Trade and the development gap

Trade and the development gap

1. Raw materials tend to come from developing countries- it is a low value good.

   • In order to farm these goods, manufactured goods are often needed.
     • These manufactured goods come from more developed countries.

2. Trade can trap developing countries as it usually means they only export primary goods, which are low value.

   • Some countries such as Taiwan/ South Korea are able to break this cycle.

3. TRADE IS IMPORTANT!!!!!!

   • If Africa increased their trade by 1% in 2002, it would have earned an extra £49bn
     • 5X the amount they receive in aid!!!

4. Terms of trade: ratio between currencies earned from its exports in comparison to imports. Any country exporting natural goods and importing manufactured goods are going to have a declining terms of trade.

5. KEY TERMS ASSOCIATED WITH TRADE:

   • Trade surplus: when a country makes money from trade.
   • A trade deficit: when imports exceed exports. it can lead to a debt trap that prevents investment and can cause a country to lose less money
   • Trade bloc: these widen the development gap because they allow members to trade freely but then put barriers on others such as developing countries who try to sell manufactured goods.