The Development of Trade
• Trade results from an uneven
distribution of raw materials.
• It plays an important role in the
economy of most countries.
• European colonial powers used raw
materials from their colonies to
establish their own industries.
Balance of Trade
• The difference between income from
visible exports and cost of visible
• Trade surplus – countries earn more from
their exports than they pay for their
• Trade deficit – countries spend more on
their imports than they make from
Regional Trade Groups/Blocs
• Operate Free Trade Agreements , which
means duty and quota free trade with
• Aim – to strengthen political relations
and security between neighbouring
• EU and NAFTA are the largest but
membership is in a state of constant
Direction of World Trade
• Most trade between advanced market
economies (EU, USA, Japan)
• These had little trade with LEDCs – they
exported more to them than they
• Little trade between LEDCs who were
producing similar types of goods.
• Older developed countries face increasing
competition from NICs (Singapore, Hong
• World trade dominated by powerful
GATT and the WTO
• GATT set up in 1948 to reduce tariffs
and provide forum for discussion of
• Replaced by WT0 in 1995 which aims to
help LEDCs by controlling TNCs.
• Many LEDCs are now willing to join to
ensure a balanced and sustained recovery
of the world economy.
Recent Trends in World Trade
• World trade has increased with trade in
services increasing at a faster rate.
• Many of Asia’s NICs are the main
• LEDCs and NICs have achieved the
fastest rate of expansion.
• World trade is fickle and the volume and
value of world trade can fluctuate.