why does free trade policies benefit countries that have well established industries?

Question

and why is that if industrialised country negotiates a free trade agreement with a country that has weak industries, the developing country can be affected in the long term??????

please..im confused

Answer 1

Because industrialized countries have the most product to sell. Free trade makes it easier for all countries to sell things overseas, so countries with the most to sell will realize the most benefit.

Political corruption in a developing country can hurt them economically, because the increase in trade generates a lot of money flying around. If that money is skimmed off by corrupt individuals and not invested in the development of the country, the country never gets any better.
Mexico, Malaysia, and a lot of the smaller African countries are examples of this, but it doesn't necessarily have to be that way. Japan, South Korea, and India were all once considered backward or developing countries, but they invested their trade revenue wisely and honestly, and today their economies are considered booming and dominant.

Answer 2

The basis of trade is the economic concept of comparative advantage. A well industrialized nation can almost always produce something more efficiently, but not necessarily at a lower opprotunity cost.

This can be examined in a hypothetical scenario: the U.S. can produce 20 cars or 10 T-shirts in one day and Mexico can produce 10 cars or 7 T- shirts. Clearly, the U.S. is more efficient for both cars and T-shirts (the U.S. has an "absolute advantage").

Does this mean the U.S. should not trade? Not at all. In order to produce one T-shirt, it must give up producing two cars, whereas Mexico only has to give up about 1.5.

Mexico has the "comparative advantage" in T-shirts. Should the U.S. produce all cars and Mexico all T-shirts, the two nations can then trade for the other and end up more wealthy than before. By each nation specializing in what it does, BOTH countries benefit.

This applies for all well-industrialized nations. No matter how much "more efficient" a nation is in terms of production capability, it can still benefit from trade with a nation with weak industry and long as it does not have the comparative advantage.

The complaint against free-trade makes no economic sense. By specializing in a particular good or service, a nation must give up others. People then cite this as a "loss of jobs", as other nations take on the gap. More often, however, this is a shifting of jobs rather than a real loss. The position is purely normative, and is best examined in an economics course.

Answer 3

John H assumes that Tshirt makers can become costless become car makers and the reverse. But in the real world this is not true.
The price of cars relative to the price of T shirts will increase in the US and decrease in Mexico compared to their pre-trade levels. Since labor is paid its marginal product, Tshirt workers that remain in US and car makers in Mexico will be worse off than they were pre trade. This is why some people oppose free trade.
If US in addition, Tshirt makers move their plants to Mexico to take advantage of the lower cost labor Mexican Tshirt workers will become more productive so Mexico will be much better off than before.
The decision to increase trade creates winners and losers, and the gains from trade is enough so the winners can compensate the losers and still be better off, but in the US they don't which create political opposition to trade.