| To What Extent is International Trade an ‘Engine | | | | standards for the nation. |
| of Economic Development'? A look at China, Pakistan, | | | | China has seen tremendous improvement in GDP. |
| & Sub-Saharan Africa. | | | | With that, the country has also seen large reductions |
| There is much evidence to support the argument | | | | in population under the poverty line. The population |
| that trade is an 'engine of economic development'. | | | | under the poverty line was 30% in 1978, now the |
| However, one can easily miss the negative | | | | statistic has been reduced to 8%. As time |
| externalities that occur from trade. The objective for | | | | progressed, much higher proportion of the population |
| this paper is to find out the extent to which | | | | has been able to afford a decent living. Many new |
| international trade is an 'engine of economic | | | | jobs have been created through trade, this led to |
| development'. The paper will aim to define the pros | | | | better opportunities for citizens . As more |
| and cons of managing trade. Indicators such as | | | | manufacturing plants open, we find greater |
| employment and gross domestic product will be used. | | | | employment options. This consistent growth helps |
| This is to help observe growth. Growth contributes | | | | the country's expansion in to further development. |
| to the increase in GDP. When industries are doing | | | | There are cases when trade has not been successful |
| better, more jobs are created. This is because when | | | | in establishing this development. Many countries in the |
| foreign capital is invested, more employment | | | | African continent are an example of this. Many of the |
| opportunities are created. This could be further | | | | lesser developed countries have high poverty levels |
| investigated by analysing data relevant to education, | | | | combined with a corrupt democratic system. This |
| such as literacy rates. Conclusions can also be made | | | | causes a lack of confidence in investors, growth is |
| from per capita levels and poverty rates. Finding out | | | | slowed down. Thus economic development is held |
| how much of the population is below the poverty line | | | | back. Less developed countries do not achieve their |
| will help indicate how well the country is doing, and | | | | long term goals. |
| the overall satisfaction of the population. All these | | | | Pakistan's agro-food industry is in a poor position. |
| tools are useful for investigating growth. Growth | | | | There are widened concerns across borders about |
| leads to economic development in the long-run. With | | | | food safety, plant and animal health. This is the cause |
| economic development, a country attains higher | | | | of poor trade relations, where other countries don't |
| standards of living. Industries are more sophisticated | | | | want imports that are of poor quality. Trade requires |
| and the nation is in a more stable position than | | | | empathy towards the interests of other nations. |
| before. | | | | Otherwise, countries won't engage in trade because |
| Countries that have a competitive economy | | | | of the lack of trust. Political corruption that exists in |
| continuously seek ways to improve their current | | | | the Pakistani government gets in the way of sound, |
| situation. Goods that are expensive in one country | | | | ethical trading decisions. This proves a very valuable |
| can be cheaper elsewhere. This would mean that a | | | | point. Trade alone cannot act as an engine for all |
| country can seeks goods from any less developed | | | | countries. Other factors have to be controlled as well. |
| country to be received as imports. The importing | | | | In Pakistan's case, its required that the country |
| country has high demand for a certain good, simply | | | | maintains better quality standards in all of its exports. |
| because there's not enough resources available to | | | | To create awareness about ethics in trading relations |
| satisfy production. This leaves the less developed | | | | and politics. This will help brand a better image for |
| country with the opportunity to export abundant | | | | Pakistan. These initiatives will produce better trading |
| goods to places with high demand. | | | | results. Investors will invest capital, which will create |
| Telecommunications is cheaper to acquire in India | | | | new employment opportunities. Since more jobs will |
| compared to North America. Labourers are willing to | | | | open up, GDP will rise. This would indicate growth in |
| be paid less in India. India has a comparative | | | | the economy. Growth will consistently contribute |
| advantage in telecommunications. This is an example | | | | towards economic development. |
| of where trade can be beneficial for the exporting | | | | Sub-Saharan region of Africa is known to export |
| nation. More jobs are created through foreign capital | | | | minerals. As trade increases, there is discouraged |
| ventures, which would eventually contribute towards | | | | investment due to market imperfections. The market |
| GDP growth. This would also raise the per capita level | | | | is highly volatile. The lack of investment leads to a |
| since the income per person increases. | | | | decline in output growth. There are also concerns if |
| There are situations where trading conditions can | | | | the region is capable of creating long-term growth. |
| face scrutiny. Since jobs are being shipped for | | | | Without growth, development won't occur. This will |
| cheaper wages, workers in developed nations find | | | | keep the region in the same or worse position in the |
| themselves in a competitive environment. There is | | | | long-run. The Sub-Saharan trade also has concerns |
| not only a devaluation in labour, but also a lack of | | | | for a lack of transparency and poor policy-making. |
| jobs available. Companies are able to find cheap | | | | This causes efficiency to decline, since trading |
| labour elsewhere, which urged them to move. Jobs | | | | decisions take too long to implement. Experts have |
| are outsourced to another country. Pakistan is known | | | | mentioned there should be a pro-active approach for |
| for producing soccer balls through major sporting | | | | transparency in the system. Meaning, regulators are |
| companies like Nike. The company finds cheap labour | | | | not hiding information. Investors will gain confidence, |
| to gain substantial profits. Compared to the standards | | | | which will further development in foreign capital. |
| in North America, the labourers in Pakistan have poor | | | | When there is more capital, more factories and |
| working conditions and very low pay. As this may be | | | | machinery will be available. These assets require |
| a humanitarian issue in a developed nation, Pakistan | | | | maintenance through skilled workers. When more |
| welcomes the new labour opportunities. There is not | | | | labour is required, demand for jobs is higher. More |
| enough job exposure in less developed nations, which | | | | workers are trained. This causes growth in GDP, |
| directly contributes towards poverty. The low class | | | | which leads to growth in the economy. With growth, |
| workers are given a new way of life and more | | | | the country can envision economical development. |
| opportunities to work. In the rural regions of Pakistan, | | | | This will lead to better stability at the |
| not only are there high unemployment rates, there is | | | | macro-economic level. |
| also a lack of capital. This creates opportunity for | | | | There isn't any indication that trade, on its own, can |
| corporations to place factories and employ labour. | | | | be an engine to drive economic development. There |
| The comparative advantage lies in labour, since an | | | | are many other factors that need to be considered |
| abundance is available. Companies have more flexibility | | | | along with trade. Pakistan needs a better system for |
| when employing labour. | | | | food and health inspection. The Sub-Saharan African |
| Capital is typically transferred from foreign countries | | | | region requires further stability through creating |
| in to lesser developed nations. This could be in the | | | | better policies and promoting transparency. Every |
| form of factories and/or machinery. There are many | | | | country has unique flaws. These flaws need to be |
| potential outcomes from this. Countries are | | | | fixed in a way that can benefit trade. Once these |
| introduced to new forms of technology and | | | | flaws are fixed, patience and consistency is required |
| alternative methods of production. Lesser developed | | | | for better results. Through consistent growth, |
| nations usually aren't exposed to such a capital | | | | development is possible. |
| intensive environment. Less developed countries | | | | China has proven itself to be successful in economic |
| find themselves embracing the new industry | | | | development, which was achieved through growth. |
| methods. New forms of capital are welcomed in | | | | This growth was channelled through trade. Along with |
| developing nations. Domestic jobs are dependant on | | | | these benefits came negative externalities. Problems |
| production. Less developed countries want foreign | | | | that are costly to the community. The factories built |
| investment to stimulate growth. If any of these | | | | by overseas companies help make China one of the |
| corporations were to withdraw, both jobs and capital | | | | most polluted countries in the world. 16 out of the 20 |
| exposure will be lost. Growth will slow down. When | | | | most polluted cities in the world are found in China. |
| growth slows down, economical development seems | | | | The negative effects on the quality of water, air and |
| unlikely. | | | | land leads to an unhealthy atmosphere for most |
| Countries such as India and China have a great | | | | Chinese people. Thus driving down the average life |
| system for exportation. Manufactured goods are | | | | expectancy for the community. These consequences |
| produced at a much lesser cost and sold to the rest | | | | require a cost-benefit analysis. Comparing negative |
| of the world at a competitive price. Companies like | | | | externalities of pollution to the benefits from trade. |
| Wal-Mart are able to have goods made in China, then | | | | Trade has also removed many jobs from certain |
| shipped to the United States. This system has | | | | countries. Many blue collared workers have seen their |
| brought an immense accumulation of GDP growth for | | | | jobs shipped overseas. A country like Pakistan is not |
| both countries, and has lowered unemployment rates. | | | | going to find similar results from trade like China did. |
| China's unemployment rate has seen an obvious | | | | Research will be needed to find other routes towards |
| decrease over the years. Accoring to statistics from | | | | economic development. There is no reason to find |
| Index Mundi, in 2004 the unemployment rate was | | | | trade to be the sole cause for economic |
| above 10%. The latest data for 2009 shows a rate | | | | development. The extent to which this is true is clear |
| of 4%. India has seen a more gradual pattern in the | | | | when studying the negative impacts. Policies need to |
| decline for unemployment. In 2004 the rate stood at | | | | be developed to uniquely suit the needs for each |
| 9%, and by 2009 it declined to 7%. This decline in | | | | country, while maintaining a balance from other |
| unemployment is a part of growth that is occurring | | | | sources of economic growth. |
| consistently. More jobs are available. This is a good | | | | Written by Basim Mirza |
| indication that companies are doing better. When | | | | |
| companies are doing better, related industries are | | | | Sources Used |
| flourishing. As the industry progresses, national | | | | |
| growth accumulates. This leads to further economic | | | | Index Mundi, Unemployment |
| development. | | | | [Available Online: |
| China's Nominal GDP increases in value as time | | | | IIASA, Essential Data: China |
| progresses. Statistics from IIASA show that in terms | | | | [Available Online: |
| of real GDP growth, there has been much volatility | | | | National Bureau of Statistics (China), Poverty |
| before the year 2000. When China decided to be | | | | Statistics in China |
| more involved in trade, there was major | | | | [ |
| improvement in growth. Trade plays a heavy role | | | | 4_poverty statistics in china.pdf] |
| because of jobs being created in specific industries. | | | | |
| These jobs are allocated towards the goods and | | | | Abdullahi, A. D., Suradi, S. (2009). Macroeconomic |
| services that bring GDP growth. China's involvement | | | | Volatility, Trade and Financial Liberization in |
| in trade has a positive impact on GDP. After the | | | | Africa. World Development, 37(10), 1623-1636. |
| millennium, we notice a major increase in both imports | | | | |
| and exports. China sets an example in creating | | | | Masakure, O., Henson, S., Cranfield, J. (2009). |
| growth through trade. There is correlation between | | | | Standards and export performance in developing |
| the country's heavy engagement towards trading | | | | countries: Evidence from Pakistan. Journal of Trade |
| and the frequent rise in GDP. This correlation can be | | | | and Economic Development, 18(3), 396-397. |
| noticed from the increase in transit between imports | | | | |
| and exports after the year 2000. This growth has | | | | Asia News, China: "the factory of the world" is the |
| been directly contributing towards development. The | | | | most polluted country. |
| long-run initiative of development has helped raise | | | | |