Development Gap - Reducing global economy - Trade

Question 1

What are some ways that countries ‘self-help’ themselves?

Answer 1

• Moving from rural areas to urban areas often improves a person’s quality of life. Things like water, food and jobs are often easier to get in towns and cities
• Some people improve their quality of life by improving their environment, eg their houses
• Communities can work together to improve quality of life for everyone in the community, eg some communities buld and run services like schools

Question 2

What is visible trade?

Answer 2

Selling and exchanging physical trade (food, clothes, steel)

Question 3

What is invisible trade?

Answer 3

The selling/exchange of servies (eg Tourism)

Question 4

What is a trading group?

Answer 4

A group of countries that have come together to make trade cheaper and easier between them

Groups of countries that make agreements to reduce barries to trade (eg reduce import taxes) - this increases trade between members of the group

Question 5

What happens when a poor country joins a trading group?

Answer 5

The amount of money the country gets from trading increases - more money means more development can take place

Question 6

Why is it bad for (poor) countries that aren’t in trading groups?

Answer 6

It is hard for them to export goods to countries that are part of trading groups. This reduces the export income of non-trading group countries and slows down their development

Question 7

What is interdependance and give some examples of it?

Answer 7

Interdependance between countries means that they are dependend on one another in some way

• LEDC’s are dependant on MEDC’s for manufactured goods or aid
• MEDC’s are dependant on LEDC’s for primary products such as steel and iron
• LEDC’s are also dependant on MEDC’s for income from tourism, whilst MEDC’s require LEDC’s to provide the climate and hospitality for some holiday destinations

Question 8

How are farmers in the EU and USA supported?

Answer 8

Many are subsidised (supported finantially) to produce food, making it cheaper to export (sometimes to developing countries)

They are protected by quotas, which restrict food imports, and tariffs which make imports from developing countries more expensive

Question 9

What does the WTO do?

Answer 9

Sets the rules of trade, and it has reduced some subsidies, quotas and tariffs

Question 10

What is fair trade?

Answer 10

Fair trade gives farmers a fairer price for good produced in poorer countries

Question 11

How can debts be reduced? What does this do? An example?

Answer 11

• Debt abolition - when a country’s debt is cancelled

This means they can use the money to develop rather than to pay back the debt

Eg Zambie had $4billion of debt cancelled in 2005 - in 2006 the country had enough money to start a free healthcare scheme for millions of people living in rural areas, which improved their quality of life.

• Conservation swaps (debt-for-nature-swaps) - where a part of a country’s debt is paid off by someone else in exchange for investment in conservation.

Eg in 2008 the USA reduced Peru’s debt by $25 million in exchange for conserving its rainforest

Question 12

What do MEDC’s export and import?

Answer 12

Export - valuable manufactured goods eg electronics and cars

Import - cheaper primary products eg tea and coffee

Question 13

What do LEDC’s export and import? And what does this mean?

Answer 13

The opposite to MEDC’s

This means that LEDC’s have little purchasing power, making it difficult for them to pay off debts and escape poverty

Question 14

What happens to the price of primary products? And what does this mean?

Answer 14

The price of them fluctuates on the world market - which means that workers and producers in LEDC’s loose out when the price drops

Question 15

Why do MEDC’s benefit from internation trade of manufactured goods?

Answer 15

Because manufactured goods are more reliable to trade which means that they benefit

Question 16

In terms of trade - what is essential in allowing the development of LEDC’s?

Answer 16

Increasing trade and reducing the balance of trade deficit

Question 17

What are tariffs? What does this do to the price of the goods to the customer?

Answer 17

Taxes imposed on imports, which makes foreign goods more expensive to the customer?

Question 18

What are quotas?

Answer 18

Limits on the amount of goods imported and usually work in the MEDC’s favour

Question 19

Three trading groups? Who do they contain?

Answer 19

• The EU

15 members - Austria, Belgium, Denmark, Finland, France, Germany, Greece, Irish Rebublic, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweeden and the UK

→ Trade is almost esclusively between the 15 member countries, leading to complaints that developing countries complaining that they can’t get fair access to the European market

• Mercosur

4 members in South America - Argentina, Brazil, Paraguay and Uraguay - as well as associate members - Bolivia, Colombia, Ecuador, Peru and Vanezuela who may become full members in time

→Relitively new, formed in late 1980’s/early 90’s but the benefits are already being felt by 4 members as trade tariffs on most products have been scrapped.

• NAFTA

‘North American Free Trade Association’ - 3 memebers - USA, Canada and Mexico

→established in 1994 and aims to eliminate trade barries, improve trade and increase investment (primarily in Mexico)