Most developing countries especially the sub-Saharan African countries have not realized the full benefits from International Trade. Required: Discuss the main reasons why such countries have...

(a) Some of the reasons why most developing countries (especially the Sub-
Saharan African countries) have not realized the full benefits from
international trade:
? Impact of economic integration – Loss of tax revenue to governments
initially in form of import duties.
? The infant industry argument – dumping of foreign goods tends to reduce
the industrial development potential in the country of destination.
? Similarity of products – reduces comparative advantage as specialization
chances are minimal and less rewarding in foreign exchange.
? Existence of trade restrictions - perhaps the most prevalent aspect of
international trade; such restrictions take different forms eg. tariffs and
quotas, which restrict the free flow of goods and services in the global
market.
? Differences in the levels of economic development – to survive and cut
oneself an international competitive trade image/performance, a country
needs to have a high productive capacity (with high product quality
standards) based on advanced and appropriate state of technology ( eg
exports should be processed and done to meet international specifications).
This is what is lacking in most developing countries, such that we have
trade between unequals.
? Minimal trade promotions – most developing countries have yet or have
established less impacting export promotions in the global market;
effective institutions have not been established abroad to make it known
what is available in the export mix of developing countries etc.
? Political atmosphere – the political atmosphere in most developing
countries is that of instability, which discourages productive investment;
both existing and potential investors have become extra cautious and most
often exercise a less than maximum portfolio selection. To invest in export oriented venture requires large capital provision and this is what
insecurity is discouraging in most developing countries.
(b) Measures:
? Increasing the budget provisions to the security/defence machinery of
peace keeping missions; the sale of arms to war torn countries should be
brought into focus in International Law in form of crime against
humanity.
? Widening the scope of bilateral and multilateral trade agreements –
specifically those seeking to open up the markets of developed countries
to exports of the developing world (currently, the United States
government has established the African Growth & Opportunities Act
(AGOA) trade initiative which grants African textile and garment
manufacturers preferential access to the US market); this is one of the
ways forward.
? Creation and sustenance of investor and development partners’
confidence by maintaining structures supportive of efficient and vice-free
domestic economic governance
? Enhanced credit facility access orientation – democratically elected
governments tend to enjoy a wider scope of support from both citizens
and development partners; STABEX funds in Kenya, for instance, should
reach the intended coffee farmers without any hindrances in order to
allow farmers to soundly decide, plan and control their farming activities
with a view to increasing the total coffee output for export.
In addition, the government should maintain strict budget discipline by
having only manageable deficits in order to avoid the punitive economic
effects ( eg high interest rates, external debt crisis) arising from continued
borrowing from the open market and international financial institutions
like the World Bank/IMF.
? Redefining the role of governments in provision of public goods eg.
physical and qualitative infrastructure etc.
? Formation of regional groupings devoid of lack of political commitment
? Extensive export promotion programmes:
The Kenya National Chamber of Commerce and Industry, for instance,
should upgrade its operations to world-class standards through search for
markets, partners and financing information. Kenya’s entrepreneurs should be able to, for example, penetrate the Private Label Marketing
Association (PLMA) which is based in Europe and represents the World’s
leading supermarket chains. The rationale behind the association is to
create their own brands and sell products under their own brand names,
hence the need for developing countries businesses (Kenya for example) to
enter into partnerships with the PLMA.
Every year a number of Third World companies are selected to exhibit and
display their products with a view to tapping into the Lucrative European
Market. Only a few Kenyan Companies have done this; this failure is
attributable to lack of guidance and awareness on how to tap into the huge
EU market. Financial analysts caution that while the CDE is willing to
assist, Kenyan companies must follow global trends, especially in ISO
standardization, branding and advertising of their products. It’s also
important for developing countries’ key export products such as Kenya’s
agricultural exports of Coffee, Tea, Cashew nuts, Fish, Handicrafts and
Horticulture to be aggressively branded and advertised to reap maximum
benefits to the economy.
Kenyan Horticulture products in the EU market, especially in London and
Paris are branded and displayed in supermarkets to make it appear they are
locally produced without giving any credit to their country of origin. The
consumers are not aware, for example, that their cup of the superior arabica
coffee come from Kenya because it will probably have a German or Swiss
Label.
For far too long, Kenyan companies have concentrated on the production
side and ignored branding and packaging which matters a lot to consumers
in the developed world market. The Caribbean Companies selling bananas
to Europe, such as Dole, have succeeded much more than the Kenyan
companies selling flowers, fresh fruit and other horticultural products.
Its vital that the developing countries’ chambers of commerce and industry
(eg Kenya National Chamber of Commerce & Industry) be revitalized as
the voice for the export – oriented business community because export –
led growth will play a key role in creating wealth and alleviating poverty.

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Gregorymasila1 answered the question on March 2, 2018 at 19:07