The Third World and Relative Gains from Global Trade: An Empirical Comparative Analysis of Developed Versus Developing Countries

Abstract

Proponents of free trade theory and trade liberalization maintain that despite drawbacks, the distribution of gains from trade is a win-win for all countries. In particular, developing countries that opt for trade openness are most likely to benefit, to generate growth, to experience a rise in standard of living and to create jobs. For instance, in developing countries that are most open to foreign trade, the so-called "new globalizers," nearly 120 million people have risen above the ranks of absolute poverty, and an impressive 13% decline in poverty rates has been observed. This is partly due to the competitive advantages in the manufacturing sector the developing countries have realized as a result of trade liberalization. However, critics of free trade argue that the gains from international trade disproportionately accrue to the developed countries, often at the expense of developing states.