Norway’s provision of NOK 800,000 will helpLeast-developed Countries (LDCs) to participate in the eleventh WTO MinisterialConference, that will take place on 10-13 December 2017 in Buenos Aires,Argentina.
According to WTO Director-General Roberto Azevêdo, the generosity ofNorway will help to ensure that the voices of LDCs becomes stronger and louderin global trade negotiations, thus helping more people leverage theopportunities that international trade offers. Also, the Ambassador HaraldNaple, Norway’s Permanent Representativeto the WTO said that Norway realized how technical assistance and capacitybuilding could increase developing members’ participation in global tradenegotiations, which carries a great importance to LDCs. Above diagramillustrates economic growth of LDCs through an increase in potential output.For example; as LDCs are able to pay their cost for meeting product standardsfor their own exports and have the approval and documentation to prove theyhave met the product standards, they could increase their exports. Increase inexports would lead to the increase in the component of (X-M) and would cause agreat increase in aggregate demand (AD).
AD1 will move upwards to AD2 andoutput within the LDCs will rise. Since exports increase; the citizens of thesecountries’ incomes will rise, the level of productivity will rise, the level ofhuman capital will rise and higher level of education and health care willoccur. So, economic development will be made. Also, higher income will causehigher levels of savings, higher levels of investment and higher economicgrowth. Thus, LRAS1 will move to the right to become LRAS2 and productionpossibility curve will rise due to the positive outcome of international trade. EVALUATIONAccording to the article, Norway is donatinghigh amounts of money to WTO and it is an organization which enablesinternational trade by lowering trade barriers. Although free trade providesmany benefits, there are some arguments against free trade.
Most known tradebarriers such as subsidy, tariff and quota are imposed by governments andpublic authorities to protect locally made goods and services from morecompetitive imported goods and services. Trade barriers are also imposed inorder to protect domestic employment, protect the economy from low-cost labor,protect infant industries, avoid the risks of over-specialization, preventdumping and to protect product standards, raise government revenue and correcta balance of payments deficient. For example; tariff is a tax that is chargedon imported goods and as tariff is imposed; supply world (SW) shifts up by theamount of tariff, increases the market price and quantity demanded for importsfalls. So, domestic producers increase their production, their revenueincreases and foreign producers’ revenue falls because they have to pay thetariff to the government. Government revenue increases. However, trade barriershave many disadvantages as well.
It might raise prices to consumers anddomestic producers of the imports they buy, lead to less choice for consumers,domestic firms might become inefficient due to the lack of competitive foreignfirms, innovation might be reduced,distorts comparative advantage and leads to inefficient use of the world’sresources and lower economic growth. PROVIDE ALTERNATIVE SOLUTIONS & SUPPORT SOLUTIONS WITHTHEORYDeveloping and LDCs were encouraged to engagein market oriented, free trade, policies and to incentivize them to increasetheir economic growth. Domestic markets of these countries were eliminated fromsubsidies or price controls, obtained liberalization of international trade andencouraged Foreign Direct Investment(FDI), reduced government expenditure inorder to eliminate budget deficits and privatized nationalized industries.Although the more developed countries promote trade liberalization, theythemselves don’t liberalize all their trade and protectionism in developedcountries makes it very difficult for the developing countries to compete on afair basis. Also, although a freer market approach may lead to economic growthin the long run, short-run costs to the poorest people exist as well. In theshort-run, domestic unemployment in these countries increase, prices ofessential products increase and provision of public services falls. The mostterribly harmed sector of these countries’ population will be the poorestpeople, which will lead a great income inequality.
The integration of freemarket strategies concentrates on the activities on the urban sectors of aneconomy and generally increases the gap between urban and rural areas whichwould lead to a great migration from the rural areas to urban areas. Governmentmight adopt a trade liberalization but if it lacks political stability, thecountry isn’t attractive enough to gain FDI to achieve economic growth. Inconclusion, there is one solution and it is the combination of differentapproaches and the combination will need to fit differently for each country.
Adopting a “one size fits all” policy won’t be effective in the long run. CONCLUSIONThe analyses suggest that for developing andLDCs to achieve economic growth and economic development, they should obtaintrade justice and debt relief. They need trade justice so that they can tradeon a fair basis with the developed countries, not hampered by the protectionistpolicies.
Also, they need debt relief to dispense funds that might be investedin physical and human capital. In this way, LRAS1 would shift to LRAS2.