The following points highlight the four main roles of International trade in Economic development of a country.
Role # 1. Slow Pace of Primary Commodities:
The foremost difficulty that comes in the path of foreign trade is that the growth of primary commodities which forms principal exports of developing countries has been very slow as compared to world trade.
In 1955, primary commodities accounted for 50% of the total exports which in 1977 came down to 35% and again to 28% in 1990 and so on. The causes responsible for this are the increasing tendency of market economies to protect their agriculture, inadequate increase in demand for primary commodities, development of synthetic substitutes etc.
Role # 2. Less Share in World Trade:
It has been noticed that exports of developing economies have been slow to develop. Consequently, the share of developing economies in the total world trade has maintained a downward trend.
Its share which was 31 percent in 1950 came down to 13.9 percent in 1960 and again 5% in 1990. This decline is caused by factors like emergence of trade blocks, restrictive commercial policies and growth of monopolies etc. These trends reflect the fact that developing economies have to face foreign trade as a barrier in the way of development.
Role # 3. Worse Terms of Trade:
In developed markets, the low demand for primary products has led the problem of balance of payment on worse trend in developing economies. Whereas prices of manufactured goods have been on the upward trend in the world market, the prices of primary products are gradually declining.
In this regard, UN report advocated that in the past developing countries could got a tractor by exporting two tones of sugar, now the time is that they have to export seven tones of sugar to get the same tractor. According to another estimate 1 to 3 percent of the GNP was lost by the developing countries due to decreasing prices of non-oil raw materials during 1990s.
Role # 4. Restrictive Trade Policies:
Restrictive trade policies adopted by industrial countries affect prospects for developing country exports of manufacturers. This is due to the fact that for developing countries markets in industrial countries have become increasingly more important.
For instance, in 1965, industrial countries took 41 percent of developing country exports of manufacturers, by 1990 this had grown to -75%. In 1990 only 3% of world trade in manufacturers was between developing countries.
In short, we may conclude that developing economies face several difficulties in their path of foreign trade. The various multinational initiatives having been mounted to tackle these problems have left them largely resolved. Therefore, in given circumstances, the developing economies have to evolve a suitable trade policy mix that may create export outlets and as well may assure supplies of essential imports.