Free Trade Agreements Between Developed And Developing Countries

The agreement between the Association of Southeast Asian Nations (ASEAN) and Korea came into force in 2007. It provides that Korea removes more than 76% of its tariffs on imports from ASEAN and that ASEAN members remove between 85 and 100 per cent of their tariffs on imports from Korea. The agreement also contains provisions on rules of origin, guarantees and transparency. The Trade in Services Agreement was reviewed in 2018 by the Regional Trade Agreements Committee. A new round of negotiations would increase global growth prospects and strengthen the international trading system. The IMF considers the success of the round of trade negotiations to be an important step towards achieving the goal of globalization`s success for the good of all. However, progress in integration has been heterogeneous in recent decades. Progress has been very impressive for a number of developing countries in Asia and, to a lesser extent, in Latin America. These countries have succeeded because they have chosen to participate in world trade and have helped them attract the majority of foreign direct investment to developing countries. This is the case for China and India, because they welcomed trade liberalization and other market-based reforms, as well as higher-income countries in Asia – such as Korea and Singapore – which were themselves poor until the 1970s. Integration into the global economy has proven to be an effective way for countries to promote economic growth, development and the fight against poverty.

Over the past 20 years, world trade has grown at an average rate of 6% per year, twice as fast as world production. But trade has been a growth engine for much longer. Since 1947, when the General Agreement on Tariffs and Trade (GATT) was created, the global trading system has benefited from eight rounds of multilateral trade liberalization and unilateral and regional liberalization. Indeed, the last of these eight cycles (the “Uruguay Cycle”, completed in 1994), led to the creation of the World Trade Organization, which aims to help manage the growing body of multilateral trade agreements. Many developing countries themselves have high tariffs. On average, their tariffs on the manufactured goods they import are three to four times higher than those in industrialized countries and have the same characteristics as tariff spikes and escalation. Tariffs on agriculture are even higher (18%) that tariffs on industrial products8 Although globalization and trade offer new opportunities, they are not without challenges. For many reasons, developing countries may find it difficult to compete globally. The increasing complexity of trade has serious repercussions on the world`s poor, who are often disproportionately separated from global, regional and even local markets. Poverty is often concentrated in geographical areas that are not closely linked to active economic centres. Businesses and communities in these areas are unable to develop a skilled and competitive workforce; they are not integrated into global production chains and are less able to diversify their products and capabilities.