Free trade does not support local firms to grow in the developing world. This paper supports the debate argument that free trade will inhibit the flexibility of developing countries to use trade policy for industrial development and could leave firms in developing countries worse off. The case study used is Syria.
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Shortcomings of free trade
In the developing world, infant firms cannot gain competitive advantage in the context of increased levels of competition from foreign companies.
|Major exports of Syria |
|Major imports of Syria |
Figure 1. A summary of the major imports and exports of Syria.
It is notable that most governments in the developing world are not adequately funding their local firms to expand. This is also the case in Syria.
The non-existing anti-dumping laws in the nation would result in many sub-standard products being sold, which could negatively impact host business organisations. It might be difficult for local firms to diversify the economy of the country due to the impacts of free trade.
In the developed world with strict environmental laws, firms might take their production centres to the developing world where they cause massive pollution. This has been witnessed in Syria.
Critical awareness of the complex nature of international trade
Four main players are involved in facilitating cross-border trade (Daniels, Radebaugh & Sullivan 2012). First, an exporter is identified as the country taking products to another nation. Second, an importer is the country that purchases products from another nation. Third, an exporter’s bank ensures that the right procedures are followed with regard to payments. Fourth, an importer’s bank pays an exporter on behalf of its client.
With regard to Syria, cross-border trade is conducted within established legal frameworks that aim at fostering high levels of legality (Daniels et al 2012).
Qualitative and quantitative analysis of trade exchanges
When analysing the level of trade in the Arab world, it is essential to look at the amount of trade with regard to the value of products and the number of countries involved. For example, in 2013, Syria exported products worth $12.66 billion while it imported products worth $13.8 (Atlas Media n.d).
The following countries were the trade partners of the country: Iraq, Saudi Arabia, Libya, United Arab Emirates, China and Kuwait. It is notable all the main trade partners of Syria were from the Arab world (Atlas Media n.d). Thus, it could be argued that free trade limits host firms to regional business transactions.
|Main exporters of Syria||Main importers of Syria|
Figure 2. The major exporters and importers of Syria.
Main trade and investment promotion tools
Rules and regulations promoted at national, regional and global level are anticipated to support international trade activities undertaken by various firms. They are aimed at providing proper guidelines to direct exporters and importers conducting trade nationally, regionally and globally (Daniels et al 2012).
The international trade theory asserts that nations engage in international trade to increase improve their GDP. The macro-economic theory argues that nations could engage in cross-border trade to satisfy the needs of its citizens (Bartlett & Beamish 2011; Daniels et al 2012).
In order to protect and promote trade, trade entities utilise many instruments. Some of these are tariffs, quotas, local content requirement, government subsidy, foreign direct investments, and anti-duping policies, among others (Daniels et al 2012).
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Political arguments are aimed at protecting human rights, national economy consumers as well as furthering foreign policy objectives. On the other hand, economic arguments aim at safeguarding infant industries, strategically positioning trade policy and protecting domestic employment (Bartlett & Beamish 2011; Daniels et al 2012).
Firms use various approaches to adhere to or to avoid protective measures from the government. Some of the strategies are gathering the right market data, adopting the best entry approaches and advocating for favourable trade policies (Daniels et al 2012).
In Syria, regional trade associations play vital roles in helping firms to avoid or to adopt measures proposed by various governments. The WTO and anti-globalisation movements are also critical in helping business organisations to achieve their economic goals.
In conclusion, it is evident that free trade in Syria allows the participation of foreign firms, which would result in high levels of business competition and dumping of goods, among other undesired results. Ultimately, host firms will face closure. Free trade needs to be halted so that upcoming business establishments in Syria and other developing countries may realise excellent performance outcomes.
Atlas Media, n.d, Learn more about Syria, <https://atlas.media.mit.edu/profile/country/syr/>
Bartlett, CA, & Beamish, P, 2011, Transnational Management, 6th ed, McGraw Hill, New York, NY.
Daniels, JD, Radebaugh, LH, & Sullivan, DP, 2012, International business: Environments and operations, 14th ed, Addison-Wesley, Boston, MA.