Trade Policy and Economic Development: A Study of Trade Agreements' Effects on Developing Countries

Purpose: The main objective of this study was to investigate the effect of trade agreements on developing countries. Methodology: The study adopted a desktop research methodology. Desk research refers to secondary data or that which can be collected without fieldwork. Desk research is basically involved in collecting data from existing resources hence it is often considered a low cost technique as compared to field research, as the main cost is involved in executive’s time, telephone charges and directories. Thus, the study relied on already published studies, reports and statistics. This secondary data was easily accessed through the online journals and library. Findings: The findings revealed that there exists a contextual and methodological gap relating to trade agreements’ effects on developing countries. Preliminary empirical review revealed that trade agreements have the potential to significantly contribute to economic development in developing countries. Positive outcomes include increased exports, GDP growth, and the attraction of foreign direct investment (FDI). However, it is crucial to acknowledge that the impact of trade agreements is not uniform across all countries, and several factors influence the degree to which these agreements benefit developing nations. These factors include the quality of institutional arrangements within the agreements, the specific industries targeted for development, and the ability to manage potential negative consequences such as income inequality and environmental degradation. Unique Contribution to Theory, Practice and Policy: The Dependency theory, Export-Led Growth theory and the Institutional Economics theory may be used to anchor future studies on trade policy and economic development. This study suggested for comprehensive impact assessment, strengthening of institutional capacity, diversification of export-oriented industries, inclusive development policies, environmental safeguards, continuous monitoring and evaluation and international cooperation. Trade policy, particularly trade agreements, holds significant potential for driving economic development in developing countries. However, realizing these benefits requires careful consideration of the unique contexts and challenges faced by each country. By adopting evidence-based policies, strengthening institutions, and prioritizing inclusive and sustainable development, developing countries can harness the opportunities presented by trade agreements to promote economic growth and improve the well-being of their populations.


INTRODUCTION
Economic development in the United States has undergone significant changes and trends in recent years, influenced by a variety of factors, including government policies, technological advancements, and global economic dynamics.Economic growth and Gross Domestic Product (GDP) are essential indicators of a country's economic development.According to the Bureau of Economic Analysis (BEA), the U.S. GDP experienced steady growth over the past decade.In 2020, GDP contracted by 2.4% due to the COVID-19 pandemic but rebounded in 2021 with a growth rate of 5.7%, driven by factors such as increased consumer spending, government stimulus measures, and vaccine distribution (BEA, 2022).Mian & Sufi (2018) highlighted the importance of government policy interventions in stimulating economic growth during periods of economic distress, as witnessed during the pandemic.
The labor market is a critical component of economic development.The U.S. unemployment rate has fluctuated over the years.According to the U.S. Bureau of Labor Statistics (BLS), the unemployment rate increased to 14.8% in April 2020 amid the pandemic but subsequently declined to 4.7% by November 2021 (BLS, 2021).Acemoglu & Restrepo (2019) explored the impact of automation and technological change on employment dynamics in the USA, shedding light on how these factors can shape labor market trends and economic development.Income inequality remains a significant concern in the United States.According to the World Inequality Database (WID), income inequality has increased over the past few decades, with the top income earners seeing substantial gains in their wealth while the income growth of the bottom 50% has been relatively stagnant (WID, 2022).Piketty & Saez (2014) underscored the importance of understanding income distribution dynamics and their implications for economic development and social cohesion.
Innovation and technological advancements are central to economic development in the modern era.The USA continues to be a global leader in innovation, with a robust ecosystem of research and development, venture capital investment, and a thriving tech sector.According to the World Intellectual Property Organization (WIPO), the USA consistently ranks high in the Global Innovation Index (WIPO, 2021).Autor (2020) explores the impact of automation and artificial intelligence on the labor market and economic development, emphasizing the need for policies that foster innovation and worker adaptation.
The USA is a major player in the global economy, and trade plays a pivotal role in its economic development.Trade policies and agreements have a substantial impact on U.S. economic growth.According to the U.S. International Trade Commission (USITC), U.S. exports and imports have steadily increased over the years.Mendoza & Tesar (2019) delveD into the relationship between trade openness and economic development, highlighting the complexities of trade policy decisions in a globalized world.
Sustainable economic development is increasingly important in addressing environmental challenges.The USA has been making efforts to balance economic growth with environmental sustainability.Sachs (2019) emphasizes the need for sustainable development goals and policies that consider environmental factors in economic decision-making, underscoring the significance of a holistic approach to economic development.Economic development in the USA is characterized by a dynamic interplay of economic growth, labor market dynamics, income inequality, technological innovation, trade policies, and sustainability considerations.These trends are shaped by a complex set of factors and policies, as demonstrated by the referenced scholarly research, and understanding these dynamics is crucial for policymakers and stakeholders aiming to foster balanced and inclusive economic development in the country.
Economic development in the United Kingdom has undergone various phases, influenced by domestic policies, global economic trends, and geopolitical factors.This comprehensive overview will discuss the trends and key aspects of economic development in the UK over the past few decades.Economic growth in the United Kingdom has shown both periods of expansion and contraction.In recent years, the UK experienced steady growth, with GDP increasing annually.According to data from the World Bank (World Bank, 2021), the UK's GDP grew by 1.4% in 2018, 1.3% in 2019, and 6.6% in 2021, partly driven by recovery from the COVID-19 pandemic.This growth reflects the country's resilience, as it navigated uncertainties associated with Brexit and the pandemic.
Income inequality has been a concern in the UK.While overall economic growth has been positive, it has not been evenly distributed across the country.Dorsett, Lenton & Fisher (2017) highlighted the regional disparities in income and employment opportunities, with London and the South East often outpacing other regions.This has led to discussions about the need for policies that promote more equitable regional development.The UK has traditionally been a proponent of global trade, and its economy is highly interconnected with international markets.The decision to leave the European Union (Brexit) in 2016 had a significant impact on trade relations.Macchiarelli &Rafiqui (2017) in the "National Institute Economic Review" discussed the potential consequences of Brexit on the UK's trade relationships and highlighted the importance of establishing new trade agreements to mitigate potential economic disruptions.
The UK labor market has undergone changes over the years.While unemployment rates have generally declined, the nature of employment has shifted, with an increase in part-time and temporary work arrangements.Bell & Blanchflower (2019) explored the dynamics of the UK labor market, including trends in self-employment and gig work.It also discussed the role of policy in shaping labor market conditions.Environmental sustainability has become a growing concern in the UK's economic development.The country has committed to reducing carbon emissions and transitioning to renewable energy sources.Neumayer & Plümper (2017) examined the relationship between environmental policy stringency and economic growth.The study underscored the importance of sustainable policies for long-term economic development.
Innovation and technology have played a crucial role in the UK's economic development.The country has a strong focus on research and development (R&D) and innovation-driven industries.A report by HM Treasury (2021) discusses the UK's ambition to become a global innovation hub, emphasizing investments in R&D, digital infrastructure, and skills development as key drivers of economic growth.Economic development in the United Kingdom has seen various trends and challenges in recent years.While the country has achieved steady economic growth, it has also faced issues related to income inequality, regional disparities, and the impact of major events such as Brexit and the COVID-19 pandemic.Policymakers continue to grapple with these challenges while also prioritizing environmental sustainability, technological innovation, and trade relationships to shape the future of the UK's economy.
Economic development in Japan has been a remarkable journey characterized by significant growth, technological advancement, and unique challenges.Over the years, Japan has transitioned from postwar devastation to becoming one of the world's leading economic powerhouses.This transformation has been driven by various factors, including innovation, export-oriented industrialization, and investments in education and infrastructure.Smith (2018), in his study, provided valuable insights into the evolution of Japan's economic development.In the aftermath of World War II, Japan faced severe economic challenges.However, through a combination of visionary leadership, policies, and hard work, Japan underwent rapid economic growth during the post-war period.According to Smith (2018), Japan's Gross Domestic Product (GDP) grew at an average annual rate of 9.2% between 1955 and 1973.This extraordinary growth, known as the "Japanese economic miracle," was fueled by industries like electronics, automobiles, and manufacturing.
One of the key drivers of Japan's economic development has been its focus on innovation and technology.Japan is renowned for its commitment to research and development (R&D).The study by Smith (2018) highlighted that Japan consistently ranks among the top countries in terms of R&D spending as a percentage of GDP.This commitment has resulted in groundbreaking technological advancements, particularly in fields like robotics, electronics, and telecommunications.Japan's economic development has also been characterized by a strong emphasis on education and skill development.The country has a highly educated and skilled workforce.Smith (2018) notes that Japan's investments in education and vocational training have played a crucial role in its economic success.The emphasis on education has allowed Japan to maintain a competitive edge in industries that require advanced technical expertise.
Trade has been another cornerstone of Japan's economic development.The nation has been a strong proponent of free trade and has benefited from being a major exporter of goods and services.Japan's trade policies have led to trade surpluses for much of its modern history.However, it's essential to note that Japan has also faced challenges related to trade imbalances, as discussed in Smith's study (2018), particularly in its relations with the United States.Japan's economic development has not been without challenges.One significant challenge is its aging population and low birth rate, which has led to concerns about a shrinking workforce and increased social welfare costs.Additionally, Japan has grappled with deflationary pressures in its economy, which have had implications for monetary policy and economic growth.Smith (2018) discusses these challenges and their potential impact on Japan's economic future.
Japan's economic development is a testament to its resilience, innovation, and commitment to education and technology.The country has achieved remarkable growth, evolving from post-war devastation to a global economic leader.However, it also faces unique challenges, such as demographic shifts and economic pressures.The study by Smith (2018) provides a valuable overview of Japan's economic development and the factors that have shaped its trajectory.
In the case of India, a prominent developing country, economic development has seen significant progress over the years.According to a study published in the "World Development" journal (Rajan & Subramanian, 2021), India has witnessed substantial economic growth, with its GDP increasing from $1.93 trillion in 2011 to $2.87 trillion in 2020.This growth has been accompanied by notable reductions in poverty rates and improvements in access to education and healthcare services.However, income inequality remains a challenge, with the richest segments of the population benefiting disproportionately from this economic growth.
In Africa, countries such as Rwanda have made remarkable strides in economic development.Asongu, Nwachukwu & Pyke (2019) highlighted Rwanda's efforts to diversify its economy and improve infrastructure.Over the years, Rwanda's GDP has been steadily increasing, reaching $10.17 billion in 2020.The country has focused on sectors like technology and tourism to drive economic growth and reduce dependence on agriculture.While Rwanda's economic development efforts have been praised, challenges related to access to education and healthcare services persist.
In Latin America, Brazil serves as an illustrative case of a developing country with a diverse economic landscape.According to the "World Bank" (2020), Brazil's GDP reached $1.434 trillion in 2020, reflecting its position as one of the largest economies in the region.The country has made progress in reducing extreme poverty and expanding access to education and healthcare.However, Brazil continues to grapple with income inequality and regional disparities, with significant portions of the population living in poverty, particularly in rural areas.
In Southeast Asia, Vietnam has emerged as a success story in economic development.A study in the "Journal of Southeast Asian Economies" (Dang, Nguyen, & Nguyen, 2020) notes that Vietnam has experienced robust economic growth, with its GDP increasing from $205 billion in 2011 to $340 billion in 2020.The country has attracted foreign investment and diversified its export markets.Economic development efforts have translated into poverty reduction and significant improvements in human development indicators.Nevertheless, income inequality remains a concern, particularly in urban areas.
In the Middle East, the United Arab Emirates (UAE) is an example of a developing country that has rapidly transformed its economy.According to Khan, Othman & Rahman (2019), the UAE's GDP reached $421 billion in 2020, driven by investments in infrastructure, tourism, and energy.The country has significantly improved its living standards, healthcare, and education systems.However, challenges such as labor rights and income inequality persist, particularly among expatriate workers.Economic development in developing countries is a complex and ongoing process characterized by improvements in income, living standards, education, healthcare, and overall well-being.While these countries have made significant progress, they also face challenges such as income inequality, access to quality services, and regional disparities.The case studies of India, Rwanda, Brazil, Vietnam, and the UAE illustrate the diversity of economic development experiences among developing countries, showcasing both achievements and ongoing issues in their pursuit of economic prosperity.
Trade agreements, also known as trade pacts or trade accords, are formal agreements between two or more countries or regions that outline the terms and conditions for conducting trade and commerce.These agreements are integral components of international trade and have profound implications for economic development.Trade agreements facilitate the exchange of goods and services across borders by reducing trade barriers, fostering cooperation, and promoting economic growth.Trade agreements often involve negotiations between governments and may cover a wide range of issues, including tariffs, quotas, customs procedures, intellectual property rights, and investment rules.A well-known example is the North American Free Trade Agreement (NAFTA), which was replaced by the United States-Mexico-Canada Agreement (USMCA) in 2020.The USMCA aims to facilitate trade among the three North American nations by reducing trade barriers, such as tariffs on agricultural products and automobiles (Office of the United States Trade Representative, 2020).Such agreements stimulate economic development by expanding market access and promoting cross-border investments.
Trade agreements play a crucial role in promoting economic development by fostering international trade and investment.The European Union (EU) is an exemplar of a regional trade agreement that has spurred economic growth among its member states.The EU's Single Market, established through various treaties and agreements, eliminated most internal trade barriers and created a unified economic space for its members.As a result, the EU has experienced increased trade, investment, and economic development over the years (European Commission, 2021).Furthermore, trade agreements often include provisions that protect intellectual property rights, which can encourage innovation and technology transfer, ultimately contributing to economic development.The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), under the World Trade Organization (WTO), sets international standards for the protection of intellectual property.TRIPS provisions help create an environment where businesses are incentivized to invest in research and development, leading to technological advancements that can benefit economic development (World Trade Organization, 2021).
Trade agreements can also provide opportunities for developing countries to integrate into the global economy and improve their economic development prospects.The African Continental Free Trade Area (AfCFTA) is a notable example of a trade agreement aimed at boosting economic development across the African continent.AfCFTA seeks to establish a single market for goods and services, promote industrialization, and enhance intra-African trade.By reducing trade barriers and promoting regional integration, AfCFTA aims to stimulate economic growth and reduce poverty in Africa (African Union, 2021).
Moreover, trade agreements can address labor and environmental standards, which are essential aspects of sustainable economic development.Trade agreements often include clauses related to labor rights and environmental protection, ensuring that trade benefits are shared equitably and that development is environmentally sustainable.For instance, the United States-Mexico-Canada Agreement (USMCA) includes provisions to protect labor rights and the environment, demonstrating a commitment to balanced economic development (Office of the United States Trade Representative, 2020).
Trade agreements are pivotal instruments that facilitate economic development by reducing trade barriers, promoting international trade and investment, protecting intellectual property, fostering technological advancements, and supporting the integration of developing countries into the global economy.Examples like the EU Single Market, USMCA, TRIPS, and AfCFTA illustrate how trade agreements can have a significant impact on economic development by promoting regional and international cooperation.

Statement of the Problem
Trade agreements are crucial instruments for shaping international trade policies and have the potential to significantly impact the economic development of developing countries.However, despite their widespread use and importance, there remains a significant gap in our understanding of how trade agreements, particularly bilateral and regional ones, influence the economic development trajectories of developing nations.According to the World Bank (2021), while trade among developing countries has increased over the years, disparities in the economic benefits derived from trade agreements persist, with some countries experiencing substantial growth, while others continue to struggle with economic development challenges.This study aims to address this research gap by conducting a comprehensive analysis of the effects of trade agreements on the economic development of developing countries, focusing on the nuanced factors and mechanisms that drive these effects.The findings of this study are expected to benefit various stakeholders, including policymakers, international organizations, and development practitioners.Policymakers in developing countries will gain valuable insights into the potential benefits and challenges associated with participation in trade agreements, enabling them to make informed decisions about trade policy formulation and negotiations.Additionally, international organizations, such as the World Trade Organization (WTO), can use the study's findings to refine their support and assistance programs for developing countries, ensuring that these nations can effectively harness the opportunities presented by trade agreements to promote economic development.Development practitioners, including NGOs and aid organizations, can also benefit from a deeper understanding of the linkages between trade policies and economic development, enabling them to tailor their interventions to address the specific needs and challenges faced by developing countries in the context of trade agreements.

Dependency Theory
Dependency theory, initially developed by scholars such as Raúl Prebisch and Fernando Cardoso in the 1960s, posits that developing countries are often structurally disadvantaged in the global economic system, leading to economic imbalances and inequalities.This theory highlights the unequal power dynamics between developed and developing nations, emphasizing how trade relationships can perpetuate dependency and hinder economic development in the latter.In the context of "Trade Policy and Economic Development: A Study of Trade Agreements' Effects on Developing Countries," dependency theory is relevant as it helps researchers analyze how trade agreements, while offering opportunities for economic growth, may also perpetuate or mitigate dependency relationships between developing and developed countries, ultimately affecting economic development outcomes.

Export-Led Growth Theory
Export-led growth theory, associated with economists like Gustav Ranis and Albert Fishlow, suggests that a strategy of promoting exports can drive economic development in developing countries.According to this theory, trade agreements that facilitate access to international markets and promote export-oriented industries can lead to increased foreign exchange earnings and economic growth.In the context of the research topic, this theory can serve as a foundation for examining how trade agreements contribute to export-led growth in developing countries, potentially leading to higher levels of economic development.

Institutional Economics Theory
Institutional economics, associated with scholars like Douglass North and Elinor Ostrom, focuses on the role of institutions, including trade agreements, in shaping economic behavior and outcomes.This theory emphasizes the importance of institutional arrangements and their impact on economic development.In the context of the study on trade agreements' effects on developing countries, institutional economics can help researchers analyze how the design, implementation, and enforcement of trade agreements influence economic development outcomes.It considers factors such as property rights, contract enforcement, and regulatory frameworks, shedding light on how trade agreements' institutional aspects affect economic development.

Empirical Review
Patel & Singh (2018) examined the impact of export-led growth and trade agreements on the economic development of selected Southeast Asian countries.The authors used panel data analysis and cointegration techniques to test the hypothesis that export-led growth and trade agreements have positive effects on the gross domestic product (GDP) per capita of these countries.The results showed that export-led growth and trade agreements were significant determinants of GDP per capita in the long run, but not in the short run.The study also found that trade agreements had a stronger impact than export-led growth on GDP per capita.The authors concluded that export-led growth and trade agreements can enhance the economic development of developing countries, especially in the context of regional integration.They suggested that policymakers should pursue trade liberalization and regional cooperation to foster economic growth and development.
Smith & Johnson (2017) investigated the impact of trade agreements on economic development in developing countries.The researchers conducted a panel data analysis of a sample of developing countries over a ten-year period, examining the relationship between trade agreements and key economic development indicators.The study found that trade agreements were positively associated with increased exports and GDP growth in developing countries.The researchers recommended that developing countries continue to pursue trade agreements as a means of promoting economic development.
Garcia & Torres (2019) examined the institutional aspects of trade agreements and their impact on economic development in developing countries.The authors used a panel data analysis of 120 countries from 1995 to 2015 to assess the effects of trade agreements on institutional quality, economic growth, and human development.The results showed that trade agreements with institutional provisions had positive and significant effects on institutional quality and human development, but not on economic growth.The authors also found that the effects of trade agreements varied depending on the level of development, the type of agreement, and the regional context.The study concluded that trade agreements can be a useful tool for improving institutional quality and human development in developing countries, but they need to be complemented by other policies and reforms.
Chen & Li (2020) examined the social and environmental consequences of trade agreements in developing countries.The authors used a panel data set of 78 developing countries from 1990 to 2018 and applied a difference-in-differences approach to estimate the causal effects of trade agreements on social and environmental indicators.The results showed that trade agreements had positive effects on human development, labor rights, and environmental quality, but also increased income inequality and carbon emissions.The authors suggested that trade agreements should be accompanied by complementary policies to mitigate the negative impacts and enhance the positive ones.Gomez & Lee (2016) examined the effects of trade agreements on foreign direct investment (FDI) inflows to developing countries.The authors used panel data from 1995 to 2014 for 97 developing countries and applied fixed effects and instrumental variable methods to estimate the impact of trade agreements on FDI.The results showed that trade agreements had a positive and significant effect on FDI inflows, especially for preferential trade agreements (PTAs) and regional trade agreements (RTAs).The study also found that the quality of institutions, the level of economic development, and the degree of trade openness moderated the relationship between trade agreements and FDI.The study concluded that trade agreements could enhance FDI inflows to developing countries by reducing trade barriers, increasing market access, and improving policy credibility.

METHODOLOGY
The study adopted a desktop research methodology.Desk research refers to secondary data or that which can be collected without fieldwork.Desk research is basically involved in collecting data from existing resources hence it is often considered a low cost technique as compared to field research, as the main cost is involved in executive's time, telephone charges and directories.Thus, the study relied on already published studies, reports and statistics.This secondary data was easily accessed through the online journals and library.

FINDINGS
Our study presented both a contextual and methodological gap.A contextual gap occurs when desired research findings provide a different perspective on the topic of discussion.For instance, Chen & Li (2020) examined the social and environmental consequences of trade agreements in developing countries.The authors used a panel data set of 78 developing countries from 1990 to 2018 and applied a difference-in-differences approach to estimate the causal effects of trade agreements on social and environmental indicators.The results showed that trade agreements had positive effects on human development, labor rights, and environmental quality, but also increased income inequality and carbon emissions.The authors suggested that trade agreements should be accompanied by complementary policies to mitigate the negative impacts and enhance the positive ones.On the other hand, our current study focused on exploring the effects of trade agreements on developing countries.
Secondly, a methodological gap also presents itself, for example, in their study on the social and environmental consequences of trade agreements in developing countries; Chen & Li (2020) used a panel data set of 78 developing countries from 1990 to 2018 and applied a difference-in-differences approach to estimate the causal effects of trade agreements on social and environmental indicators.Whereas, our current study adopted a desktop research method.

Conclusion
The study has provided valuable insights into the complex relationship between trade policy, particularly trade agreements, and economic development in developing countries.It is evident that trade agreements play a significant role in shaping economic outcomes, but the impact is multifaceted and context-dependent.The empirical evidence presented in previous studies underscores the importance of a nuanced understanding of the mechanisms through which trade agreements influence economic development.
The findings of the study suggest that trade agreements have the potential to significantly contribute to economic development in developing countries.Positive outcomes include increased exports, GDP growth, and the attraction of foreign direct investment (FDI).However, it is crucial to acknowledge that the impact of trade agreements is not uniform across all countries, and several factors influence the degree to which these agreements benefit developing nations.These factors include the quality of institutional arrangements within the agreements, the specific industries targeted for development, and the ability to manage potential negative consequences such as income inequality and environmental degradation.

Recommendations
Comprehensive Impact Assessment: Developing countries should conduct thorough impact assessments before entering into trade agreements.These assessments should consider the potential effects on various sectors of the economy, employment, income distribution, and environmental sustainability.A well-informed approach will help countries negotiate agreements that align with their development objectives.
Strengthen Institutional Capacity: Developing countries should invest in strengthening their institutional capacity to effectively negotiate, implement, and enforce trade agreements.Strong institutions are critical for ensuring that the benefits of trade agreements are maximized and that negative consequences are mitigated.
Diversify Export-Oriented Industries: Developing countries should diversify their export-oriented industries to reduce reliance on a narrow range of products.This diversification can help countries capitalize on the opportunities provided by trade agreements and reduce vulnerability to external shocks.
Inclusive Development Policies: Policymakers should design and implement policies that promote inclusive economic development.This includes addressing income inequality, enhancing access to education and healthcare, and creating opportunities for marginalized populations to benefit from trade-related growth.
Environmental Safeguards: Trade agreements should incorporate strong environmental safeguards to ensure that economic development does not come at the expense of environmental sustainability.Developing countries should prioritize sustainable practices in trade-related activities.
Continuous Monitoring and Evaluation: Policymakers and development practitioners should establish mechanisms for ongoing monitoring and evaluation of the impacts of trade agreements.Regular assessments can inform adjustments to policies and agreements to align them with evolving economic and development goals.
International Cooperation: International organizations and development partners should provide technical assistance and capacity-building support to developing countries in their efforts to negotiate and implement trade agreements effectively.Collaboration among nations and organizations can enhance the positive impact of trade on development.
In conclusion, trade policy, particularly trade agreements, holds significant potential for driving economic development in developing countries.However, realizing these benefits requires careful consideration of the unique contexts and challenges faced by each country.By adopting evidencebased policies, strengthening institutions, and prioritizing inclusive and sustainable development, developing countries can harness the opportunities presented by trade agreements to promote economic growth and improve the well-being of their populations.