Free Trade In Developing Countries

Free trade is the unrestricted import and export of goods between countries without the fear of government intervention such as tariffs, duties or quotas. The notion of a free trade system encompassing several sovereign states originated in a draft form in 16th century Spain. An American jurist named Arthur Nussbaum noted that Spanish theologian Francisco de Vitoria was “the first to set forth the notions (though not the terms) of freedom of commerce and freedom of the seas.” However it was two British economists, Adam Smith and David Ricardo who later developed free trade in to its modern and recognizable form. The relative costs, benefits, and beneficiaries of free trade are often debated by academics, interest groups and governments. Arguments …show more content…
International institutions and governments argue that trade liberalization is essential and that new jobs, more foreign investment and increased access into foreign markets (via free trade) will bridge the gap between the developed and developing world. Unfortunately, free trade has done the opposite and has further impoverished the developing population and in some cases has increased …show more content…
One particular issue is called “race to the bottom,” this is a situation characterized by the progressive lowering or deterioration of standards, especially in business contexts as a result of pressure from competition. Racing to the bottom is often done by large multinational corporations, they do this to lower overhead costs in order to create a more competitive product. This usually means that important factors such as workplace safety, fair wages and ethical labour practices are disregarded because they are so costly. Once a developing nation lowers their standards it triggers a “global race to the bottom” meaning that MNCs will move operations to the country with the worst working conditions and the lowest environmental standards. A notable example of race-to-the-bottom is of the Rana Plaza Collapse in Dhaka, Bangladesh in 2013. Rana Plaza was an eight-story building which housed 4 different garment factories. The average monthly wage of a worker in the factory was $38 which is relatively low compared to nations like China in which the average monthly wage is $280. Along with this issues such as fire safety, building safety, working conditions and workers’ protection were not discussed thoroughly and that left to the collapse of the building and the death of hundreds. This is a prime example of race to the bottom as it minimized costs for the companies but came