Question

Discuss 'Trade as an engine of growth.'

Answer 1

Although the rate of economic growth and the space and pattern of economic develop­ment depends primarily on internal conditions in developing countries, international trade can make significant contribution to economic development. The traditional theories of trade examine how growth in production capabilities can affect international trade.

Clearly, growth can have a major impact on international trade. There is also likely to be an impact in the other direction—from trade to growth. Exposure to interna­tional trade can have an impact on how fast a country’s economy can grow and how fast its production facilities are growing over time.

“Free trade promotes a mutually benefi­cial division of labour among nations; free and open trade allows each nation to expand its production and consumption possibilities, raising the world’s living standard. Protectionism prevents the forces of comparative advantage from to maximum advantage.”

However, there is dissatisfaction among LDCs as to the virtue of completely free trade and most such countries feel that it is not the ideal policy for them. They feel that they are partners in global trade since the gains from trade are not equally shared by developed and developing countries.