UNIT 6 (Trade and Aid)

• Globalisation


  A term used to describe how trade and technology have made the world into a more connected and interdependent place
• Interconnectedness


  The state of being linked with other things
• Trans-national corporation (TNC)


  A company that operates in more than one country
• Migration


  The movement of people from one place to another to live or to work
• Inter-cultural


  Something that occurs between people of different cultures including different religious groups or people of different national religions
• Factors leading to interdependence


  • Transport links
  • Communication
  • Social media
  • Trade
• Trade


  The exchange of goods and services between countries
• Trade happens when a producing country is able to produce goods or services more cheaply or of better quality than the consuming country
• No country is self-sufficient with a range of both raw materials and manufactured goods
• Trade


  The movements of goods and services from one place to another
• Interdependent


  Countries that rely on each other for resources such as food, energy, minerals and manufactured goods
• Self sufficient


  A person or community that can provide its own basic needs, so no need to trade
• Imports


  Goods brought into a country (bought)
• Exports


  Goods that leave a country (to be sold)
• Balance of trade


  The difference between the value of imports and exports
• Trade surplus


  When a country earns more on exports than its spends on imports
• Trade deficit


  When a country spends more on imports than it earns on exports
• Disadvantages of LEDC countries relying on primary product/raw material


  • Raw materials have less value than manufactured goods
  • Prices are dictated by the buyer (MEDC) not the producers (LEDC)
  • Prices of raw materials fluctuate from year to year
  • Man-made alternatives are found to some raw materials (Polyester instead of cotton and plastic instead of rubber), which decreases the demand for those raw materials
• Manufactured goods have higher prices and hold their prices
• Prices of manufactured goods rise faster than primary goods
• This creates an increasing gap between rich and poor
• Reasons why prices of raw materials fluctuate


  • Harvest
  • LIC producers undercut each other
  • HIC dictating the price
  • Man made alternatives
• Trade bloc


  Trading partnerships between different countries (European Union)
• Tariff


  A type of tax that may be charged on goods as they enter a country
• Quota


  Restrictions on the amount of goods that can be imported each year
• Other problems for LIC countries


  • They often find it hard to join trade blocs. So they might be prevented from trading with other countries
  • They may have to pay tariffs or quotas
• Fairtrade


  It is a foundation that guarantees a better deal for farmers and workers in developing countries so they can have a better standard of living
• Benefits for farmers in Fairtrade


  • A payment that is agreed and stable
  • Additional payment called a fair trade premium
  • Fair trade aims to develop a long term trading partnership with its producers
• SEEP (Social, Economic, Environmental, Political) impacts of Kuapa Kakoo


  • Social: In 2013, the organisation had 87,907 member of which 32% were women. Members of Kuapa Kakoo are mostly small-holders highly reliant on cocoa income.
  • Economic + social: Cocoa products is a major employer in Ghana, employing 3.2 million farmers and workers out of a total population of 25.3 million.
  • Economic: Almost all cocoa production is destined for export making cocoa Ghana's second most important export commodity after gold.
• Drawbacks of Fair Trade


  • Fair trade cooperatives can not reach everyone (only reach local population centres with workers) and can create a divide within communities as some local workers may not qualify to receive the benefits coop workers are able to receive.
  • Expensive/very high fees - in order for an organisation, an individual or a cooperative to be certified as Fair Trade, they must undergo an examination period which costs them money. They also must pay joining fees in case of exception and annual fees to keep the certification (can reach several thousand dollars). This disadvantages local entrepreneurs trying to change their communities.
  • There is a limited customer base around the world - fair trade products have a higher price value compared to normal products.
  • Relatively little fair trade coffee originates from the poorest countries so the coffee they sell would come from Mexico, Brazil and Colombia while it should be coming from Ethiopia, Kenya and Tanzania.
  • Fair trade can't develop a country as a whole, it targets certain villages leaving others in bad conditions.
  • The amount of product choice is really reduced as the other goods which are available for sale don't have a very large market which endangers the existence of the cooperative itself. Main products people buy when it comes to Fair trade is chocolate and coffee which limits the raw materials that can be produced.
  • No paper trail for investment into community products.
• Aid


  The giving of resources by one country or organisation to another
• Types of aid


  • Emergency aid: Money, food, goods and services given at times of dire need.
  • NGO's: An independent charity/agency that provides aid.
  • Long term aid: Aid that provides support over a long period of time to make changes that last.
  • Food aid: Edible things donated to needy populations.
  • Bilateral aid: Aid from one country to another.
  • Tied aid: Foreign aid that must be used in the donor country to buy goods and services from the country giving aid.
  • Multinational aid: Aid that is given by a number of countries and organisations like the UN and WHO.
  • Short term aid: Aid that provides support for a short time, sometimes when there is an immediate need.
  • Voluntary aid: Money collected from the public (and sometimes governments) by non-governmental organisations.
• Sustainable development


  Development that meets the needs of the people today without harming the ability of future generations to meet their own needs
• Top - down development


  Development projects that are imposed on people from 'above'
• Bottom - up


  Development projects that start and work from the grass-roots level
• Benefits of aid


  • Provision of medical training, medicines and equipment can improve health and standards of living.
  • Aid helps rebuild livelihoods and housing after a disaster.
  • Aid for agriculture can help increase food production and so improve the quality and quantity of food available.
  • Emergency aid in times of disaster saves lives.
  • Encouraging aid industrial development can create jobs and improve transport infrastructure. Infrastructure projects may end up benefiting employers more than employees.
  • Aid can support countries in developing their natural resources and power supplies.
  • Projects that develop clean water and sanitation can lead to improved health and living standards.
• Drawbacks of aid


  • Aid can increase the dependence of LEDCs on donor countries.
  • Sometimes aid is not a gift, but a loan, and poor countries may struggle to repay.
  • Aid may not reach the people who need it most.
  • Corruption may lead to local politicians using aid for their own means or for political gain. Sometimes projects do not benefit smaller farmers and projects are often large scale.
  • Aid can be used to put political or economic pressure on the receiving country.
  • The country may end up owing a donor country or organisation a favour.
  • It may be a condition of the investment that the projects are run by foreign companies or that a proportion of the resources or profit will be sent abroad.
  • Some development projects may lead to food and water costing more.
• Formal sector


  Workers have a contract, Jobs may include teacher, doctor, vet, Workers have rights to holidays and sick pay, Workers can save and plan ahead, Workers pay tax regularly
• Informal sector


  Earnings are irregular, The government doesn't earn any taxes from them, Jobs may include shoe shining, working on street markets and recycling waste, Workers find it very difficult to borrow money from a bank or pay rent for housing, Workers have no rights and only earn when they work, Work can often be illegal or dangerous