Trade, Globalization & Development Strategies
- Explain comparative advantage, complementarity, and trade blocs
- Compare export-oriented and self-sufficiency development strategies
- Analyze how deindustrialization and outsourcing reshape economies
Why places trade
Comparative advantage holds that a place should specialize in what it produces relatively most efficiently and trade for the rest, raising total output for everyone. Trade requires complementarity — one place has a surplus of what another needs. States lower barriers through trade blocs and agreements — the EU, USMCA, ASEAN, Mercosur — and global rules set by the World Trade Organization. Trade also flows through global supply chains and special economic zones (China’s SEZs, export-processing zones) designed to attract foreign investment with tax and regulatory incentives.
Two development strategies
Developing countries have historically chosen between two paths. The self-sufficiency (import substitution) model protects domestic industries behind tariffs so the country makes goods it would otherwise import; it spreads investment evenly but tends to breed inefficiency and shortages (India before the 1990s). The export-oriented (international trade) model opens the economy and specializes in exports for the world market, seeking rapid growth through comparative advantage — the strategy of the Asian Tigers (South Korea, Taiwan, Singapore, Hong Kong) and China. Export orientation has generally outperformed self-sufficiency, though it raises dependence on global markets.
Restructuring: deindustrialization and outsourcing
Globalization has reshuffled where things are made. A new international division of labor sends manufacturing from high-wage core countries to lower-wage periphery and semi-periphery nations through outsourcing and offshoring. Core economies experience deindustrialization — the loss of manufacturing jobs — and shift toward services, sometimes leaving a hollowed-out Rust Belt. Meanwhile firms like Toyota adopt just-in-time delivery and flexible post-Fordist production. The upside is cheaper goods and jobs in developing regions; the downside includes displaced workers, weaker labor and environmental standards, and vulnerable supply chains.
South Korea shifted from protecting its industries to aggressively exporting electronics and cars to world markets, growing rapidly into a developed economy. Identify the development strategy and one advantage and one risk of it.
- 1.South Korea opened its economy and specialized in producing goods for sale on the world market rather than shielding domestic industry.
- 2.Producing chiefly for global export is the export-oriented (international trade) development strategy.
- 3.An advantage: specializing by comparative advantage and reaching huge foreign markets drove rapid growth and rising incomes (the Asian Tiger model).
- 4.A risk: heavy reliance on exports leaves the economy exposed to downturns in global demand and foreign competition.
The rapid economic rise of the “Asian Tigers” such as South Korea and Taiwan, achieved by specializing in manufactured goods for the global market, best illustrates which development strategy?
Don’t equate globalization with pure gain or pure loss. Outsourcing brings cheaper goods and jobs to developing regions and causes deindustrialization and displacement in core economies. FRQ answers earn more when they weigh both the benefits and the costs.
A U.S. manufacturing city loses its factories as production moves overseas to lower-wage countries, leaving unemployment and abandoned plants. This process in the core is called:
Answer the 2 checkpoints as you read.
Sign in to save your progress