Trade

1. Trade LESSON AIMS: What is trade? How is international trade controlled by certain countries? What are the rules of international trade?

2. "Before you've finished your breakfast this morning, you'll have relied on half the world" Martin Luther King

3. What is trade? • Trade is the exchange of goods and services between one country and another. • Goods bought into a country are called imports, and those sold to another country are called exports. http://www.bbc.co.uk/schools/gcsebitesize/geography/development/trade_video.shtml

4. Usually, MEDC’s export valuable manufactured goods such as electronics and cars and import cheaper primary products such as tea and coffee. • In LEDC’s the opposite is true. This means that LEDC’s have little purchasing power, making it difficult for them to pay off their debts or escape from poverty • The price of primary products fluctuates on the world market which means that workers and producers in LEDC’s lose out when the price drops. • The price of manufactured goods is steadier which means that MEDC’s always benefit.

5. Task One • Using the worksheet match the key terms and the definitions. • Each one needs to be written out fully in your books.

6. Governments interfere with international trade… • Increasing trade and reducing their balance of trade deficit is essential for the development of LEDC’s. • However, sometimes MEDC’s 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 MEDC's favour. • Subsidies are payments made by a government to a producer in it’s country.

7. Advantages and Disadvantages Advantages to MEDC’s • The price of manufactured goods has increased steadily • MEDC’s are becoming richer so are able to import more raw materials from LEDC’s • Competition between LEDC’s ensures MEDC’s can buy goods for the lowest possible prices. Disadvantages for LEDC’s • The price of raw materials has fallen compared to the price of manufactured goods • LEDC’s 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 LEDC’s earn even less • Exploitation of raw materials may damage the environment • This all increases the dependency of LEDC’s on MEDC’s

8. Why do rules of trade make it difficult for LEDC’s to sell imports into a European Union (EU) country like the UK? Think about these things below UNITED STATES, JAPAN, CANADA AND THE EUROPEAN UNION COMPETITION – EU goods v. LEDC goods TARIFFS, QUOTAS AND SUBSIDIES PROTECTING YOUR OWN FARMERS / WORKERS

9. UNITED STATES, JAPAN, CANADA AND THE EUROPEAN UNION • The big problem with trade is that it is mostly controlled by a very powerful group of countries.

10. TARIFFS, QUOTAS AND SUBSIDIES • These countries use tariffs, quotas and subsidies for many years to protect their workers and farmers from competition abroad and they have no intention of stopping. PROTECTING YOUR OWN FARMERS / WORKERS

11. COMPETITION – EU GOODS v. LEDC GOODS • For many African countries, this system can be very unfair. • Products would be very expensive in the UK because when the products are imported into the EU, a tariff would be charged. • EU goods would not have this tariff – they could also been given a subsidy to make them even cheaper.

12. What is dumping and how is it bad for LEDC’s? • Because of the subsidies paid in the EU, we often overproduce things – especially certain foods and drinks. • This then gets dumped into LEDC’s ay prices lower than a farmer could produce it. • Cheap food to LEDC’s may be considered good – but in reality it puts farmers out of business. • In your own words, explain ‘Dumping’ and why it is bad.