Abstract
International trade and economic growth are two substantial issues that have been debated over decades. Whether international trade and especially exports lead economic growth or economic growth causes exports have been on the agenda of scientists. By means of international trade, a country can have access to potentially scarce sources of capital, technology, knowledge, know-how, etc. Through having access to such resources, a country shall develop its economic, production, and commercial structures and eventually develop the country as a whole. Moreover, the development of a country shall lead to the enhancement of the overall welfare. Thus, the aim of this study is to review the literature on international trade and economic growth as well as scrutinize these issues on Turkey comprehensively. With the statistical data presented in this study, one can conclude that Turkey has always been subject to negative trade balance, which is not beneficial to its economic performance.
TopIntroduction
International trade can be postulated as a potential stimulator of a country’s economic growth. The value and volume of commerce fostering economic growth has been ascribed to several factors involving more efficient utilization of sources, employing economies of scale and labor training, fostered technological change and moving investments towards more productive sectors and businesses. While, the export-leg growth (ELG) hypothesis indicates that exports necessarily promote economic growth, the import-led growth (ILG) hypothesis stands for economic growth would be stimulated by growth in imports. Imports do not only cause to long-run economic growth by catering endogenous businesses with access to the necessary inputs and foreign technology, but also act as a medium for transfer of growth-developing foreign research and development (R&D) knowledge from developed to developing states (Bastola & Sapkota, 2015).
The correlation among international trade, commercial openness and economic growth have been debated over the years. Commerce enables the integration with the resources of innovation and developed gains from foreign direct investment. By rising the size of the market, international trade enables economies better utilize the possible benefits of increasing returns to scale and economies of specialization. Trade openness enhances the transfer of new technologies, lead to technological progress and productivity development as well as these advantages rest on the degree of openness. Foreign trade and economic growth are based on the premise that trade constitutes economic incentives which fosters productivity by two dynamics; in the short-run, trade diminishes resource misallocation and; in the long-run, it enables the transfer of technological improvement. Commercial development could also cause governments to commit reform programs under the pressure of international rivalry, thus achieve economic development. Nevertheless, commercial development policies act as an important role in accomplishing higher growth as well as human development. Commercial improvement in in developing countries has thus been implemented with the expectation of growth promotion. Moreover, macroeconomic stability and advantageous investment environment shall supplement to trade development (Egbetunde & Obamuyi, 2018).
Key Terms in this Chapter
Economic Growth: Economic growth is an increase in the production of economic goods and services, compared from one period of time to another.
Foreign Direct Investment (FDI): A foreign direct investment (FDI) is a purchase of an interest in a company by a company or an investor located outside its borders.
Import-Led Growth: ILG hypothesis stands for economic growth would be stimulated by growth in imports.
Gross Domestic Product (GDP): GDP is the total value of goods and services sold in the course over the course a year.
Export-Leg Growth: ELG hypothesis indicates that exports necessarily promote economic growth.
International Trade: International trade is the exchange of goods and services among countries. International trade allows countries to expand their markets and access goods and services that otherwise may not have been available domestically.
Inflation: A steady increase in the price level of the economy of a country.