Are you wondering who benefit from free trade? Developing countries are among the biggest winners, as it allows them to access global markets, attract foreign investment, and boost their economies. Learn more about the advantages of free trade for developing nations here.
1.
Increased access to global markets.
Thanks to
strategic free trade agreements, developing countries can sell goods and
services to other countries. This brings various benefits, such as higher
income through sales, production incentives, information, and technology.
Income diversification is also a positive consequence, it can protect someone
from the loss of one’s sole job. In
conclusion, thanks to increased access to global markets, the locals are surely
the ones who benefit from free trade.
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2.
Attraction of foreign investment.
Foreign
investment brings new work opportunities and careers. It boosts economic growth
and creates jobs for the local population. Not only does foreign investment
include the building of factories, hotels, or any other type of structure, but
it also improves local infrastructure by building access roads, bridges, and
improving local roads.
Additionally,
foreign investments are essential for the financing of eco-friendly programs
and renewable energy projects such as solar energy, which benefits not only the
local population, but also the environment, and increases sustainable
development.
3. Economic
growth and development
How does
free trade lead to economic growth? Essentially, it allows lower prices for
consumers and widens the choice of products.
Additionally,
it also leads to faster productivity growth. In general, free trade brings
several benefits to economic growth and development. Besides the job prospects
and the higher wages, it also gives opportunities to specialize, increases
revenues, and creates better risk management. Last but not least, free trade
surely improves relations between countries.
4. Job
creation and poverty reduction
Foreign
investment creates millions of job opportunities. Not only investment, but also
know-how, technology, and management skills are brought over, which have a
significant impact on the workforce of the host country.
Moreover,
foreign investors tend to upgrade employee skills by providing continuous
coaching to meet their quality standards, which in turn also benefits the
employees.
Although
affordable labor costs can be a main motivator for foreign investment, in
general, foreign companies pay higher salaries than local businesses. Thanks to
their need for a stable workforce, foreign firms tend to offer more job
security and training.
Nonetheless,
various businesses that are solely attracted by the low wages may take
advantage of that and still pay poorly.
If wages
are fair, then the investors as well as the workforce are the ones who who benefit from free trade.
5.
Technology transfer and knowledge sharing
Technology
transfer and knowledge sharing are essential for economic development and
growth. Progress in that area is influenced by the ability to adapt and spread
technological learning that comes from abroad.
Transfer of
technology includes the following points:
- Providing technical
knowledge for the installation and operation of the plant and equipment - Technical
knowledge to install and use machinery and equipment - Technical knowledge
necessary to acquire and use purchased or leased raw materials - Feasibility
studies, plans, guides, diagrams, models, etc - The assignment,
sale, and licensing of forms of industrial property, except for trademarks
Technology
transfer also helps by promoting economic development and opening new markets
with better social and political stability.
In the short
run, the transfer of technology is very important, but in the long run, the transfer
of knowledge is too. In other words, technology should come first. After that,
people will need the knowledge to maintain and support that technology.
Transfer of
knowledge would lead to reaching long-term goals instead of short-term goals.
Even with new and improved technology, knowledge lasts a lifetime and can only
increase and advance.
In
conclusion, the transfer of technology and knowledge may not be exactly the
same, but they go hand in hand. With knowledge, technology is maintained. This
knowledge can be increased and contribute to creating new technology. With
knowledge, locals can obtain benefits from new or improved technology.
So, the
ones who benefit from free trade in
this scenario will, once more, be the investors and the locals.
Thoughts
One big
plus is that free trade gives more access to low-priced goods of high
quality. Developing countries can advance their economy, thanks to increased
economic resources, production innovation, improved foreign relations, and
consequently a better quality of life.
All in all,
the ones who benefit from free trade
are many. With the elimination or reduction of tariffs, goods, and products can
be transported across international borders with fewer obstructions. This in
turn encourages investment, which consequently leads to increased access to
global markets.
Increased
access to global markets can bring enormous benefits to the local population,
not only in the work sector but also as consumers. The creation of new jobs may
lead to a reduction in unemployment and poverty. With more foreign investment,
local salaries can be increased, which, of course, depends on each individual
company.
Not only
does free trade allow foreign investment, but it also paves the way for local
businesses to sell abroad. With an expanded consumer base, this can also lead
to even more employment opportunities and innovation.
From an economic
perspective, the advantages are numerous and effective.
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