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Evaluate the view that 'unfair terms of trade' are the primary cause of poverty in LDCs (Least Developed Countries)

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Introduction

Evaluate the view that 'unfair terms of trade' are the primary cause of poverty in LDCs (Least Developed Countries). What is the aim of this report? The aim of this report is to evaluate to what degree unfair terms of trade are one of the main causes of poverty in LDC nations. This view is going to be evaluated through different case studies, which show different views of unfair terms of trade. What are 'unfair terms of trade'? Trade involves the importing of primary products and exploiting of goods and services. Over the past few decades, MEDC nations have dominated the trade market with MEDC companies, which are now market leaders. Unfair terms of trade are when MEDC companies take advantage of the producers disadvantage by exploiting them. Exploitation can be created in several ways. It could be in the form of cheap labour, or unfair prices. Trade needs to be unrestricted by trading blocs, tariffs and subsidies to make it fair. Fair trade is an ethical approach to conventional methods of trade. It is like a trading partnership, which targets sustainable development for the producer of the product in an LDC, who is usually at a disadvantage. The North And South The development gap separates the North and South. ...read more.

Middle

The best offers are found in LDC nations, which are usually struggling economically. So globalisation could be a major cause of unfair terms of trade, as capitalism, and TNCs influence trade patterns around the world. TNCs do this by exploiting an areas comparative advantage. This means that they look for locations that specialise in activities for which the location is best equipped for, so as to make it competitive, and allow the TNCs to be more competitive in the global market. LDCs, for their comparative advantage offer cheap labour. This is because they need to increase there employment, so as to help the economy, and the only way that they are able to do that is to attract multinational companies or transnational corporations to set up in their country. The only way they can do this is to have a comparative advantage so as to attract these countries, and the only attraction they can offer, which MEDC countries cannot, is cheap labour and resources for cheap prices. This allows TNCs and MEDC countries to exploit these countries. What difference does Fair Trade make to the producers? As you will see in the table below, fair trade makes a large difference to people and communities producing products. ...read more.

Conclusion

While still selling to consumers in Western countries for around US$10 per pound, the world market price for coffee is less than US$0.50 per pound, of which farmers only receive half. Just five years ago, the farmers would receive at least five times that amount. As a result of this massive slump in coffee price, the Ethiopian coffee farmers are facing a sharp increase in poverty and hunger. The rise in poverty level among Ethiopian coffee farmers has developed into another unexpected problem. Many farmers have abandoned coffee and started growing a more profitable crop: Khat, a leafy narcotic often mentioned as the region's version of moonshine. Khat is chewed legally by millions of people in the Horn of Africa and Middle East. However, in Britain and United States (where it is illegal), Khat can fetch as much as $200 a pound. Ethiopia's Oromia Coffee Farmer's Cooperative Union (OCFCU) aims to help small-scale coffee farmers take advantage of the Fair Trade coffee market, the viable alternative trade strategy. It was set up to help the 100,000 farmer families working in Oromia cooperatives to get through the difficult price crisis. In only its third year, the OCFCU is already starting to return 70 percent of its gross profits back to the Fair Trade cooperatives, in order to help coop members. (Case Study was adapted from http://www.globalexchange.org) ?? ?? ?? ?? Geography Development And Disparity Ismail Mulla Question 3 ...read more.

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