Developing Countries Gain from Trade Liberalization

4. Developing countries gain from trade liberalization

Developing countries do have much to gain from general trade liberalization. Trade expansion is positively linked to growth. Many industries will be affecting by the trade liberalization. Such as banking system and finical industry in developing countries. The internationalization of financial services is an important issue for the strengthening and liberalizing of financial systems in developing countries. The elimination of discriminatory treatment between foreign and domestic financial services providers and the removal of barriers to the cross-border provision of financial services opens the door to the entry of foreign suppliers. Developing countries financial systems can learn from other developed countries. First, internationalization of financial services can help countries build more robust and efficient financial systems by introducing international practices and standards; by improving the quality, efficiency and breadth of financial services; and by allowing more stable sources of funds. The competitiveness increased in financial system also can support the economic growth. Increased competition may imply a reduction in domestic bank profits, but banking customers gain through reduced net interest margins, lower costs of fee-based services and the availability of a greater variety of services.

WTO also affects other industries in developing countries. Such as more and more MNCs investment in developing countries. They must bring new technology, new management skills and for the manufacture industry the new production standards will improve the domestic companies?competitive advantages in the world marketing.

5. The protectionisms affect developing countries

One that substitutes tariffs and quotas with antidumping sanctions. Many political parties in the developed countries encourage the use of these antidumping sanctions to "enforce" higher labor and environmental standards in poor countries. The case for sanctions rests on the myth of a "race to the bottom." Without the threat of sanctions, poor countries will supposedly exploit the "unfair advantage" of low standards to capture investment and export markets from rich countries. But low standards seem to be more of a handicap than an advantage. Of the $1.1 trillion in global foreign direct investment flows in 2000, only 17 percent went to less developed countries, down from about 40 percent in the mid−1990s. American manufacturing companies directly invest far more in the high−standard economies of the European Union than in all of the developing world.

Different industries gains inequity from the world trade, therefore, the government will adopt protectionisms in order to support the negative benefit industries. Compare to US other industries in the free trade; the steel industry got negative benefit through the free trade. The US steel industry, for example, has argued for years with some success that it is vital to national defense. In the event of a war, the United States would not want to depend on foreign countries for products as vital as steel. Even if the US acknowledges another country's comparative advantage producing steel, they may want to protect their own resources. No industry has ever asked for protection without invoking the national defense argument. The testimony on behalf of the scissors and shears industry argued that in the event a national emergency and imports cutoff, the United States would be without a source of scissors and shears, basic tools for many industries and trades essential to our national defense.

The same protectionisms also exist in other industries. Such as agriculture, the textile industry and services trade,