Export processing zones are industrial states that export manufacturing products and follow free trade policies, which is basically where all the countries in the trade agreement (bilateral or multilateral) don't have any protectionism policies such as embargo or tariffs. There are many things that a host government would find attractive about Export processing zone. Firstly, trading in free trade conditions actually promotes international specialization and increases world output, which would lead to global economic growth. It also promotes efficient use and allocation of world resources, which is also known as allocation efficiency. Secondly, it also levels or rather matches the playing field or the developing countries and the developed countries as it allows the developing countries to access the heavily protected markets of the developed world thus helping promote development. Lastly, the corporations coming to the country help build export specialization and build skilled labor force.
The Export processing zones are attractive to the corporations for similar reasons. The corporations do not have to pay any tariffs or face any other protectionist/ trade barriers when trading with EPZs. This helps with having equal balance of trade, which is desirable. There is resource allocation as there are no trade boundaries. Another reason why EPZs are really attractive to corporations is because of cheap labor, cheap manufacturing of goods and products, easy credit and mass consumption. Furthermore, EPZs are desirable because these countries have a really good geo-political location, which makes it rally easy to trade with. They have strong developmentalist state and they invest a lot in developing the skills of the workforce. The Corporations find these qualities desirable because they are trying to attain global monopoly and trying to profit hugely. They are looking for cheaper cost of production and cheaper labor with fewest labor regulations and low labor union laws. They want to expand consumer market and production. For example; countries like Korea and Hong Kong were huge success stories because they manufactured in technology, which is the demand in the world. The focus from agriculture has now more or less shifted to technology. Hence, there is a huge demand, and countries that manufactured technology, in this case Korean and Hong Kong developed really fast.
"Export-oriented industrialization' (EOI) transform the meaning of the development project because development projects due to trading evolved into globalization. Slowly, the third world countries opened up to global trade markets, as their debt was too high. This caused a paradigm shift from the development project to globalization. The third world economies not longer were nationally managing economic growth.
The role of debtor governments decreased and countries started trading and reached efficiency in the global market. Due to specialization of international labor, a lot of countries gained comparative advantage. However, globalization also led to the local business in the host country to shut down and exit the economy because the imported products were cheaper as the cost of production of imported products was cheaper. Hence, demand for imported good increased and local products decreased. In conclusion, the countries no longer needed as much foreign aid as they started trading, which opened up a smoother path to industrialization for the third world countries.
Sociology on International Development
Bryn Mawr College, Pennsylvania, USA