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Regional Trade Blocs Essay

At the onset of the formation of regional trading blocs, development theories are mainly to be accounted for the inspiration it brought as it tried to gain the attention of developing countries (Grimwade, 1996). Primarily, the assumption is that developing countries could promote their own local industries through constructing safety nets from the imports of developed countries and increasing the trade among the members of the regional trade blocs (Grimwade, 1996).

However, as practice has shown, it remains that this is not the case and that small industries are placed at greater risk as a government joins in regional trading blocs. This subsequently leads the government to provide safety nets for these small domestic industries in order to avoid losing it altogether. As formed into being by Alexander Hamilton, the infant industry argument shows that the government has to take care of its “infant industries” from threats to its growth until the time where it is able to compete with the large industries (Aswathappa, 2006).

Means through which the government could support these infant industries is through the provision of incentives and subsidies (Aswathappa, 2006). Moreover, import subsidies could be implemented for the products coming from the developing countries while making use

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of the products at home that can serve as an alternative. Through the safety nets that are provided by the government, as mentioned above, the infant industries are strengthened and are given the chance to build their own capabilities in order to compete as the countries join in the regional trade blocs.

Likewise, the strict adherence to the tenets of the development theories, which is to promote the local industries over imports, will most likely be the guiding principle of governments. References Aswathappa, K. (2006). International business (2nd Ed. ). New Delhi, India: Tata McGraw-Hill. Grimwade, N. (1996). International trade policy: A contemporary analysis. London: Routledge.

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