Answer to Question #171048 in Economics for Sibongisiwe

Question

What are four reasons why international trade could be bad for South Africa

Answer 1

1) First reason - international trade creates so-called 'dual economies' in underdeveloped countries, so that the export sector of the economy became high developed while the rest of the economy remains undeveloped and weak.

2) Second reason - limited possibility of gain from foreign trade because underdeveloped countries export mainly primary goods.

3) Third reason - the international trade has not been entirely beneficial to poor countries because of the adverse effects of foreign investments on their economy. Since in underdeveloped countries only the export sector of the economy highly developed, the inflow of foreign capital doesn't invested in the development of the domestic sector of such countries. As a result, the peolpe remains very poor.

4) Fourth reason - the international trade resulted in an international transfer of income from the poor to the rich countries through a secular deterioration in the commodity terms of trade of the poor countries.