Burnsville High School
It is common for developing nations of the world to impose high tariffs and quotas on imported goods in an effort to protect their domestic markets. However, these barriers prevent developing countries from being active in international trade and actually cut these countries off economically from the rest of the world. As a result, they are poor because of their inability to focus on producing goods that they are most efficient at producing, less developed due to a lack of technology, and have low standards of living due to the lack of competition to produce high-quality goods. On the other hand, the tariffs imposed by industrialized nations are "10 percent lower than those imposed by developing nations" (The Economist), and these nations are more developed, more wealthy, and have higher standards of living. Thus, the growing gap between rich and poor countries is due to the higher tariffs that poor countries impose on imports. If developing countries lowered their trade barriers, they would become wealthier, more developed, and embrace a higher standard of living, which would begin to close the gap between the rich and poor spectrum of the world.
Imagine a country that is filled with skilled electronic engineers but does not allow textile imports to enter in an effort to protect their domestic textile market. In order to wear clothing, these engineers would be forced to sew their own. As a result, they would have less time to work on electronics, the more profitable good, and the country would be poorer. This simple example displays one of the problems with trade barriers: countries must provide such a wide variety of goods that they are unable to focus on producing goods that they are most proficient at producing, also known as comparative advantage. If these countries were to lower their tariffs, they would be able to import goods that their country could not produce as efficiently. The importation of these goods could "create income for the community by reallocating jobs and capital from lower-productivity to higher productivity sectors of the economy" (Krauss). Countries could then make large profits through exporting goods of which the country has a comparative advantage. This obviously would create a wealthier economy for developing nations.
Along with being pertinent to becoming wealthy, the importation of goods is the key to becoming more developed. Countries that do not have large trade barriers are able to import new technology from other parts of the world and, as a result, become more advanced and developed nations. Poor countries with high tariffs are unable to benefit from the technological advances being made throughout the world because it is much more difficult for them to import goods. According to Yilmaz Akyüz of the Turkish Economic Association, developing countries "still account only for 10 percent of the world's exports which score high in technological complexity." Their lives remain more primitive and they cannot benefit from the increased productivity of goods that typically results from the use of new technology. As some nations take advantage of new technology and become more developed and rich, while other nations maintain high tariffs on trade and remain poor and underdeveloped, the gap between rich and poor countries continues to grow. If poor countries reduced tariffs on trade they would be able to take advantage of the many advancements in technology and become more developed, and rich, nations.
In order for a country to effectively participate in international trade,
it must produce goods that are equal in quality to those of other nations in order to successfully compete in trading markets. As consumers become accustomed to higher quality goods, they begin to expect them, forcing producers around the world to produce at the level of consumers' expectations. Countries that participate in relatively free trade produce high-quality goods, resulting in a high standard of living and more wealth. On the other hand, countries that maintain high tariffs on the importation of goods are not affected by consumers' expectations to the extent that the other countries are since most of their products are produced within their own borders. Therefore, these countries produce lower-quality goods, resulting in a low standard of living and poorer nation. According to the International Monetary Fund, "no country in recent decades has achieved economic success, in terms of substantial increases in living standards for its people, without being open to the rest of the world." If these developing countries were to reduce barriers on trade, they would be required to increase the quality of their goods in order to compete in the trade market and would eventually increase their standard of living and, finally, become richer.
While industrialized nations enjoy wealth, development, and high standards of living, developing nations suffer from poverty, underdevelopment, and low standards of living. The trade barriers imposed by developing nations are the underlying issue of why these countries are poor while others remain rich. Tariffs on trade prevent these developing countries from producing the most efficient goods, from using new technologies as a way to become more developed, and from producing high-quality goods. If these poor countries were to reduce the trade barriers imposed on the importation of goods, the gap would begin to close between the rich and the poor countries of the world.
"The Blessings of Free Trade." 1 May 1998. Center for Trade Policy Studies. 2 March 2005.
"Developing Countries in World Trade." May 2004. Turkish Economic Association. 13 March 2005. [PDF]
"Growth is Good for the Poor." 19 June 2000. International Chamber of Commerce. 2 March 2005.
"Market Access for Developing Countries." September 2002. International Monetary Fund. 2 March 2005.
"The Never-Ending Question." 1 July 1999. The Economist Newspaper. 2 March 2005.
"The Pros and Cons of Pursuing Free Trade Agreements." 31 July 2003. The Congressional Budget Office. 2 March 2004.
"World's 50 Poorest Countries." 2004. Fact Monster. 2 March 2005.