International Trade and

Development
By Group 1
Objectives

1. To understand the role of trade in fostering economic growth and

development.
2. To explore how trade can be leveraged to reduce poverty levels in
developing countries.
3. To identify challenges faced by developing countries in
international trade.
4. To assess the importance of capacity building and technical
assistance in helping developing countries participate in global
trade.
Trade and Economic Development
Trade - is the exchange of goods or services between individuals, businesses, or
countries. It can be domestic (within a country) or international (between countries).

Economic Development - refers to the process of improving the economic well-

being of a country or region, typically characterized by:
• Growth
• Development
• Improvement in living standards
• Trade is indeed a powerful driver of growth. It can stimulate
economic development in several ways:

1. Increased Market Access: Trade expands the potential market for

a country's products and services. This can lead to increased
demand, higher production, and job creation.

2. Specialization: Countries can focus on producing goods and

services they have a comparative advantage. This specialization
can increase efficiency, increase productivity and lower costs.
3. Technology Transfer: Trade can facilitate technology and knowledge
transfer between countries. This can help improve productivity,
innovation, and competitiveness.

4. Foreign Direct Investment: Trade can attract foreign investment,

bringing capital, expertise, and job opportunities. This can stimulate
economic growth and development.

5. Competition: International competition can encourage domestic firms

to become more efficient and innovative. This can lead to higher
quality products, lower prices, and improved competitiveness.
Role of Export Diversification
Export diversification is the strategy of a country or region to expand its range of
exported goods and services. This can help to reduce economic vulnerability and
promote sustainable growth.

Key Benefits of Export Diversification:

1. Reduced Economic Vulnerability:

• Risk Mitigation: By exporting a wider range of products, a country is less

susceptible to fluctuations in demand or prices for a single commodity.

• Market Fluctuations: If the market for one export product declines, the impact
on the overall economy can be mitigated by exports of other goods.
2. Enhanced Market Access:
• New Markets: Diversification can help a country enter new markets and expand its
customer base.
• Product Preferences: Different markets may have different preferences, and diversification
allows a country to cater to these preferences.

3. Increased Competitiveness:
• Product Range: A wider range of exports can enhance a country's competitiveness in the
global market.
• Brand Image: Diversification can help to build a stronger brand image for a country's
exports.

4. Sustainable Growth:
• Economic Stability: Diversification can contribute to more stable and sustainable economic
growth.
• Reduced Dependence: A country can avoid the "resource curse" phenomenon by reducing
dependence on a single export.
Trade as a
Tool for
Poverty
Reduction
Link Between Trade and Poverty Reduction
• Global economic interactions can
influence the well-being of individuals
and communities.
• Trade can lead to the transfer of
technology and skills, potentially
boosting productivity in developing
countries. This can create more job
opportunities and improve living
standards, offering a pathway out of
poverty.
Access to Goods and Services
• Access to goods and services plays a crucial
role in the relationship between trade and
poverty reduction.
• Trade can facilitate the availability of
essential goods and services, such as
healthcare, education, and technology, in
underserved regions. This increased access
can empower communities by improving
health outcomes, enhancing educational
opportunities, and fostering innovation.
Income Generation and Employment
• Trade drives economic diversification, enabling countries to move beyond
reliance on a few industries and instead develop a more varied economic
base. This diversification can lead to more resilient economies and create a
broader range of job opportunities.

Example: Bangladesh's garment industry.

Over the past few decades, Bangladesh has become one of the largest
exporters of ready-made garments in the world. This industry has played a crucial
role in the country's economic growth and poverty reduction efforts. The expansion
of the garment sector has created millions of jobs, particularly for women, who
make up a significant portion of the workforce.
Bangladesh's Garment Industry
Challenges Faced
by Developing
Countries in
International
Trade
1. Trade Barriers
2. Limited access to technology and
infrastructure
3. Lack of Market Access
1. Trade Barriers
• Trade barriers are limitations that make it harder for developing countries to
sell their products to other countries. Tariffs (import levies) and quotas (sales
limits) are examples of such measures.

For example, many African countries grow

coffee. However, when they try to export it to
wealthier countries such as the United States
or Europe, tariffs can raise the price, reducing
the amount they can sell or diminishing
revenues. Rich countries may also subsidize
their own farmers, making it difficult for
emerging nations to compete.
2. Limited Access to Technology and Infrastructure
• Developing countries frequently lack advanced technology and infrastructure
(such as roads, ports, and reliable energy), which are required for efficient
manufacturing and delivery of goods.

For example, farmers in some rural parts of

India or Sub-Saharan Africa lack access to
modern farming equipment, resulting in
poorer production compared to farms in
nations with better technology. Poor road
conditions can also make moving goods to
ports or cities difficult and expensive,
impeding trade and driving up expenses.
3. Lack of Market Access
• Market access entails being able to sell things in multiple nations.
Developing countries may face barriers to entry into global markets
because to rivalry, laws, or a lack of buyer contacts and networks.

• For example, a local textile maker in Bangladesh may produce high-

quality apparel, but without ties to major international stores or the
capacity to meet the demanding quality standards of wealthier
countries, exporting their products may prove difficult. Even if they
meet these standards, larger firms in industrialized countries control
the market, making it difficult for smaller players to obtain.
Trade Capacity
Building and
Technical
Assistance
Definition and Importance
• Trade capacity building refers to efforts and
initiatives that aim to enhance a country's
ability to participate in and benefit from
international trade. It includes improving
institutions, regulations, and policies that
facilitate trade and foster economic growth.
Its importance lies in strengthening a
country's competitiveness, allowing better
integration into the global economy, and
fostering sustainable development.
Role in Enhancing Trade
• Trade capacity building plays a
crucial role in enhancing trade by
equipping countries, especially
developing nations, with the
knowledge, skills, and resources
needed to participate effectively in
global markets. This leads to
increased exports, improved trade
balances, and economic
development.
Role of International Organizations
• International organizations such as the World Trade Organization
(WTO), World Bank, and International Monetary Fund (IMF) often
provide technical assistance and support in trade capacity building.
These organizations offer training, policy advice, and financial
resources to help countries improve their trade infrastructure and
regulations.
Example:

• An example of trade capacity

building could be the WTO's
Aid for Trade initiative, which
helps developing countries
enhance their trade-related
infrastructure and capacities
to boost trade.
 Summary Points
• Trade drives economic growth by increasing market access, enabling
specialization, transferring technology, attracting foreign investment, and
fostering competition.
• Trade enhances access to essential goods and services, and drives economic
diversification.
• Barriers like tariffs, limited technology, and lack of market access hinder
participation in global trade, impacting competitiveness.
• Initiatives to strengthen countries' abilities to engage in trade are essential,
with support from international organizations like the WTO and the World
Bank.