The second limitaion is its exclusion of risk and

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The second limitaion is its exclusion of risk and uncertainty in internaional trading arrangements. The focus on one or two vital primary exports can play havoc with development plans when earnings are unpredictable from one year to the next. The coexistence of rich and poor regions can be counteracted and ameliorated by state intervenion. Cumulaive processes for inequality within naion-states by which growth poles , regions that are more economically and socially advanced than others, may expand rapidly while other regions stagnate and can be modiied by government through legislaion, taxes, subsidies, etc. Governments are oten parisan players whose acivist intervenions in this area of industrial policy are speciically designed to create a comparaive advantage where none existed before but where world demand is likely to rise in the future. Governments may employ various instruments of commercial policy, such as tarifs , quotas and export subsidies and can manipulate commodity prices and their trade posiion Downloaded by Mohamed Zahran ([email protected]) lOMoARcPSD|3216806
vis-à-vis the rest of the world. They oten serve to reinforce the unequal distribuion of resources and gains from trade resuling from diferences in size and economic power. With balanced trade (a situaion in which the value of a country’s exports and imports are equal) and no internaional capital movements, the balance of payments problems never arise in the pure theory of trade. In some enclave economies , small economically developed regions in developing countries in which the remaining areas have experienced much less progress, foreigners oten pay very low rents for the rights to use land, bring in their own foreign capital and skilled labour, hire local unskilled workers at subsistence wages and have a minimal efect on the rest of the economy. This all depends on the bargaining power of mulinaional corporaions and developing-country governments. A developing country’s export performance can be decepive unless the character and structure of export earnings are analysed for who owns the factors of producion. - With regard to the rate, structure and character of economic growth, trade can be an important simulus to rapid economic growth. Expanded foreign-exchange earnings through improved export performance also provide the wherewithal by which a developing country can augment its scarce physical and inancial resources - Growth of naional output, however, may have litle impact on development. It all depends on the nature of the export sector, the distribuion of its beneits and its linkages with the rest of the economy and how these evolve over ime - The existence of increasing returns, the inluence of MNCs, the combined ability of governments and businesses, levels of producion and paterns of demand are crucial. The ability of developing countries helps them in achieving development aspiraions - Whether to trade or to remain in isolaion is not the issue. The balance between

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