Obstacles to development...

 

Economic factors

• global imbalance of trade between different parts of the world.

 

• The imbalance in the pattern of world trade  - word doc - complete the tasks on this handout

 

A solution? 

• The attempts to reduce it: The contributions of Fair Trade and Trading Groups.

 

 

Read this and page 202 in your text...

 

The pattern of world trade is a problem for poorer countries that depend mostly on primary products...

 

The basic pattern of world trade.. 

Usually, richer countries export valuable manufactured goods such as electronics and cars and import cheaper primary products such as tea and coffee.

In poorer countries the opposite is true. This means that poorer countries have little purchasing power, making it difficult for them to pay off their debts or escape from poverty.

  

Problems of relying on primary products for export:

• The price of primary products fluctuates on the world market (and it is often the financial centres in rich world countries that set the prices) which means that workers and producers in poorer countries lose out when the price drops. The price of manufactured goods is steadier which means that richer always benefit.
• Richer countries impose tariffs and quotas on imports. Tariffs are taxes imposed on imports, which makes foreign goods more expensive to the consumer. Quotas are limits on the amount of goods imported and usually work in the richer country's favour.
• Primary farm products  (cash crops) are at risk from natural hazards such as flooding and drought.
• Poor countries increase the land available for their 'cash crops' at the expense of land available for local food production.

 

WATCH: Banana production in Ecuador and then watch this clip too. - What are the problems of over-reliance on primary industry?

 

Interdependence

 

Interdependence between countries means that they are dependent on one another in some way. For example, many poorer are dependent on richer countries for manufactured goods or aid. Richer countries are dependent on poorer countries for primary products such as steel and iron. Poorer countries are also dependent on richer countries for income from tourism, whilst richer countries require poorer countries

 to provide the climate and hospitality for some holiday destinations.

 

 

The changing pattern of trade

 

The global economy has grown continuously since the Second World War. Global growth has been accompanied by a change in the pattern of trade, which reflects ongoing changes in structure of the global economy. These changes include the rise of regional trading blocs, deindustrialisation in many advanced economies, the increased participation of former communist countries, and the emergence of China and India.

1. The emergence of regional trading blocs, where members freely trade with each other, but erect barriers to trade with non-members, has had a significant impact on the pattern of global trade. While the formation of blocs, such as the European Union and NAFTA, has led to trade creation between members, countries outside the bloc have suffered from trade diversion. 

2. Like several advanced economies, the UK's trade in manufactured goods has fallen relative to its trade in commercial and financial services. Many of these advanced economies have experienced deindustrialisation, with less national output generated by their manufacturing sectors.

3. The collapse of communism led to the opening-up of many former-communist countries. These countries have increased their share of world trade by taking advantage of their low production costs, especially their low wage levels.

4. Newly industrialised countries like India and China have dramatically increased their share of world trade and their share of manufacturing exports. China, in particular, has emerged as an economic super-power. China's share of world trade has increased in all areas, and not just in clothing and low-tech goods. For example, in 1995, the US had captured nearly 25% of global trade in hi-tech goods, while China had only 3%. By 2005, the US share had fallen to 15%, while China's share had risen to 15%. (Source: European Central Bank - ECB, Occasional Paper - China and India's Role in Global Trade and Finance, 2008)

read more at:  http://www.economicsonline.co.uk/Global_economics/The_pattern_of_trade.html

 

extension - find out who the WTO are and what they do and why some people are against it.