Question

“Free trade can adversely affect the economies of developing countries.” Support the statement with suitable arguments.

Answer 1

Free trade or trade liberalisation can have a number of negative impacts on the economies of developing countries.

1. Lack of Level Playing Field: Influential nations often focus on their own commercial interests, putting adverse conditions on developing countries while protecting their domestic markets.
2. Loss of Domestic Industries: Liberalisation allows global products to compete directly with local ones. Domestic producers, particularly in low-end industries, may struggle to compete with lower-cost imported goods, resulting in firm closures and job losses.
3. Issue of Dumping: Developing countries are vulnerable to “dumping”, which develops when developed nations export goods at cheaper rates than domestic costs, causing significant harm to local companies.
4. Economic Dependence: Excessive reliance on foreign markets and imported critical resources might expose these economies to global market swings and supply chain disruptions.
5. Environmental and Social Neglect: In order to keep production prices low, countries may be forced to decrease environmental standards or neglect worker rights and child labour issues.