of scale which says that a greater scale production makes
production more efficient or lowers the cost per unit of output and product
differentiation refers to products that are produced within the same industry but a
slightly differentiated.
Both rich and poor countries have found arguments why too much trade is
detrimental to domestic economy and trade barriers must be put up. There are 2
major arguments against free trade. Firstly, unions worry that wage inequality is
widening due to the removal of trade barriers. The shift away from agricultural and
textile production towards industries using high-skilled labor increases
unemployment as low-skilled workers lose their jobs. Secondly, the industrial
revolution transformed some countries from agricultural to manufacturing societies
and this transformation took place under the protective umbrella of trade
restriction. However, if the wrong industry is protected, it may never be able to
compete on the world market.
The history of international trade policy in the last hundred years has been
reflecting various attitudes towards free trade. In the late 19th and early 20th
century, world trade was extensive and vibrant. At the outbreak of WWI, the world
economy collapsed and didn’t fully recover until after WWII. After WWI, many
developing countries became large producers of agricultural commodities. In
developed countries, low commodity prices threatened domestic agriculture and
political pressure mounted to impose import tariffs. The US passed the infamous
tariff act in 1930, this prolonged the Great depression. The worldwide economic
slowdown in the 1930s and the world trade shrank by 66% between 1929 and
1934. After WWII, many primarily rural nations were eager to develop their own
manufacturing industries by imposing heavy restrictions on imports. But at the end
of the 1970s, that approach was abandoned due to the poor results in terms of real
growth and consquent debt crisis in 1982. In 1947, 23 countries signed GATT
which became the WTO in 1995 to develop rules under which they impose lower
tariffs on each other’s goods. Governments of industrialized countries continuously
push for free trade. In the 1980s, the main concern was the fierce competition from
the newly industrialized countries and its effect on domestic manufacturing jobs. In
the 1990s, the argument was the international trade increased the wage unequality
due to technological advances in high-skilled labor industries.
Today, there is little doubt among economists that free trade is welfare improving.
But the problem of unequal distribution of the gains from free trade remains an
issue so the governments must better reallocate these benefits. The most incisive
arguments against free trade today are not economic one but empahsize the impact
of international trade and labor standards in developing countries.

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