Free Trade Agreement Developing World

The potential benefits of removing the remaining trade barriers are considerable. Estimates of the benefits from removing all barriers to merchandise trade range from $250 billion to $680 billion per year. About two-thirds of these profits would go to industrialized countries. However, the amount that goes to developing countries would be even more than double the aid they currently receive. Moreover, developing countries, as a percentage of their GDP, would benefit more from global trade liberalization than industrialized countries, because their economies are better protected and they face higher barriers. The resulting integration of the global economy has increased living standards around the world. Most developing countries contribute to this prosperity; over the course of several years, revenues have increased dramatically. As a group, developing countries have become much more important in world trade – they now account for one-third of world trade, up from about a quarter in the early 1970s. Many developing countries have significantly increased their exports of manufactured goods and services compared to traditional commodity exports: production from developing countries has increased to 80% of developing countries` exports. In addition, trade between developing countries has grown rapidly, with 40% of their exports to other developing countries.

Improving market access for the poorest developing countries would give them the means to use trade for development and the fight against poverty. Giving the poorest countries duty-free and quota-free access to global markets would have little cost to the rest of the world. Recent market opening initiatives in the EU and some other countries are important in this regard.10 To be absolutely effective, this access should be sustainable, extended to all products and accompanied by simple and transparent rules of origin. This would give the poorest countries the confidence to stick to difficult internal reforms and ensure effective use of debt relief and aid flows. In industrialized countries, protection of manufacturing is generally low, but remains high for many labour-intensive products manufactured by developing countries. For example, the United States, which has an average import duty of only 5%, has peak tariffs on nearly 300 individual products. This mainly concerns textiles and clothing, which account for 90% of the $1 billion in U.S. imports per year from the poorest countries, a figure held back by import quotas and tariffs.

Other labour-intensive producers are also disproportionately subject to tariff peaks and tariff increases that hinder export diversification to higher value-added products. However, progress in integration has been heterogeneous in recent decades. Progress has been very impressive for a number of developing countries in Asia and, to a lesser extent, in Latin America. These countries have succeeded because they have chosen to participate in world trade and have helped them attract the majority of foreign direct investment to developing countries. This is the case for China and India, because they welcomed trade liberalization and other market-based reforms, as well as higher-income countries in Asia – such as Korea and Singapore – which were themselves poor until the 1970s. The parties reported that trade between ASEAN and Korea increased by more than 178 percent, from more than $56 billion in 2006 to more than $156 billion in 2019. In its speech on behalf of ASEAN, Thailand noted that Korea is ASEAN`s fifth largest trading partner and tenth largest source of foreign direct investment. Industrialised countries enjoy high agricultural protection through a series of very high tariffs, including tariff spikes (higher tariffs)