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

Abstract

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.