Trade or Aid

Is development through trade better than aid?

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Benefits of trade

  • exports from LEDCs to MEDCs are worth £200M annually = 4x more than the aid that is given
  • trade makes up a bigger proportion of LEDCs GDP than in MEDCs
  • trade has fewer political and economic ties than aid
  • the value of aid has fallen in real monetry value
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Disadvantages of trade

Current trading between LEDCs and MEDCs is seen as unfair towards the poorer.

  • LEDCs have to specialise in primart exports, the prices of these are low and fluccuate which means saving capital is hard
  • Total trade is small, LEDCs have 82% of world population but only 24% trade
  • MEDCs have protectionism (e.g. EU) which enables free trade & subsidies so LEDCs struggle to compete as they get little in aid
  • Terms Of Trade work against LEDCs = exports are low or falling in price but inports are rising, e.g. a farmer now needs to sell more cocoa than he did 20 years ago to buy the same tractor
  • Lack of capital saving means LEDCs can't invest in infrastructure so development is limited and competition with MEDCs is hard and unfair
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Fair Trade Reform

  • less MEDC protectionism
  • stable and higher primary product prices
  • better terms of trade
  • greater sharing of technology to LEDCs
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International Aid

Humanitarian aid is given after a disaster usually in the from of food or transport. Development aid is given internationally and is used to help economic & social development. It is either bilateral (given from one government to another) or multilateral (given by a government to an international agency e.g. IMF)

Aid crticisms

  • Only small amount of a countries GDP goes to aid, 0.7% the target but many countries don't reach this
  • Bilateral aid is tied and usually has the condition it must be spent in the donor country, LEDCs have little choice on what to spend thier aid and prices are usually high for these products
  • Most aid is given for political or historical reasons, poorest 50 countries recieve less than 5% of aid given, many of the poorest countries are not seen as popular with MEDCs (Cuba)
  • Aid does not help the poorest people in a country and os used to fund overall economic growth & build infrastructure like HEP or ports, these don't help the poorest people
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