Unit 13 - Essays - Debt Flashcards
How far do you agree that trade can solve the problems of the international debt crisis?
Paragraph 1: How Trade Can Help Countries Pay Back Debt
Topic Sentence: Trade can help countries manage their debt by increasing export revenues, which improves the balance of payments and helps repay loans.
Key Points to Include:
Explanation: Exporting goods and services brings in foreign exchange, which can be used to pay back international loans.
Examples and Evidence:
Vietnam: Adopted an export-led growth strategy that resulted in 7% annual GDP growth from 2016 to 2019, stabilizing its debt-to-GDP ratio at 45%.
Bangladesh: The garment industry generates significant foreign exchange, helping to manage debt repayments.
Analysis:
Spatial Variation: Benefits of trade are not evenly distributed. LICs and MICs often face trade barriers imposed by HICs, reducing the effectiveness of trade as a debt solution.
Scale Variation: Large countries with diverse exports benefit more compared to small economies relying on a few products.
Evaluation: Trade helps but only if poorer countries gain fair access to international markets.
Paragraph 2: How Trade Can Help with Currency and Inflation Problems
Topic Sentence: Trade can help stabilize national currencies and control inflation, making it easier for countries to repay their debts.
Key Points to Include:
Explanation: Diversifying exports helps maintain a stable currency value, which in turn makes debt repayments less costly.
Examples and Evidence:
Chile: Diversified exports (copper and agriculture) stabilized the peso and reduced inflation to 3% by 2018.
Angola: Reliance on oil exports caused severe currency volatility when oil prices dropped, making debt repayment harder.
Analysis:
Sectoral Variation: Countries exporting a mix of goods fare better than those relying on a single commodity.
Scale Variation: Larger economies can absorb shocks better than smaller ones.
Evaluation: Trade helps stabilize currencies and inflation but requires a diverse export base.
Paragraph 3: Limitations of Trade in Addressing Structural Debt Problems
Topic Sentence: Trade alone cannot solve debt issues caused by structural problems such as corruption, odious debt, and low-value exports.
Key Points to Include:
Explanation: Structural issues like corruption and a lack of value-added industries prevent trade from significantly reducing debt.
Examples and Evidence:
Mozambique: Despite increasing trade, its debt-to-GDP ratio reached 120% in 2021 due to undisclosed loans and corruption.
Primary Product Dependence: Many LICs export low-value raw materials, limiting their earnings and ability to pay debt.
Analysis:
Spatial Variation: LICs and MICs are more affected by structural issues than HICs.
Scale Variation: Larger and more diversified economies can better absorb structural problems.
Evaluation: Trade must be paired with governance reforms and efforts to add value to exports.
Paragraph 4: Short-term vs Long-term Effects of Trade on Debt
Topic Sentence: The effectiveness of trade in solving debt problems varies between short-term and long-term impacts.
Key Points to Include:
Explanation: Trade liberalization can worsen debt in the short term by increasing imports faster than exports.
Examples and Evidence:
Kenya: Trade liberalization in the 1990s increased its trade deficit by 22%, worsening its debt situation initially.
South Korea: Strategic trade policies focusing on high-value exports reduced its debt-to-GDP ratio from 45% in the 1980s to 35% by 2000.
Analysis:
Temporal Variation: Trade can worsen debt in the short term but improve it in the long term with strategic planning.
Scale Variation: Larger economies benefit more from long-term trade strategies.
Evaluation: Trade is more effective for managing debt in the long term if planned carefully.
Paragraph 5: How Trade Works Better with Debt Relief Programs
Topic Sentence: Trade can be more effective in solving debt problems when combined with debt relief programs.
Key Points to Include:
Explanation: Debt relief frees up resources that can be used to invest in export sectors.
Examples and Evidence:
Uganda: The HIPC Initiative reduced its debt stock by 90%, allowing reinvestment in export sectors.
Jamaica: Trade alone failed to reduce its debt-to-GDP ratio, which remained above 120% until 2015.
Analysis:
Spatial Variation: LICs benefit more from combining trade with debt relief compared to HICs.
Scale Variation: Smaller economies find debt relief more impactful in enabling trade-led growth.
Evaluation: Trade must be part of a broader strategy that includes debt relief to be truly effective.
Conclusion
Summary of Key Points:
Trade can help reduce debt by increasing foreign exchange, stabilizing currencies, and improving creditworthiness.
However, structural issues, unfair trade rules, and the need for debt relief programs limit trade’s effectiveness.
Judgement:
Trade alone cannot solve the international debt crisis. A combined approach, including trade, debt relief, and governance reforms, is essential for sustainable debt management.
How far do you agree that trade can solve the problems of the international debt crisis? (SIMPLE ENGLISH)
Paragraph 1: How Trade Can Help Countries Pay Back Debt
Topic Sentence: Trade can help countries pay back their debt by earning money from exports.
Key Points to Include:
Explanation: When countries sell more products to other nations, they earn foreign money, which can be used to pay back what they owe.
Examples and Evidence:
Vietnam: Focused on selling goods to other countries and grew its economy by about 7% every year from 2016 to 2019. This helped keep its debt under control.
Bangladesh: The garment industry earns a lot of foreign money, helping the country pay its loans.
Analysis:
Unequal Benefits: Richer countries often make rules that make it hard for poorer countries to sell their goods. This means not all countries can benefit equally from trade.
Different Scales: Big countries with many different products to sell benefit more than small countries with only a few products.
Evaluation: Trade helps countries pay debt, but only if poorer countries can sell their products fairly.
Paragraph 2: How Trade Can Help with Currency and Inflation Problems
Topic Sentence: Selling a mix of products to other countries can help keep a country’s money and prices stable, making it easier to pay back loans.
Key Points to Include:
Explanation: When a country earns money from different types of exports, its currency is less likely to lose value. Stable money means debt payments cost less.
Examples and Evidence:
Chile: Sells both copper and farm products, which helped keep its money value steady and inflation (price rises) low at about 3% in 2018.
Angola: Depends mostly on oil sales. When oil prices dropped, its money became weaker, making it harder to pay back loans.
Analysis:
Different Types of Products: Countries that sell many types of products do better than those selling just one.
Size Differences: Bigger countries find it easier to handle money problems than smaller ones.
Evaluation: Trade can help with money and price problems, but only if countries sell different kinds of products.
Paragraph 3: Why Trade Alone Cannot Fix All Debt Problems
Topic Sentence: Trade cannot solve all debt problems because some are caused by things like corruption, unfair loans, and selling low-value products.
Key Points to Include:
Explanation: Even if a country sells more products, problems like corruption and bad loans can keep debt levels high.
Examples and Evidence:
Mozambique: Its debt reached 120% of GDP in 2021 despite trading more because of hidden loans and corruption.
Low-value Exports: Many poorer countries only sell raw materials like cotton or coffee, which earn less money compared to finished products.
Analysis:
Where Problems Happen: Poorer countries are more affected by corruption and bad loans than richer ones.
Big vs Small Countries: Big countries with many industries can cope better than small ones.
Evaluation: Trade alone cannot fix debt problems caused by corruption and unfair loans. Better governance and selling higher-value products are also needed.
Paragraph 4: Short-term vs Long-term Effects of Trade on Debt
Topic Sentence: Trade can cause problems in the short term but can help reduce debt in the long term if managed well.
Key Points to Include:
Explanation: At first, trade can increase debt if imports grow faster than exports. Over time, selling more valuable products can help reduce debt.
Examples and Evidence:
Kenya: When Kenya opened its markets in the 1990s, imports increased quickly, making debt problems worse in the short term.
South Korea: Focused on selling high-value products like electronics, which helped lower its debt-to-GDP ratio from 45% in the 1980s to 35% by 2000.
Analysis:
Time Differences: Trade can make debt worse at first but better in the long run.
Big vs Small Economies: Big countries can handle the short-term problems better than small ones.
Evaluation: Trade can help reduce debt, but countries need to plan for the short-term problems first.
Paragraph 5: How Trade Works Better with Debt Relief Programs
Topic Sentence: Trade can help solve debt problems more effectively if countries also get help like debt relief programs.
Key Points to Include:
Explanation: Debt relief programs reduce what countries owe, making it easier for them to invest in products to sell.
Examples and Evidence:
Uganda: Was part of a debt relief program that cut its debt by 90%, allowing it to focus on growing its exports.
Jamaica: Relied mostly on trade without debt relief, so its debt stayed above 120% of GDP until 2015.
Analysis:
Where it Works Best: Poorer countries benefit more from debt relief combined with trade.
Big vs Small Countries: Small countries find debt relief more helpful than big ones.
Evaluation: Trade alone isn’t enough. Debt relief programs make it easier for trade to help reduce debt.
Conclusion
Summary of Key Points:
Trade can help reduce debt by bringing in money and keeping the currency stable.
However, trade alone cannot fix problems caused by corruption, unfair rules, or low-value exports.
Debt relief and better governance are also needed to solve the debt crisis.
Judgement:
Trade can solve some parts of the debt problem but not everything. The best way to fix the debt crisis is to use trade together with debt relief and better rules for trade.
