Trade Flashcards
Trade
Global Trade is the flow of goods and services between and across the developing world and the developed world
Trade Introduction
- Offers an opportunity for the economic development of LDCs
- Others suggest trade relationships between poor and rich countries is exploitative and doesn’t help development.
Modernisation Theory
- Argue LDCs need to create their market share in world trade to develop
- Most LDCs can compete, as unlike the West they have an abundance of natural resources and cheap labour
- Increasing trade with other countries is a crucial part of ‘climbing the ladder of development’
Modernisation Theory: Rustow
Five Stages of Development:
- ) Phase Two: Pre Conditions for Takeoff. Developing countries need capital, investment and advise from the West in order to establish an industrial base
- )Phase Three: ‘Take off’ phase. Countries will start to manufacture goods for export to other countries, earnings are then reinvested into infrastructure resulting in a highly skilled workforce and further integration into the global economy
- Then the age of mass consumption and will be equal trading partners in the global market. Relationship between trade and growth.
Modernisation Theory: Examples
=GDP of worlds top countries ranked by GDP export and profit account for 40% of the world’s goods. Meanwhile, the bottom 50 countries export less than 1% of the world’s goods
=China’s economic reforms including opening up markets to the rest of the world started at 20 billion and went up to 500 billion
Modernisation Theory: Evaluation
- The assumption that entrepreneurship will transition traditional to modern is too simple
- Modernity creates many social problems
Neo-Liberalism
- Free global trade markets as both means and desired ends for development.
- Free Trade: Trade without government interference in the private affairs of private businesses and consumers who buy the product. Depend on free trade agreements
- Free Trade Agreements: Policies established between countries and private businesses which make it easy for these companies to produce and sell goods in that country
- Conditions: Eliminating tariffs and quotas, reducing regulation and protection, eliminating subsidiaries, lower tax
- Business-friendly to encourage wealth and TNCs
Neo-Liberalism: Reid-Henry
Developing countries need to pull down all barriers to trade and work cheaply for TNCs, organised social life around profits.
Neo-Liberalism: Examples
=Kenya and Flowers: Found niche that they could produce cheaply. Their climate is perfect for top quality flowers as near the equator so direct stimulant and good quality water and food. Now accounts for 35% of all flowers in the EU
IMF/WB and Trade
- IMF provides short-term loans that are paid back with interest when they cannot function as a ‘business’ anymore
- WB provides long-term loans also paid back with interest to aid a verity of investments such as infrastructure projects
- Both only loan money through SAPs which limits gov spending. Based on Neo-liberal approach to reduce trade barriers
SAPS
- Set up IMF/WB as conditions when providing loans or aid
- Involve reducing public spending and introduce privatisation
- If resist it is blocked
- Advocated free trade due to Neo-Liberal approach
Neo-Liberalism: Evaluation
-Western aid is based on this theory which is ethnocentric towards the culture of developing countries
Dependency Theory
- Gaunder-Frank: Trade doesn’t work for poor countries due to colonialism. Before independence the west made took all commodities so they remain dependent. Export primary commodities which have inherently low market value. Keeps them dependent which in turn keeps them rich.
- Elwood: Three commodities account for 75% of the total exports from the worlds poorest countries, makes prices do down globally which means they need to produce more to remain stable.
- Value added to primary commodes by the west later on
- Trade deal terms are biased, overproduction and subsidiaries put them at a disadvantage
- They are pressured into debt, loans and debt agreements. Can’t keep up payments due to the unfair and volatile markets so they can’t invest infrastructure, it goes to developed countries. Produce more to keep up which adds to the problem.
Dependency Theory: Evaluation
- Defining dependency. Hard to measure and operationalise concepts like Satellites and Metropolis that are undefined
- Deterministic. Frank stated there was no way of changing position whereas Wallerstein does with WST.
Worth of Trade Globally
$20 Trillion
