TITLE:
Competitive Advantage of Nations and Multilateral Trade System: How Can Lebanon Benefit from Trade Liberalization without Enhancing Its Strategic Industries?
AUTHORS:
Georges N. Nehme, Eliane Nehme
KEYWORDS:
International Trade; Competitive Advantage; Preferential Treatment
JOURNAL NAME:
Open Journal of Social Sciences,
Vol.2 No.4,
March
25,
2014
ABSTRACT: International trade theories explain the advantage of nations to adopt a liberal trade model and to participate in the multilateral trade system via liberalizing their systems by eliminating trade quotas, tariff barriers and other forms of protectionism. The influence of international institutions on trade flow, mainly the World Trade Organization (WTO), has been important. The WTO contributed by helping and advising governments so that they would benefit from multilateral agreements by granting preferential treatments for developing countries joining the institution, and making them learn from other countries’ experiences in the accession process. Both liberalizing and protecting local production have advantages and weaknesses; how do existing theories about trade policy explain this landscape? Liberalizing the economy proved to be beneficial for some countries, while others suffered from distasting consequences on domestic production, employment and purchasing power. Some researches explained that large-scale changes in political institutions, especially in the direction of democracy, may be necessary for the kind of massive trade liberalization that has occurred. Changes in preferences cannot be overlooked in some economies while explaining the rush to free trade. The reciprocal impact of trade on domestic policies and the international political system is important. Analyzing the hypotheses about nation’s competitiveness and its dependence on the capacity of its industry to innovate and upgrade deems indispensable. This paper will be testing the relevancy from applying Michael Porter’s diamonds theory and the Heckscher-Ohlin-Samuelson model on developing economies, mainly Lebanon, in order to gain national competitive advantages while having strong regional and international rivals. Do companies gain advantage against the world’s best competitors because of pressure and challenges? Lebanese productive companies are suffering from lack of competitiveness because of weak governmental support and absence of public planning to enhance strategic industries by developing a strong flexible export based model. With a 2.6 billons dollars deficit of its balance of payment, how can Lebanese government join the WTO and liberalize its trade system while avoiding its negative impact on national and social prosperity?