Managing Change in the Twenty First Century
Chapter 4: Trade, Technology, and Industrialization in the Asian States
4. Trade, technology and industrialization in the Asian states All countries promoting trade free of all restrictions as advocated by Smith ( 1976) can increase their own economic wealth and thereby can also increase the wealth of the global economy. By ‘free of restrictions’ we refer to the total absence of all tariff and nontariff barriers to trade. If a country continues to maintain a large and rising surplus in its trade with other countries, then its currency will appreciate in value vis-à-vis those currencies of importing countries. Consequently, although free trade does not necessarily guarantee that the trade will be automatically balanced, at least free trade aided by an appropriately flexible exchange rate system can help a country running a deficit in its trade with another country to increase its income from its exports to and reduce its payments for imports from the trading partner maintaining a surplus with it. However, even if the currency of the country running a deficit in its trade with another country is depreciated, it may not increase export income if the foreign demand for its exportable goods is less than one. This is the situation with which India has been confronted in late 2011. Currently, India’s burgeoning trade deficit has been accompanied by substantial depreciation of the Indian rupee against all major currencies of the world. Even then, there does not appear to be any perceptible and justifiable increase in India’s export income. Furthermore, the depreciation of the rupee at an alarming...
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