Importance of Trade
- Countries with strong economies have greater influence over international trade
- Many TNCs or MNCs strike hard bargains with the producers of their primary products.
- General Motors, Wal-Mart and Exxon Mobil all have revenues greater than the GDPs of the 48 least developed countries
- A country should aim to have trade surplus - the opposite is trade deficit
- Free Trade assumes that there are no barriers to trade between countries
- A balance is created between how much the producer wants and how much the consumer is prepared to pay
- If a commodity is scarce, the producer has the greatest influence
- If there is a glut, the consumer has greatest influence
- Focuses on trading with poor and marginalized groups
- Pays fair prices that cover production costs and provides living wage
- Provides credit for producers
- A premium can be paid that will provide funds for social development in local communities
- Fair treatment of all workers + safe workplace conditions
- Development of long term trading relationships
Kenya - Disadvantaged
Kenya is classified by the World Bank as a LOW INCOME COUNTRY
- The cost of Kenya's imports is rising more quickly than the value of Kenya's exports
- Most of the exports are primary products: tea, coffee and fresh flowers
- Tourism is a growing industry, but in susceptible to political instability
- Farmers in countries like the EU and USA recieve subsidies - can sell goods at cheap prices
- Countries whose farmers are not given subsidies cannot compete with these subsidised producers
Traidcraft in Kenya
Kenya is ranked 134 out of 177 in HDI - 60% of the population live on less than $2 a day.
AIMS OF TRAIDCRAFT
- Help local businessed develop and enhance their capacities
- Promoteethical trading policies = increased productivity & reduced poverty
- improve skills of businesses
- Craft productts from Bombolulu Workshops for the Handicapped in Mombassa
- Machakos District Co-operative Union - 7000 artisans
- Tea from a range of producers on the FLO register
- Business Linkages Project - small & medium businesses create links in supply chain
- Coastal farmers and wood carver co-operatives to gain access to new markets
- Fair Trade Tourism - promoting people-to-people tours
Role of WTO
The WTO has 162 members (2016). It remits to reduce tariffs and other barriers to trade.
Significant progress has been made; the average rate of import tax has gone down from 40% in the 1940s to 4% today.
- CANCUN WTO MEETING 2003
- Discussing on agricultural and on-agricultural goods, as well as services
- If talks were successful, it was said that global income could be raised by $500 billion a year and over 60% of teh inc. would occur in poorer countries
- The real discussion was centred around LEDCs opening their markets compeltely to free trade, whilst the MEDCs cut subsidies for farmers
- Meeting failed as no one was willing to compromise
There is a growing recognition that it is in everyone's interest to have a system of trade that allows LEDCs and LDCs to develop their industries and compete with MEDCs.
- The EU is home to many dairy farmers who are subsidised on average $2 for every cow
- In Burkina Faso, a cotton famrer with a small plot of landwithout fertiliser or irrigation etc. has an average annual income of just $250
- The USA is the world's biggest cotton exporterand gave its cotton farmers $4.7 billion in subsidies in 2005
- This figure is larger than the amount of aid given to sub-Saharn Africa in the same year
- In order to develop their industries, LEDCs may want to move away from producing and exporting raw amterials, and instead export manufactured goods
- This is already difficult as they do not have the same level of knowledge or technologies as MEDCs
- Whats more, richer countries charge higher import levies on manufactured goods than on raw materials
TRIPS (Trade-Related Aspects of Intellectual Prope
- TRIPS is a policy that was agreedon by the WTO
- TRIPS states that the inventors of medical treatments have monopoly rights over their inventiions for 20 years
- During the AIDS epidemic, the standard drug used in MEDCs was too expensive for the LEDCs, so South Africa purchased generic drugs from India and Brazil - this was in breach of the TRIPS agreeement
- LEDCs are unable to treat their patients as they are unable to create their own drugs (limited knowledge).
What is needed to make trade fairer?
LEDCs need help in developing their trade. This comes in the form of...
- Protection of their fledgling industries from cheaper imports
- Rich countries sharing technical expertise and knowledge
- The dismissal of policies which support the protection of such informations
- In terms of the WTO, poorer countries often lack the expertise of the teams of specialist advisers that support trade ministers from richer countries
- All the G7 countries meeting their target of giving 0.7% of GDP in aid