GCSE Revision - Development - Trade

Trade is the exchange of goods and services between countries. More than half the world's trade takes place between just eight countries known as the G8 which includes some of the world's most wealthy and industrialised countries. Why?

  • Being industrialised countries, they need lots of raw materials and energy supplies

  • They make a wide variety of manufactured goods

  • People can afford to eat foods or buy goods not produced in their own country

  • Trade groupings, such as the EU, encourage trade by making it easy to cross borders without paying customs duties

  • Transport links have improved, e.g. mororways, high speed trains and tunnels link EU countries together making for quicker and easier movement of goods between countries

For poor countries such as LEDCs especially found in Africa the reasons are the opposite of the above such as

  • Little Manufacturing Industry

  • Many are poor farmers

  • No trading groupings

  • Poor or non-existent communications

  • Often poor countries rely on only one or two raw materials such as Ecudor which grows bananas - When the price or demand for bananas falls the countries income can be badly affected

The Pattern of World Trade

MEDC's make much more money from Trade than LEDCs. Why is this

  • LEDCs export raw materials (crops, timber, ores etc) to MEDCs

  • MEDCs export manufactured and processed goods (processed food, vehicles, electronics) to LEDCs

  • Raw materials have much less value than manufactured goods.

 

Colonialism

This unequal pattern of world trade was established during the colonial period in the eighteenth century and nineteenth centuries.

  • Europeans established colonies and imported resources from the Americas, Africa and Asia such as agricultural produce and raw materials.

  • Europeans then exported manufactured goods back to their colonies e.g. textiles and railway trains to India

  • European countries gained an economic advantage over their colonies

  • Colonies are now independent, but most are finding it difficult to break this pattern of trade

Advantages to MEDCs

  • The price of manufactured goods has increased steadily

  • MEDCs are becoming richer so are able to import more raw materials from LEDCs

  • Competition between LEDCs ensures MEDCs can buy goods for the lowest possible prices.

 

Disadvantages for LEDCs

  • The price of raw materials has fallen compared to the price of manufactured goods

  • LEDCs cannot afford to import the manufactured goods they need

  • The price of raw materials is not stable. When there is a surplus, prices fall and LEDCs earn even less

  • Exploitation of raw materials may damage the environment

  • This all increases the dependency of LEDCs on MEDCs

Fair Trade
Fair Trade is a way of doing business that ensures the people who produce the raw materials benefit.
Benefits

  • Minimum wages and safe working conditions

  • Restrictions on child labour

  • Protection for the environment

  • Fair Trade products can be bought in most supermarkets in the UK - they just cost a little more and the increased cost is passed on to the producer

LINKS - Revision DVD - Development - Good for Bananas and how trade works

Common Questions

  • Describe the pattern of trade shown on the map

  • What do we mean by fair trade and how does it benefit LEDCs

  • How does the pattern of trade bring advantages and disadvantages to LEDCs and MEDCs

  • What is meant by primary product dependency - what are the advantages and disadvantages of this form of trade