Free trade is a trade where countries carries out economic activities ‘without restrictions or barrier such as import and export tariffs’
Free trade is a trade where countries carries out economic activities ‘without restrictions or barrier such as import and export tariffs’, barrier to market entry and policies (Johnston, Gregory, & Smith, 2011, free trade). Many countries have reaped benefits from free trade and especially developing countries. Some benefits include improvement in infrastructures, expanded markets, access to technologies, free movement of labour and capital, investment, and political relations in form of integrations. These benefits have played a major role in the economic developments of developing countries. However, some countries argue against free trade claiming that it is a burden to developing countries and they object it. Some arguments against include exploitation of developing countries by industrialised, environmental pollution, unemployment of domestic workers, and underperformance of domestic industries thus affecting the country’s economic growth. Free trade has positively impacted to developing countries by stimulating their economic development goals such as millennium development goals thus it can be said to be realistic in the real world.
However, free trade has been argued to be unrealistic to small developing countries and instead it is detrimental to its economy by increasing level of unemployment, exploiting domestic companies, increasing pollution and lowering people’s standard of living.Free trade is viewed as means by which developed countries exploit domestic industries of developing countries thus affecting their economic development. Multinational companies such as Nike have been reported to exploit developing countries, (for example Asian countries) by recruiting cheap labour and taking advantage of reduced barriers to maximise on their profits (Irwin, 2009 p. 204). Free trade causes increased influx of imports in a country resulting to increased supply of goods in the market. This causes decrease in prices of goods and services causing domestic companies and industries to reduce their prices, which may result loss and reduced share of the market. Therefore, they become less competitive. This may affect the domestic industries by causing decreased growth and as a result crippling. Hence, for countries to protect their domestic industries, they ‘impose taxes on imports and policies that restrict imports’ that may cause price fluctuations in the market (Hanson, 2010 p. 204). For example, increased steel import to UK from Asia resulted in ‘decreased prices of motor vehicles and thus the car manufacturers and sellers experienced reduced prices thus making losses’ (Verband der Automobilindustrie, 2005 p. 34). The imposition of tariffs on imports decreases entry into a country market thus increasing the prices and the supply of goods by domestic companies. On the other hand, free trade has increased imports resulting reducing the price of good in the market, thus increasing the demand of imported goods and decreasing demand of domestic products thus affecting domestic industries economic growth and that of the host country. Free trade has also been argued to be the cause of unemployment to domestic developing countries. Free trade does not limit both the entry of entrepreneurs and labour in a countries. This means that there will be transfer of skilled labours from different countries coming together with their manufactures and other entrepreneurs in the country to carry out their operations. This limits the country’s domestic workers from getting such employments and hence increasing the levels of unemployment to developing countries (Trentmann, 2008 p. 73). This increases dependency ratio to these countries and hinders them from realizing developmental goals such as decreasing unemployment rates. Similarly, due to lack of tariffs and barriers to market, many industries are established in the developing countries resulting to losses of some of the industries due to competition and hence the industries move to other countries leaving a gap in employment in the previous country. According to Isis Women, (2014 Free Trade Causes Massive Unemployment) free trade caused massive unemployment in Philippines in 1995 to 2001 with 53 firms being closed down resulting in loss of jobs for 80,319 workers as 29 downsized their human resource causing unemployment of 4,019 jobs. Similarly, free trade in US has led to relocation of most of companies to Mexico, India and other place of the world where tariffs could restrict industries from entry and thus enjoying a stable market. This led to mass unemployment in US.Free trade has been argued as form of colonialism and imperialism in disguise and instead of contributing to developments it results in exploitation of small developing countries (Igwe, 2013 p. 113). Free trade is believed to benefit industrialized countries because of their capital potential. Most developed countries target the third world countries as the host countries where they carry their investment through exploitation of their resources. They dominate in the economy of the host country ending up controlling most of its resources, revenues, and most development projects. In 19th century, free trade helped European countries such as ‘Britain to obtained natural resources from small developing countries and this became disadvantageous to colonized countries over years, creating a gap development between the countries’ (French, 2008 p. 13). This may lead to industries or companies controlling the government though being independent. Therefore, for government to avoid this problem, it imposes barriers, taxes and customs duties so that it can limit industries and also control their operations within the country (Hanson, 2010 p. 204). This has seen countries deviating from policies of free trade and moving back to controlled trade with little free trade that is allowed to the level of regions where countries have similar economic capacities and so there would be no likelihood of exploiting each other or feeling of unfairness for example in European union.Countries argue that free trade deny them access to sources of revenue from foreign investors that could otherwise be used in their development projects. The argument is laid on the fact that ‘free trade allows trade between countries without imposing tariffs and taxes’ (Wacziarg, ; Welch, 2008 p. 197). Hence, the trade is exploitive to the developing countries. Most governments and particularly those from developing countries steer their economic development projects and caters for wages from revenues that they get from tariffs, taxes and licensing of businesses that operates within its territories and so, free trade deny them from accessing these funds. Hence, their development projects may end up taking time and making a country poorer as most of its resources are utilized at no benefits. ConclusionFrom the discussion, it can be concluded that free trade has been a reality to developing countries since it contributed greatly to development of current developed countries such as china, South Korea, and other European countries such as Germany and Britain. For example, China is one of the developed countries that have achieved its developments through taking advantage of free trade to attract investors to its country and it investing in small countries such as those in Latin America thus boosting its developments. Although free trade has been attributed by negative impacts on small developing countries, positive impact surpasses the negative one and thus contributing to most of developments in the small countries. Therefore, based on my opinion, I think that free trade has positively impacted to developing countries as it has stimulated their economic development goals such as millennium development goals. Hence free trade has been a realistic aspect to developing countries.
Bhutan is a typical landlocked country and heavily trades with a limited number of neighbouring countries. Because Bhutan has small domestic market and unfavorable resource endowment for industrialization, majority of its population live on primary sectors and trade issues are not national policy priorities. However, Bhutan has increased trade volumes beginning in the 1990s and thus trade became an indispensable part of its economy. Trade policy is a requisite for all countries. The key issue is how to set up optimal trade policy framework aimed at maximizing economic gains from trade and specialization.
Bhutan is renowned for its gross national happiness (GNH) philosophy, but it faces many social and economic issues. One of these issues is the need to raise Bhutan’s living standards. Its economic growth has so far been led mainly by hydropower secto development and has not been creating enough jobs especially for the young. Inequality remains high even though Bhutan has been successful in reducing poverty. Bhutan thus needs to ensure a more inclusive and job-generating growth.
As a country in the early stages of economic development, Bhutan has tried to improve its business environment since 2008, although it still lags behind its neighbors in this respect. The country faces many challenges in boosting its economy and attracting foreign direct investments (FDIs) to its target sectors in order to improve its people’s well-being. Easing regulations favors business activities, but it is just one of the factors investors will consider. Furthermore, investors usually examine the overall competitiveness of the country before investing. Bhutan needs to recognize that its neighbors are competing for FDIs.
The Government of Bhutan requires new policies to meet the threshold score of the GNH index. However, the GNH index includes some factors seemingly unfavorable to an active trade policy. Moreover, although the share of trade reached 80% of gross domestic product (GDP) as of 2013, the involvement of the trade authority in the government is very small (the trade authority belongs to only one of 10 departments under the Ministry of Economic Affairs). In most countries, trade policies are administered in the cabinets, such as Ministry of Commerce, Ministry of Trade, or Ministry of Foreign Affairs and Trade. Bhutan is a landlocked country with little economic power, which has resulted in a passive attitude toward international trade.
Bhutan is a typical landlocked country and heavily trades with a limited number of neighbouring countries. The Bhutanese economy has undergone significant changes since the beginning of planned economic development in the 1960’s. Within a span of 40 years the country has transformed itself from mostly subsistence farming to a modern trading economy with expanding regional and global economic ties. Bhutanese economy is mostly based on agriculture which is still the main source of livelihood for about 79 percent of the people who lives in rural areas. Agriculture sector, including horticulture and livestock rearing contributes to about 39.5 percent of the GDP. However, in the recent years the country has depended on Hydroelectricity and tourism. Bhutan is gifted with enormous hydroelectric potential. With an estimated potential to generate about 30000MV of electricity, this sector has contributed significantly to the economy.
Hydro Power is the backbone of the Bhutanese economy which has help Bhutan in economic development and foreign relation. The rugged terrain, compounded by the fact that the country is land locked does not provide much economic advantage to Bhutan so hydro- powers has helped Bhutan to reach to a new level of modernization. Transportation costs are high and unless Bhutan can think of certain niche products, her exports are not going to be competitive and less income. The decision by the Royal Government to exploit its water resources for production of electricity has changed the economic scenario for Bhutan, involving rapid development in all section and districts. The rapid altitudinal variations with swift flowing rivers has made Bhutan a natural haven for hydro power production. The close and friendly ties between Bhutan and India has provided the necessary political will and the market for Bhutan’s power, as India has a huge power deficit. While electricity has provided the much needed revenue, the Royal Government has also prioritized network expansion in the Country. It is expected that by 2020, the entire Country will have access to electricity. Industrial activities are expected to increase with the commissioning of Tala Hydroelectric Project. There is however, a need to ensure that internal electricity tariff is kept affordable so that it becomes the main source of energy in the Country and also to stimulate industrial activities. This paper highlights the role and importance of hydropower for social and economic development of Bhutan and covers aspects related to planning and policy initiatives being pursued by the Hydropower sector to fulfill the national objectives. The introductory sections provide the baseline information on hydropower resources of Bhutan, development potential and existing situation in the supply and demand of hydroelectricity. Subsequent sections cover the planning and policy interventions that the Royal Government of Bhutan is undertaking in order to maximize on the benefits from hydropower development.
The Kingdom of Bhutan, by virtue of its geographical location on the Southern slope of the Eastern Himalayas, is blessed by nature with altitudinal varying land mass with good vegetation cover, perennial flow of water in the swift flowing rivers and fair climatic conditions which are favorable condition needed for hydropower project. Bhutan is a land-locked country bordering China in the North and India in the West, South and East. It covers an area of 38,394 square kilometers. Bhutan receives fair amount of annual rainfall Thus, Bhutan is endowed with rich development potential for harnessing hydropower. Most of the schemes identified are run-of-the river types and they are found to be techno-economically least-cost and environment-friendly. Few reservoir schemes are also identified with limited and/or no environment impact in the Southern belt before the Bhutanese rivers fan-out and enter the Indian plains. Bhutan has an estimated hydropower potential of 30,000 MW and 120 TWh mean annual energy generation indicating an average development potential of 781 kW in a square kilometer of area of land (catchment). So far 23,760 MW has been identified and assessed to be technically feasible. Only 1.6% of the potential is harnessed so far. Bhutan’s ability to harness the hydropower resources has been made possible because of the close and friendly ties with its neighbour India. India has been the lead donor in providing both technical and financial assistance to develop the numerous hydro power projects in Bhutan. The relationship 2 developed in the hydro power sector has been a win win situation for both the countries. India has a huge power shortage while Bhutan a large hydro power potential.
Bhutan as a typical landlocked country had a very few trading partners in the past however, things improved drastically for our country with it moving from closed to open economy in the 1960s. Unlike other countries our country’s policies are made based on the Gross National Happiness (GNH) principles which highly values the psychological aspects of social welfare and well-being of the people.