TRADE AND DEVELOPMENT INTERNATIONAL TRADE AND WORLD MARKETS

TRADE AND DEVELOPMENT

INTERNATIONAL TRADE AND WORLD MARKETS. ■ This is goods and services across country borders, where there is a benefit for both countries. ■ They each gain something which they cannot produce. ■ Without international trade each nation will only have access to their own resources. ■ Buyers and sellers trade on the international market.

1. COMMODITIES 2. TERMS OF TRADE

1. COMMODITIES ■ These are items which countries trade. ■ This could be raw materials. ■ Or finished products. ■ Only a small percentage was raw material in 2010 that was traded. ■ Most LEDC trade raw materials. Tis brings in way less money than finished products. ■ MEDC mainly exports finished products.

2. TERMS OF TRADE ■ This is the ratio between the value of exports and imports in a country. ■ Calculated b dividing the value of exports by the value of imports and multiplying by 100 ■ If equally balanced we term it will be 100 and it will be seen as unfavourable. ■ Earns more on the exports than the imports, we say it is favourable.

■ ACTIVITY 1 PAGE 211 – UNDERSTANDING TRADE ■ ACTIVITY 2 page 212 – CALCULATING AND COMPARING INTERNATIONLA TERMS OF TRADE.

TYPES OF TRADING RELATIONSHIPS 1. FREE TRADE 2. TRADE BARRIERS 1. Tariffs 2. Quotas 3. Subsidies 3. FAIR TRADE

1. FREE TRADE ■ Occurs without any restrictions. ■ Nations open their borders one another and goods and services move freely. ■ Countries with similar economic systems may form free trade.

2. TRADE BARRIERS ■ Free trade allowed cheap Chinese gods to be imported into the country ■ Putting strain on local business and causing some of them to close down. ■ Government regulates this by placing – Tarriffs – Quotas – Subsidies – On imported goods

Tariff ■ Are a type of tax placed on imported goods. Makes the goods more expensive. ■ Example tarrifs on cheap Chinese items could be 34% and 40% making it more expensive. ■ This is used as a source of income for the government.

QUOTAS ■ Are limits governments set to the amount of imported goods that can enter the country within a particular time frame. ■ When local production is lower than usual, quotas can be changed,

SUBSIDIES ■ Protects local business from foreign competition. ■ Are payments made by the government to local producers. ■ Government shares the production costs. ■ Therefore prices can be kept lower.

■ Subsidies are a trade barrier that works well for Japan, Europe and the USA> ■ Local prices in the country are lower than the imports. ■ Where farming is not subsidised. Imports can be cheaper. ■ Farmers may go out of business. ■ And the country will lose money.

■ Subsidies not only prevent fair competition, but negatively affect development in LEDC’s ■ E. g. cotton farmers in Africa lost up to $US 250 million per year because they could not sell their produce to the international market.

3. FAIR TRADE ■ The trading relationship is not between nations but between producers and consumers. ■ This gives farmers a fighting chance in developing countries.

■ Creating opportunities: producers directly linked to MEDC’s ■ Fair trade stable prices: producers involved in determining prices. Includes fair wage, production costs + environmental consideration. ■ Social development: re-invest extra income in community -building projects. ■ Gender equality: woman are paid the same as men ■ Sustainability: environmentally responsible methods are

GLOBALISATION

■ Process whereby the increased flow of goods, services, capital, technology, ideas, information ■ This then connects people.

ADVANTAGES ■ Multinational corporations (MNCs) – own or control production facilities in more than one country. ■ Increase employment opportunities. ■ Better working conditions. ■ Better salaries.

■ Increased access of information, ■ Spread of knowledge and innovations. ■ Rapid and effective natural disaster response and relief. ■ Increased tolerance and appreciation for cultural diversity. ■ Migrant workers send remittance of money they have earned back to their home countries. ■ Global associations distribute funds for development as well as regulate disputes. UN

■ Outsourcing: employing workers in another country. ■ Such as call centres/ tech support etc. ■ Global environmental awareness ■ Poverty is reduced, life expectancy increases and literacy rates increase ■ Relaxation of trade barriers promotes trade in development in developing countries.

DISADVANTAGES ■ Insufficient infrastructure to support technology – excludes some nations. ■ Employment inn MNC creates upper middle class – increase income inequalities. ■ MNC shows influence in their host countries. ■ Outsourcing creates unemployment. May lead to unfavourable working conditions. ■ Rules and Regulations of global associations influence governments. ■ Government spending might decline to pay off loans.

■ Brain drains might take place in LEDC ■ Economic dependency leads to global economic crises. ■ Technological advances may destroy traditional agricultural systems or erode cultures and languages. ■ Increase of trade and travel facilitates spread of human, animal and plant disease.

EXPORT LEAD DEVELOPMENT. ■ Economic strategy used by developing nations to catch up to developed ones. ■ Aim is to increase wealth by export. ■ Investing in industry, manufacturing and education in order to create export products. ■ Re-investing money earned in social and physical infrastructure. ■ ASIAN tigers are the most successful

Success of the Asian tigers related to ■ Their export products were seen as essential to technological revolution of the time. ■ Trade barriers were lowered. ■ Large consumer markets. USA

following this development countries have to follow. ■ Less favourable economic global economy ■ Industrialisation must take the environment into consideration. ■ Greater competition ■ Target markets may be saturated.

Newly Industrialised countries have the following characteristics ■ High level of social freedoms and civil rights. ■ Shift fro

■ Copy and summarise the mind maps on page 217 and 218