You obviously have not been present in the initial stages of a developing country's market experience.
The US was once a developing nation. I'm not that old but my father-in-law is and we've discussed the early days as the US rose up, extensively. I've spent a lot of time in developing nations. I like to travel.
Free markets are a great idea if both trading partners are on equal footing.
There are three reasons why this is not true:
1. absolute advantage
2. comparative advantage
3. economies of scale
These are very basic principles in economics and international trade that anyone who wants to debate international trade should understand but you'd never know it from listening to various politicians or even individuals like yourself who claim to be well educated in markets. Adam Smith wrote about these in 1776 but you'd be amazed at how many times people have unsuccessfully tried to refute these three notions throughout the last couple of centuries, the most notable, Marx and his numerous followers.
When one side is far less developed in terms of technology and capital, it is merely exploited as a market by the other, until such a time as it can compete with the other one.
You must have a different definition for "exploited" than I do. If the developing country can only be exploited until it can compete with the more developed one, how is it being exploited? It appears what you are saying is that the more developed country can sell their high order goods until the other country advances in order to make them themselves. Doesn't this imply that the less developed country has advanced while involved in trade with the larger more developed one? Has it occurred to you that it was the trade which helped advance that country in the first place? Again, the poorest countries are those who have been isolated from world trade, either through geography, political isolation or trade barriers.
The greatest advances that arise from trade occur in situations where there is little parity between trade partners, mostly because of of comparative advantage but also because of economies of scale which can't be achieved in a smaller country unless it either has access to products produced in the larger country or has access to a larger market in the more developed country.
A short definition of comparative advantage from Basic Economics by Thomas Sowell:
Although country A may be capable, in the abstract, of producing anything more cheaply than country B, it cannot in reality produce everything more cheaply because the time it spends producing one thing comes at the expense of the time that could have been spent producing other things. As we saw in Chapter 2, the real cost of producing anything is the loss of other things that could have been produced with the same time, effort, and resources. If country B is very inexperienced in producing television sets, it will take an inordinate amount of time to make one -- time that could have been better spent producing chairs and trading them to Country A to get television sets.
Conversely, while Country A can produce either product more efficiently, the time it spends producing chairs would pay off much bigger in producing television sets, some of which it can trade for chairs from Country B, ending up with more of both products than if it produced both for itself.
Each country's economic well-being -- and the world's economic well-being -- will be greatest if it devotes its scarce resources to producing those things in which it has the greater "comparative advantage" and trades with another country to get the rest of what it wants.
In other words, the total economic output will be higher in both countries after they engage in trade.
Or did you think it is in any country's best interests to let huge US corporates in so that they can sell for a loss for years if necessary to garner market share and put mom & pop stores and brands out of business, meanwhile having nothing to say as the US slams quotas on THEIR basic exports like textile and steel?
Trade restrictions hurt both countries but they actually hurt the country who places restrictions on imports far more than they hurt the country whose imports are restricted resulting in a lower standard of living by keeping industries less efficient and competitive than they'd be otherwise. This ties up resources which could be put to more productive use elsewhere in the economy. This is true of any kind of "protective" measure passed even internally like price supports or wage controls, they keep resources from moving to where they might be used more productively. |
