Trade Liberalization: India And South Korea

Preeti Naik, REVA University, Bengaluru, Karnataka, India

INTRODUCTION:

In the past half-century, especially the last two decades, the global economy has witnessed a significant shift towards free trade and financial transactions. This trend has been driven by international institutions like the GATT (now succeeded by the WTO), the International Monetary Fund (IMF), and the World Bank. These organizations have played a key role in promoting trade liberalization by reducing barriers like tariffs and quotas, while also working to establish a more stable and open international financial system.1 It was observed in developing countries such as Bangladesh that trade liberalization and economic deregulation had reduced poverty and hence the concept of Trade liberalization plays an important role in uplifting developing countries.

Trading among countries is a widely accepted economic concept. Changes in trade policy may have redistributive effects if the economy as a whole benefit from more open trade. However, this may not provide much consolation to individuals who are negatively impacted. When trade barriers are lowered, it shakes things up for an economy. This ‘adjustment’ is unavoidable, but economists believe it’s a sine qua non. Trade liberalization essentially forces a reshuffling of resources, moving them away from less efficient sectors and towards areas where a country has a comparative advantage. In the long run, this reallocation should lead to a more productive and efficient economy. India and the Republic of Korea are two major democracies in Asia. Both countries had to struggle for their long-awaited liberation. A trend analysis states that trade liberalization had no impact on the economy as in India the rate initially drops and then increases after 1972. Korea commerce opens at a fast rate until 1972 and then decelerates.