The main pattern of trade is that developing countries tend
to export mainly primary goods, and import mainly manufactured goods. In
developed countries the pattern is the other way around - they tend to import
primary goods and export manufactured goods. Primary goods are raw materials.
They include coal, grains and fish. Manufactured goods are goods that have been
made. They include cars, machinery and computers.
This graph shows that
Colombia, which is a developing country, imports a lot of manufactured
Most of Colombia's
exports are primary goods.
Developed and developing countries are interdependent. This means they rely
on each other. Developed countries need the raw materials for their
manufacturing industries, and developing countries need to have a market for
Trade Problems for Developing Countries
Developing countries believe they get a raw deal when it
comes to international trade. These problems include
- Relying on only one or two primary goods as their main exports
- They cannot control the price they get for these goods
- The price they pay for manufactured goods increases all the time
- As the value of their exports changes so much long term planning is
- Increasing the amount of the primary good they produce would cause the world
price to fall
The graph shows how much the price of tin has
Developing countries that try to export manufactured goods find that trade
barriers are put in their way. There are two types of trade barrier -
quotas and tariffs.
- A quota is a limit on the amount of goods a country can export to another
- A tariff is a tax on imports
Other problems that developing
countries face are they are short of the money that is needed to set up new
businesses and industries. Also, developing countries have fewer people who have
the wealth to buy the goods made in local industries.
A multinational company has branches in may countries. Ford
and Sony are examples.
Multinational companies do bring some benefits to developing
countries. They provide jobs and increase the wealth of the local people. The
country gains some wealth by way of taxes.
However, there are some problems as well. The jobs are often
low-skilled and poorly paid. Much of the profit will go out of the country, and
the company may pull out to relocate in a country where it can make a greater
profit. Multinational companies are primarily interested in making profits for
their shareholders. Paying wages is an expense that the company will try to
reduce to as low a level as possible.