The Relative Impact of Trade Liberalization on Developing Countries
In recent years, new trade agreements have often been promoted on the basis of their potential benefit to developing countries. Political leaders, international financial institutions and even advocacy groups have argued that rich countries such as the United States have an obligation to expand trade in order to help poorer countries grow and develop. These claims are often grossly exaggerated, as can be seen from an examination of the economic literature on trade.
Furthermore, there are costs associated with trade liberalization in the developing countries, and with the changes required by such agreements as the WTO’s TRIPS (Trade-Related Aspects of Intellectual Property Rights). When the benefits and costs of continued liberalization along the lines set out in these agreements are evaluated according to standard economic research, it is not clear that the developing countries as a group are facing a net gain.
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