TRADE

TRADE

1. Global Trade

   • The flow of goods and services between and across the developing and developed world
   • Offers a lot of opportunity for the economic development of the LEDC
   • There are also some negative effects of global trade
     • Some sociologists suggest that trade relationships between the rich and poor countries are exploitative. It is a form of neo-colonialism – dependency

2. Measuring Trade

   • Coyle 2001
     • The ratio of exports to GDP has risen significantly for the whole world over the past 50 years, and for most developing countries.
       • But the least developed countries have the smallest stake in world trade
         • • the 49 poorest countries with 646million people had only 0.6% share of the world trade in 2002. • Whereas the worlds top 5 exporting (US, France, Germany, UK and Japan) had 37%.
   • The poorest countries tend to be selling ‘cash crops’ or/and raw materials as a main export to only one or two other countries - Coffee accounts for 73% of Burundi’s exports
     • The farmers receive very little compared to what they sell, the main profits are taken by the manufactures and shippers
       • Even this small profit is at risk - If supply or demand change the prices will likely fall, if this is a countries main export they are all vulnerable
         • Changing tastes and lifestyles in the West/North affect demand
           • Crops are vulnerable to weather changes and disease, relying on one main crop export is risk.
   • But developing nations have also benefited from global trade relationships
     • Because terms of trade and prices of commodities change there can be positive effects for Developing countries
       • Africa benefited because of a number of things - High Oil Prices: The overseas Development Institute estimates that if oil prices stay the same than Africa will get £19bil a year, way more than aid
       • A dramatic increase in trade with China: rapid industrialisation process go on and that means it needs raw materials which Africa can supply thus demand and process goes up and China’s goods are available in African markets.

3. Dependency Theory

   • Trade is a form of neocolonialism over the developing nations
   • Back in the colonial days the economies of developing countries would benefit the colonial power by providing raw materials
   • Developing countries are dependent on trade
   • The West keep prices low so that the selling of cash crops will not be sufficient to fund development.
   • Relient on crop monocultures - susceptible to price fluctuations and produces over competition - all produce the same limited products - value falls

4. Neo-Liberalism

   • Most important process in promoting development
   • Growth + development occurs when entrepreneurial populations invest in small businesses
   • Emphasis importance of free trade
     • Developing countries can become fully integrated
       • Remove trade barriers such as subsidies and import tariffs
   • Reduce taxation - cut back on public spending on health care etc
   • 2 ways to reach these conditions
     • A range of agreements and treaties such as the WTO - commit to free market principles
     • Structural Adjustment Plans to the loans giving to LEDCs - so economies reflect priorities of NL

5. Fair trade

   • People Centred initiatives - equip developing world with skills, resources, equipment and social networks to compete in world market
     • Formation of cooperatives
       • Strength in numbers - no longer in competition with one another
         • Economies of scale - greater amount of produce can be offered
   • Criticisms
     • attaching a fixed price - distorts markets and acts as a barrier preventing long term improvement
     • fixed prices - encourages specialising in these products - reliance in mono culture