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4.4 Role of International Trade (barriers to primary X-led growth (TOT…
4.4 Role of International Trade
barriers to primary X-led growth
TOT deteriorate in the LR
supply shocks: weather
demand is Y inelastic
domestic AD unstable
overspecialisation
risky investment
increase in tech push world P down
face trade protection
MEDCs subsidised: can't compete
for EG and EDevt
X promotion of mfg goods
advantages
produce low cost, high qly goods
heavy I in education: +ve externalities
labour intensive: N+ increase
X rev help with BOP and AD
acquire EOS quickly
intl competition stimulated
EAST ASIAN TIGERS: KOREA TAIWAN HK SG
disadvantages
must overcome trade protection
environmental degradation e.g. China
depends on EG: if Y rises fast M increases
undervalue ExR for comp: inflation and retaliation
preferential trading agreements
advantages
opens market to LEDCs
increase size of mkt
trade creation
more exports outside the bloc
greater bargaining power
decrease dependence on MEDCs
MERCOSUR (1991)
disadvantages
administrative problems
lack of commitment
structure of economy does not complement
high transport costs as infrastructure is poor
import-substitution industrialisation (ISI)
advantages
exchange rate kept overvalued
P of imported materials low
establish EOS
disadvantages
low quality and highly priced goods
ExR a tax: less dom curr earned
no incentive to become efficient
capital-intensive: less jobs created