Question

Why do developed countries want developing countries to liberalise their trade and investment?

Answer 1

1. Lower production costs: Multinational companies from developed countries locate factories in countries where labour and raw materials are cheaper, thereby cutting production costs and raising profits.
2. Market access and sales growth: Opening markets in developing countries gives MNCs easier access to large, growing consumer markets, enabling them to expand sales and market share.
3. More foreign investment and competitiveness: Liberalisation encourages foreign direct investment (FDI), bringing capital and encouraging competition that benefits firms from developed countries and helps them exploit comparative advantages.
4. Technology, management, and supply benefits: When MNCs invest abroad, they bring advanced technology, managerial know‑how, and integrated global supply chains, thereby lowering costs and improving efficiency for their worldwide operations.
5. Policy incentives and facilitation: Developing countries often create favourable conditions (special economic zones, tax breaks, relaxed labour rules) to attract foreign firms, which further motivates developed‑country investors to push for liberalisation.