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.
The pattern of world trade
A trade surplus means that the value of exports is greater than imports. A trade deficit is when there are more imports than exports.
Usually, MEDCs export valuable manufactured goods such as electronics and cars and import cheaper primary products such as tea and coffee. In LEDCs the opposite is true. This means that LEDCs 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 LEDCs lose out when the price drops. The price of manufactured goods is steadier which means that MEDCs always benefit.
Increasing trade and reducing their balance of trade deficit is essential for the development of LEDCs. However, sometimes MEDCs 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.
Interdependence
Interdependence between countries means that they are dependent on one another in some way. For example, many LEDCs are dependent on MEDCs for manufactured goods or aid. MEDCs are dependent on LEDCs for primary products such as steel and iron. LEDCs are also dependent on MEDCs for income from tourism, whilst MEDCs require LEDCs to provide the climate and hospitality for some holiday destinations.
Fair trade
The result of the pattern of world trade is that the workers in primary industries in LEDCs often lose out. They receive low wages and often have poor standards of living. They cannot afford education for their children and many children are required to work to help their families earn a living.
Fair trade means that the producer receives a guaranteed and fair price for their product regardless of the price on the world market. This means their quality of life should improve, as well as the long-term prospects for their children.
Fair trade products sometimes cost more in supermarkets in MEDCs, but many consumers consider this a small price to pay for the benefits they bring.
Fair trade sets minimum standards for the pay and conditions of workers. The Fair Trade Organisation promotes Global Citizenship by guaranteeing a fair, minimum price for products. In this way, they support producers in improving their living conditions. About 5 million people benefit from Fair Trade in 58 countries.
Fair trade products are becoming more widespread and include tea, coffee, sugar, chocolate and cotton.
