What is the Meaning of Trade Development?
Trade development is more than just expanding access to markets. It involves promoting exports and reducing trade barriers. This article discusses some of the ways trade development can help countries. It also addresses the question whether trade development is a good thing. Trade is not a panacea. It can have its drawbacks, as with any economic policy.
Access to more markets
The concept of enhancing market access is a common theme in trade policy. This is the ability to sell goods or services across borders. It may refer to domestic trade or international trade, but its most common use is in the context of international trade. Market access does not necessarily mean “free trade.” While goods and service can freely flow across borders, selling on one market often requires the payment of duties and taxes. To increase market access, the goal is to promote trade ties between countries and open up new markets.
Access to northern markets for developing countries is not always easy. Sometimes, markets are completely closed to them. For example, east Asian exporters are more favored by the North than western European exporters. However, they have greater difficulty accessing northern markets. Both industrialized and developing nations benefit from increased market access. However, there are exceptions. This can be seen in maps 1 and 2.
Export promotion
Export promotion has been a critical component of developing country efforts to participate in the global trading system. It is also a critical step toward overcoming barriers to foreign trade and asymmetric information problems associated with heterogeneous goods. The number of national export promotion agencies has increased significantly over the past two decades, although some studies have criticized the efficacy of export promotion policies in developing countries. Recent survey data covering 103 developing and developed countries has allowed us to reexamine the effectiveness of these agencies in trade promotion activities. The article also describes the activities of Norway’s import promotion office, or NORIMPOD, and analyzes how these efforts pay off.
Import protection can be supplemented by export promotion. Export promotion can help a product enter an external market. It also provides an outlet for a growing industry. It is often necessary to import goods from abroad because domestic markets are small or a country has high labor costs. Export promotion is often seen in the context of alternative industrialization. However, the benefits of export promotion are not universal. In some cases, it has been difficult to find effective measures to promote exports, or the economic environment is not conducive to export promotion.
Increasing supply capacity
Global trade is worth nearly $29 trillion a year, accounting for about 30 percent of the world’s economy. Three-fourths are generated by trade in goods. This is largely due to global supply chains. The U.S. and Japan should lead the development of frameworks to diversify supply chain. Both countries should improve cooperation among development finance institutions and export credit agencies to promote supply chain diversification.
Trade reforms have significantly decreased the number of government-imposed trade barriers. However, policies to protect domestic industries differ widely, and some countries continue to place high tariffs on imports. Others restrict the exports of raw materials, which depresses the prices for their inputs. This means that trade benefits are not evenly distributed among beneficiaries. Trade development refers to a country’s ability to increase its supply capacity.
Reducing barriers to trade
Reducing trade barriers could help boost productivity and growth. But removing tariffs may not be enough. It is important to understand how supply chain reforms impact other areas. Lower transaction costs can have far greater benefits than removing tariffs. Lower transaction costs benefit nearly everyone, not just multinational companies. The degree of competition among firms is what determines the benefits. For example, some firms may reap disproportionate benefits if their market power is high.
To reduce non-tariff trade barriers, specific actions are needed. Promoting universal rules and origin is one example of such an action. The World Customs Organization plans to complete its harmonization program before the end of this year. Promoting technical standards is another important step in reducing trade barriers. This includes setting up a Standards Development Forum to coordinate financial assistance for developing countries. Moreover, the EU is keen to help member states comply with international standards.