It has been observed that the relation between global trading system and the developing countries is undeniable. The developing nations have benefited a lot from the liberalization process introduced in the global trading system. Rise in income levels, reduction of tariffs, opening up to trade are some of the advantages, which are being enjoyed by the developing countries owing to trade reforms.
Facts about the global trading system and the developing countries: Majority of the countries around the globe have lifted trade barriers, which were posing to be a problem for liberalizing trade the world over. There are many countries who are following suit. Studies reveal the following facts about the global trading system.
The members of European Union have designed a single internal market . Certain countries have already created their free trade zones, like New Zealand as well as Australia. Trade agreements have been framed in several countries for enhancing trade in the global arena.
Some of them are as follows:
ASEAN Free Trade Agreements signed by countries like Malaysia, Brunei, Indonesia, Vietnam, Thailand, Philippines and Singapore.
North American Free Trade Agreement or NAFTA signed by countries like United States of America, Canada and Mexico.
Mercosur signed by Uruguay, Brazil, Argentina and Paraguay.
Advantages for the developing countries:
As far as the developing countries are concerned, most of them benefited by reforms brought about in the global trading system. For example, phasing out of the Multifiber Arrangement fostered export activities of the developing countries. The ban imposed on VERs or Voluntary Export Restraint Agreements. With the inception of WTO or the World Trade Organization (replacing GATT) and with the introduction of DSM or Dispute Settlement Mechanism, the countries having smaller trade levels are rendered protection. In a study conducted by the World Bank, it was found that in developing countries, the income levels could swell by a percent or 2 owing to the various rounds of talks, which are held once in a while to promote trade.
Due to several changes, which were affected as part of the trade reforms and trade agreements, the developing countries benefited in many areas of trade. Reduction of tariffs, for instance was advantageous for the developing economies by decreasing expenses for consumers.
Regional Trade Agreements:
The essence of the Global trading system is extending equal treatment to all the trading countries. The principle followed in trade liberalization is removal of several trade barriers and avoiding any discrimination against any particular country. For reasons similar, the RTAs or the Regional Trade Agreements were formulated. The RTAs were introduced so that regional trade liberalization could be promoted. It was anticipated that the regional trade would make developing global trade liberalization easier. However, it has been observed lately, that these RTAs are acting as parallel and independent trade regimes. This approach makes the RTAs deviate from their actual purpose.