There is simply no way that LEDCs can catch up with MEDCs. This is mainly due to the fact that most LEDCs are only ‘allowed’ to export primary products (which may fluctuate in price) and must therefore import secondary products. One example of this is that Gabon exports a tree for $1. This is then exported to France and made in a factory into a wooden bench. This is on sale in France for $500, but, if exported to Gabon, would be around $600. One can see from this example why LEDCs always lose out if they only export primary and import secondary products, because they build up a trade deficit. MEDCs may charge heavy import duties on products not from MEDCs and may have special trade agreements and free trade zones with other MEDCs, such as the European Union, which make it far cheaper to trade with themselves.
Another factor is that, because they cannot naturally compete on costs with LEDC raw material producers because of factors such as higher wages, MEDC raw material producers are often subsidised. One example is that an apple grown in Senegal may cost under 1 Eurocent, yet one grown in Germany may cost around 5 Eurocents. Because of subsidy from the EU, however (farmers are possibly the only type of workers that are subsidised), they may cut the cost down to 0,5 Eurocent.
An additional factor is that any more expensive, raw materials can easily be artificially and synthetically produced if there is no way that an MEDC can produce it cheaper than an LEDC. One example of this is that 1kg of rubber imported from Laos may cost the manufacturers Rs 10000. However, if Japan or Germany made mass-produced synthetic rubber in a processing plant, it could cost only Rs8000, and importing and exporting the products would be cheaper due to better communications in MEDCs.
MEDCs also find it better to trade between themselves, therefore trade between G7 countries (Canada, France, Italy, UK, USA, Germany and Japan – 7 of the world’s most industrialised nations) accounts for around 60% of world trade, yet the countries take up maybe under 10% of the world’s landmass.
Because MEDCs are so highly protectionist (meaning they do not have a completely free market and favour some trading countries to others), this means that LEDCs lose out as they have no infrastructure of which to trade between themselves because so many were originally colonies and were designed to trade only with the colonial powers that they were owned by, and they also do not have a varied market and may depend on similar or the same products as their neighbours. For instance, many Persian Gulf states all depend on oil and have not used oil money to vary their economies. Therefore, not only does their wealth depend ONLY on world oil prices but they will be just as poor as before when oil runs out.
The main reason for Africa’s trade problems is that rich countries have over 3 times as many trade barriers as middle income countries. Another reason is that up to 40% of total earnings are spent on transportation of goods to and from far away countries. 45% of clothes from Africa face the same trading barriers as only 5% of clothes from MEDCs to trade with MEDCs. Because of all of this, from 1980 to 1996, Africa’s percentage in World Trade has HALVED. African goods exports only grew by 2% (the world average was 7% and the Asian average was 10%). In 1980 African trade accounted for 5.9% of World Trade (still small considering it is around 20% of world landmass) but fell to 3% by 1990 and then 2.3% in 1996. However, for a while, there was a sense of optimism. After years of negotiations called the Uruguay Round, which tried to allow LEDCs into the economy, there was an African trade growth of 13% followed by 16% the next year. However, this is such a small figure as the percentage of African trade is so small. It really needs growth of a few hundred percent to compete with MEDCs. There is simply no way that LEDCs can catch up with MEDCs. This is mainly due to the fact that most LEDCs are only ‘allowed’ to export primary products (which may fluctuate in price) and must therefore import secondary products. One example of this is that Gabon exports a tree for $1. This is then exported to France and made in a factory into a wooden bench. This is on sale in France for $500, but, if exported to Gabon, would be around $600. One can see from this example why LEDCs always lose out if they only export primary and import secondary products, because they build up a trade deficit. MEDCs may charge heavy import duties on products not from MEDCs and may have special trade agreements and free trade zones with other MEDCs, such as the European Union, which make it far cheaper to trade with themselves.
Another factor is that, because they cannot naturally compete on costs with LEDC raw material producers because of factors such as higher wages, MEDC raw material producers are often subsidised. One example is that an apple grown in Senegal may cost under 1 Eurocent, yet one grown in Germany may cost around 5 Eurocents. Because of subsidy from the EU, however (farmers are possibly the only type of workers that are subsidised), they may cut the cost down to 0,5 Eurocent.
An additional factor is that any more expensive, raw materials can easily be artificially and synthetically produced if there is no way that an MEDC can produce it cheaper than an LEDC. One example of this is that 1kg of rubber imported from Laos may cost the manufacturers Rs 10000. However, if Japan or Germany made mass-produced synthetic rubber in a processing plant, it could cost only Rs8000, and importing and exporting the products would be cheaper due to better communications in MEDCs.
MEDCs also find it better to trade between themselves, therefore trade between G7 countries (Canada, France, Italy, UK, USA, Germany and Japan – 7 of the world’s most industrialised nations) accounts for around 60% of world trade, yet the countries take up maybe under 10% of the world’s landmass.
Because MEDCs are so highly protectionist (meaning they do not have a completely free market and favour some trading countries to others), this means that LEDCs lose out as they have no infrastructure of which to trade between themselves because so many were originally colonies and were designed to trade only with the colonial powers that they were owned by, and they also do not have a varied market and may depend on similar or the same products as their neighbours. For instance, many Persian Gulf states all depend on oil and have not used oil money to vary their economies. Therefore, not only does their wealth depend ONLY on world oil prices but they will be just as poor as before when oil runs out.
The main reason for Africa’s trade problems is that rich countries have over 3 times as many trade barriers as middle income countries. Another reason is that up to 40% of total earnings are spent on transportation of goods to and from far away countries. 45% of clothes from Africa face the same trading barriers as only 5% of clothes from MEDCs to trade with MEDCs. Because of all of this, from 1980 to 1996, Africa’s percentage in World Trade has HALVED. African goods exports only grew by 2% (the world average was 7% and the Asian average was 10%). In 1980 African trade accounted for 5.9% of World Trade (still small considering it is around 20% of world landmass) but fell to 3% by 1990 and then 2.3% in 1996. However, for a while, there was a sense of optimism. After years of negotiations called the Uruguay Round, which tried to allow LEDCs into the economy, there was an African trade growth of 13% followed by 16% the next year. However, this is such a small figure as the percentage of African trade is so small. It really needs growth of a few hundred percent to compete with MEDCs. There is simply no way that LEDCs can catch up with MEDCs. This is mainly due to the fact that most LEDCs are only ‘allowed’ to export primary products (which may fluctuate in price) and must therefore import secondary products. One example of this is that Gabon exports a tree for $1. This is then exported to France and made in a factory into a wooden bench. This is on sale in France for $500, but, if exported to Gabon, would be around $600. One can see from this example why LEDCs always lose out if they only export primary and import secondary products, because they build up a trade deficit. MEDCs may charge heavy import duties on products not from MEDCs and may have special trade agreements and free trade zones with other MEDCs, such as the European Union, which make it far cheaper to trade with themselves.
Another factor is that, because they cannot naturally compete on costs with LEDC raw material producers because of factors such as higher wages, MEDC raw material producers are often subsidised. One example is that an apple grown in Senegal may cost under 1 Eurocent, yet one grown in Germany may cost around 5 Eurocents. Because of subsidy from the EU, however (farmers are possibly the only type of workers that are subsidised), they may cut the cost down to 0,5 Eurocent.
An additional factor is that any more expensive, raw materials can easily be artificially and synthetically produced if there is no way that an MEDC can produce it cheaper than an LEDC. One example of this is that 1kg of rubber imported from Laos may cost the manufacturers Rs 10000. However, if Japan or Germany made mass-produced synthetic rubber in a processing plant, it could cost only Rs8000, and importing and exporting the products would be cheaper due to better communications in MEDCs.
MEDCs also find it better to trade between themselves, therefore trade between G7 countries (Canada, France, Italy, UK, USA, Germany and Japan – 7 of the world’s most industrialised nations) accounts for around 60% of world trade, yet the countries take up maybe under 10% of the world’s landmass.
Because MEDCs are so highly protectionist (meaning they do not have a completely free market and favour some trading countries to others), this means that LEDCs lose out as they have no infrastructure of which to trade between themselves because so many were originally colonies and were designed to trade only with the colonial powers that they were owned by, and they also do not have a varied market and may depend on similar or the same products as their neighbours. For instance, many Persian Gulf states all depend on oil and have not used oil money to vary their economies. Therefore, not only does their wealth depend ONLY on world oil prices but they will be just as poor as before when oil runs out.
The main reason for Africa’s trade problems is that rich countries have over 3 times as many trade barriers as middle income countries. Another reason is that up to 40% of total earnings are spent on transportation of goods to and from far away countries. 45% of clothes from Africa face the same trading barriers as only 5% of clothes from MEDCs to trade with MEDCs. Because of all of this, from 1980 to 1996, Africa’s percentage in World Trade has HALVED. African goods exports only grew by 2% (the world average was 7% and the Asian average was 10%). In 1980 African trade accounted for 5.9% of World Trade (still small considering it is around 20% of world landmass) but fell to 3% by 1990 and then 2.3% in 1996. However, for a while, there was a sense of optimism. After years of negotiations called the Uruguay Round, which tried to allow LEDCs into the economy, there was an African trade growth of 13% followed by 16% the next year. However, this is such a small figure as the percentage of African trade is so small. It really needs growth of a few hundred percent to compete with MEDCs.
