Economic Development Paper

Joseph Chan Student ID#13486917 Seat Number: B14 Econ Development 169 Professor Neuhauser Paper number 2

Should developing countries participate in international trade?

Economic Development is the process of growth plus change which corelated to the improvement in levels of health, income per capital, education, infrustructure, and, technology. It does not necesscary happen if only income per capital increase, but the combination of multipule elements work together as an engine to generate wealth, improve standard of living, and, reduce poverty. In the study of Economics, utilty is generated by the amount of input in terms of labor, capital, and, resources. In order to maximize utility, the levels of labor and capital should be set at the optimal level. However, one of the case that developing countries are facing today, is the lack of skilled labor, capital, and resources as a result stop developing countries from generating economic development. International trade despite these limitation, boost developing countries' economy and shift their utility level to an unreachable level by the import of new technology, specialization, foreign investment and as a result, generate economic development. Therefore, developing countries should open their domestic market to international trade that create competition, new technology, jobs, and, opportunities. International trade brings competition to domestic market in respond boost productivity by specialization in local industry. Import of goods from other countires under international trade increase the consumers choice instead of limiting on domestic manufacturing products. Trade open the local market, in order for domestic goods to compete against foreign goods, local manufactures are forced to improve their products. These competition encourage industries to specialize on their strength. Focusing on particular products reduce cost of diverge investment and increase the industry's productivity. An explict example is the textile industry in China. The Chinese has import large amount of cottons through international trade from America, and turns them to clothes that export all over the world. Specialization give more resources and attention to

quality control. Proper distribution and use of resources under specialization increase efficiency and enable industry to compete worldwide. Not only lower production cost and increase of productivity, competition of import goods also create room of innovation for domestic market to produce new and creative products that encourage education and research. Last decade, South Korea has focused their manufacturing sectors to higher electronics technology. In returns, cell phones, LCD and automobiles which are created by South Korea has been able to compete against large manufactures from Japan and Europe. On the other hand, most developing countries have large labor forces, laborintensive products for example electronics and garment can be largely produce by developing countires in order to trade for advance technology, resources or generate wealth. These advantage leads to the idea of Outward looking trade discussed in world trading lectures and text Economic of Development by Dr. Perkin. The idea is to focus on manufacturing products for the purpose of exporting to other countires and attract foreign companies to invest in local industries with abundance of labor resources. Accompany with foreign investment, job opportunities increase which leads to an increase of incomes per capital, as a result, increase local saving and generate economic development. New techology and ideas are absorbed through the process of trading. Advantage of adapting advance technology from developed countires increase efficency in manufacturing and trading sectors. Under international trade, foreigners brought new system, knowledge, skills, and technology to developing countires. These either brought directly by teaching local workers through education or provide job opportunities for them to learn by doing. Large automobiles companies from Europe and Japan has been setting up power plants for manufacture in China and Mexico. In perticular, according to Toyota's website, Toyota, the Japanese automobiles cooperation has setup a factory in

Southern China to produce its newest hybrid technology vehicles – Prius last year. International trade generate foreign investment which brought the share of research and managerial skills to developing countires, not only that, it also open the door to the access of information. As developing countires get access to worldwide information and technology, it will increase their ability to compete in gobal markets and produce goods to export to other countires. The shift of workers from agricultural sectors to industrial sectors increase personal incomes and acknowledging the need of skilled labor encourage education on advance technology. Access of information in developing countires provide health facilities and knowledge to local hospital and general health education, advance technological device and medicine can be imported from international trade. The improve on the level of health and education generate economic development and provide healthy and skilled labor for the job market. Large amount of jobs and opportunities are created by open trade and foreign investment. As discussed earlier, open market in developing countires attract foreigners to invest. Import and export sector or manufacturing sector generate under an increase in needs for skilled labor. Because of the low wages in developing countires, foreign firms provide large amount of jobs in power plants, or customer services sectors. India is one of the countires where large amount of trading and foreign investment took place. Outsourcing firms from America has been established in India since the mid 90s, according to Economic Times website, India has over twenty-five millions well educated english speaking workers. With the expanding of millions each year, firm range from creditcard center customer services to computer programming has created millions of job in India. Ports and transportational related types of industry has also benefited from international trade. In the article “Small is Beautiful”, it mentions that not only the city

has been benfited by international trade, rural areas like Rongqi and other local cities has also benefited by the model of enterprise which manufacture consumptional goods for international trade. Urbanization exist when trading industry need large amount of labor in manufacturing factories. On the other hand, some developing countires does not have a large domestic market. With open trade, developing countires specificly using outward looking trade policy can export their goods to the entire world which is hundred times larger than domestic market. In return, trade also open room for import of raw materials, advance technological device, and, capitals. During lecture, Professor has also indentified this success by the example of the Four Asian Tigers. In perticular, HongKong and Singapore has extremely small domestic markets, however, trade has created extrordinary amounts of opportunities for export which generate huge amount of wealth in this two areas, foreign currency that these countries accumlate enable them to have the ability to consumer from other developed countries. No only trading increase the opportunities and jobs in developing countires, the needs for transportation push government to invest and build road, ports, railroads, and other infrustructure which is essential for international trade. Buildings for storage and commerical office and facilities accompany with other infrustructure.As level of infrustructure increase, it combines its function with job opportunities and other element to form economic development. With successful example throughout the world, models such as Japan's rises after World War II to Asian Tigers in the mid 90s to China which becomes the largest manufacturing country. Dr. Perkins suggested that “The strongest correlate with economic growth is 'openness' to trade with the gobal economy.”(708) International trade has been proven to be a huge success. Competition, technology, jobs and opportunities has brought to developing countires through International trade which generate health,

saving and improvement of infrustructure, education, income and health which transform to economic development.

Work Cited

“PRIUS PRODUCTION STARTS IN CHINA” http://www.toyota.co.jp/en/about_toyota/outline/ “Outsource to India or die: BCG” http://economictimes.indiatimes.com/articleshow/msid-762717,curpg-5.cms “Small is Beautiful” Lecture articles “Economic of Development” Perkins