Finance

Analysis of Back to Basics Why Countries Trade Finance and Development by McDonald B

Despite several measures taken (by the international bodies like WTO and conferences like the Doha Conference of 2001) towards a reduction in tariffs and facilitating free trade, one needs to consider the right policies which would help in bringing a balance between the advantageous and the less advantageous business groups. The article begins by addressing the very basic concepts of economics and international trade, that is, the comparative advantage theory of Ricardo and its importance to the business world. The methods applied are qualitative in nature and based upon the basic theoretical concepts considering their practicality. The author also talks about the exchange of technology and the consideration of product varieties as one of the pro-competitive forces. A country trades internationally only if it gains from trade, that is, it has produced and consumption gains. The article hence considers that while some measures encouraging trade might be good for some groups it might adversely affect others. It takes up an example of tariffs imposed on products imported from Bangladesh and those from European Union in the United States. The burden of trade is skewed towards the developing nation. The article thus considers the basic economic concepts in the light of practical events and issues and also picks up the Doha conference and the WTO where the issues of facilitating trade in the light of benefiting the cause of international trade and addressing the problems of the less advantageous business groups were addressed. According to Ricardo, trade between countries is driven by comparative advantage and not absolute advantage. This means that a country exports the commodities in which it has a relatively greater advantage (comparative advantage) and imports commodities where it has the comparatively lesser advantage.

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