Joseph Chan

Student ID#13486917
Seat Number: B14
Econ Development 169
Professor Neuhauser
Paper number 2

Should developing countries participate in international trade?

 Economic Development is the process of growth plus change which corelated to

the improvement in levels of health, income per capital, education, infrustructure, and,

technology. It does not necesscary happen if only income per capital increase, but the

combination of multipule elements work together as an engine to generate wealth,

improve standard of living, and, reduce poverty. In the study of Economics, utilty is

generated by the amount of input in terms of labor, capital, and, resources. In order to

maximize utility, the levels of labor and capital should be set at the optimal level.

However, one of the case that developing countries are facing today, is the lack of skilled

labor, capital, and resources as a result stop developing countries from generating

economic development. International trade despite these limitation, boost developing

countries' economy and shift their utility level to an unreachable level by the import of

new technology, specialization, foreign investment and as a result, generate economic

development. Therefore, developing countries should open their domestic market to

international trade that create competition, new technology, jobs, and, opportunities.

International trade brings competition to domestic market in respond boost

productivity by specialization in local industry. Import of goods from other countires

under international trade increase the consumers choice instead of limiting on domestic

manufacturing products. Trade open the local market, in order for domestic goods to

compete against foreign goods, local manufactures are forced to improve their products.

These competition encourage industries to specialize on their strength. Focusing on

particular products reduce cost of diverge investment and increase the industry's

productivity. An explict example is the textile industry in China. The Chinese has import

large amount of cottons through international trade from America, and turns them to

clothes that export all over the world. Specialization give more resources and attention to
quality control. Proper distribution and use of resources under specialization increase

efficiency and enable industry to compete worldwide. Not only lower production cost

and increase of productivity, competition of import goods also create room of innovation

for domestic market to produce new and creative products that encourage education and

research. Last decade, South Korea has focused their manufacturing sectors to higher

electronics technology. In returns, cell phones, LCD and automobiles which are created

by South Korea has been able to compete against large manufactures from Japan and

Europe. On the other hand, most developing countries have large labor forces, labor-

intensive products for example electronics and garment can be largely produce by

developing countires in order to trade for advance technology, resources or generate

wealth. These advantage leads to the idea of Outward looking trade discussed in world

trading lectures and text Economic of Development by Dr. Perkin. The idea is to focus on

manufacturing products for the purpose of exporting to other countires and attract foreign

companies to invest in local industries with abundance of labor resources. Accompany

with foreign investment, job opportunities increase which leads to an increase of incomes

per capital, as a result, increase local saving and generate economic development.

New techology and ideas are absorbed through the process of trading. Advantage

of adapting advance technology from developed countires increase efficency in

manufacturing and trading sectors. Under international trade, foreigners brought new

system, knowledge, skills, and technology to developing countires. These either brought

directly by teaching local workers through education or provide job opportunities for

them to learn by doing. Large automobiles companies from Europe and Japan has been

setting up power plants for manufacture in China and Mexico. In perticular, according to

Toyota's website, Toyota, the Japanese automobiles cooperation has setup a factory in
Southern China to produce its newest hybrid technology vehicles – Prius last year.

International trade generate foreign investment which brought the share of research and

managerial skills to developing countires, not only that, it also open the door to the access

of information. As developing countires get access to worldwide information and

technology, it will increase their ability to compete in gobal markets and produce goods

to export to other countires. The shift of workers from agricultural sectors to industrial

sectors increase personal incomes and acknowledging the need of skilled labor encourage

education on advance technology. Access of information in developing countires provide

health facilities and knowledge to local hospital and general health education, advance

technological device and medicine can be imported from international trade. The improve

on the level of health and education generate economic development and provide healthy

and skilled labor for the job market.

Large amount of jobs and opportunities are created by open trade and foreign

investment. As discussed earlier, open market in developing countires attract foreigners to

invest. Import and export sector or manufacturing sector generate under an increase in

needs for skilled labor. Because of the low wages in developing countires, foreign firms

provide large amount of jobs in power plants, or customer services sectors. India is one of

the countires where large amount of trading and foreign investment took place.

Outsourcing firms from America has been established in India since the mid 90s,

according to Economic Times website, India has over twenty-five millions well educated

english speaking workers. With the expanding of millions each year, firm range from

creditcard center customer services to computer programming has created millions of job

in India. Ports and transportational related types of industry has also benefited from

international trade. In the article “Small is Beautiful”, it mentions that not only the city
has been benfited by international trade, rural areas like Rongqi and other local cities has

also benefited by the model of enterprise which manufacture consumptional goods for

international trade. Urbanization exist when trading industry need large amount of labor

in manufacturing factories. On the other hand, some developing countires does not have a

large domestic market. With open trade, developing countires specificly using outward

looking trade policy can export their goods to the entire world which is hundred times

larger than domestic market. In return, trade also open room for import of raw materials,

advance technological device, and, capitals. During lecture, Professor has also indentified

this success by the example of the Four Asian Tigers. In perticular, HongKong and

Singapore has extremely small domestic markets, however, trade has created extrordinary

amounts of opportunities for export which generate huge amount of wealth in this two

areas, foreign currency that these countries accumlate enable them to have the ability to

consumer from other developed countries. No only trading increase the opportunities and

jobs in developing countires, the needs for transportation push government to invest and

build road, ports, railroads, and other infrustructure which is essential for international

trade. Buildings for storage and commerical office and facilities accompany with other

infrustructure.As level of infrustructure increase, it combines its function with job

opportunities and other element to form economic development.

With successful example throughout the world, models such as Japan's rises after

World War II to Asian Tigers in the mid 90s to China which becomes the largest

manufacturing country. Dr. Perkins suggested that “The strongest correlate with

economic growth is 'openness' to trade with the gobal economy.”(708) International trade

has been proven to be a huge success. Competition, technology, jobs and opportunities

has brought to developing countires through International trade which generate health,
saving and improvement of infrustructure, education, income and health which transform

to economic development.

Work Cited
 “PRIUS PRODUCTION STARTS IN CHINA”

http://www.toyota.co.jp/en/about_toyota/outline/

“Outsource to India or die: BCG”

http://economictimes.indiatimes.com/articleshow/msid-762717,curpg-5.cms

“Small is Beautiful” Lecture articles

“Economic of Development” Perkins