How does trade and development affect the development gap?

Question 1

Globalisation and improvements in transport and communications have rapidly increased the volume and value of world trade, but the benefits of this have not been evenly distributed.

Answer 1

The rich countries have traded more and gotten richer- and relatively the poorer countries have traded less and gotten poorer.

Question 2

Patterns of world trade

Answer 2

MEDC dominated
The Global Triad
Value and Volume
Rise of the BRICs (e.g China - Africa)

Question 3

What is the global triad between?

Answer 3

NAFTA, the EU and APEC.

Question 4

Trade, investment and China

Answer 4

The growth of China has changed the world pattern of trade and investment.
In 2002 China was the largest recipient of FDI, overtaking the USA.

Question 5

The history of trade between MEDCs and LEDCs.

Answer 5

Colonialism, the search for raw materials

LEDCs stuck trading commodities.

Question 6

What is the terms of trade?

Answer 6

The terms of trade…the ratio between currencies earned from exports and the price of imports.
Prices of commodities have decreased relative to the prices of manufactured goods.
The producers of primary products also got very little of their eventual value.
MVA- manufactured value added

Question 7

Coffee

Answer 7

LEDCs encouraged to export more to earn US$ to repay loans.
Collapse of commodity agreements (coffee in 1989)
Problems of oversupply and bad harvests
Commodity substitutes
Changing technology causes changing demand
Speculation on world markets doesn’t benefit producers
Fair trade

Question 8

Dependency on commodity exports

Answer 8

Primary Product Dependency
Many countries depend on one commodity for over 50% of exports, especially in Africa…Uganda and coffee, Ghana and cocoa, Zaire and Copper.

Question 9

Trade blocs

Answer 9

NAFTA the EU
Free trade within a group- however, they tend to have tariffs (import taxes) from outside the trade bloc.
Arguably it protects their markets and jobs
However it makes it more difficult for poorer countries to compete or produce manufactured goods (things that add value).
Trade blocs attract investment and trade away from poorer countries- further concentrating trade and investment in richer countries thereby widening the development gap.

Question 10

WTO

Answer 10

Promotes free trade…but not everyone trades freely.

Promotion of TRIPS (trade related intellectual property rights).

Question 11

Reasons why trade and investment widens the gap.

Answer 11

The patterns of trade favour the richer countries, most trade occurs within the richer countries. Whereas most developing LEDC still depend on trade in commodities (legacy of the colonial system)
Volume of commodity trade has increased (banana’s), the relative value has not, this is because of the terms of trade. The value you get for exports of primary goods doesn’t equate to the value of imports of manufactured goods. In some countries this is worsened by primary product dependency.
Furthermore trade blocs and WTO don’t help the situation as richer countries maintain import tariffs and subsidies, that make trade unfair for poorer countries.