Key Term |
Definition |
Fair trade |
Is an international movement that sets standards for trade with LICs. It aims to get a better price for crops for LIC farmers but also reinvests in these farming communities to provide education for example. |
Free trade |
When countries do not charge tariffs and quotas to restrict trade with each other. |
Tariffs |
Taxes on imports (goods coming into a country) |
Quotas |
Limits on the quantity of goods that can be imported |
The World Trade Organisation and Subsidies
The World Trade Organisation aims to make trade easier and remove barriers. One of the main barriers to trade is agricultural subsidies. This is financial support from governments to help their farmers. Rich countries can afford to pay subsidies so their products are cheaper than those produced by poorer countries. This goes against free trade.
Trading Groups/ Blocs
These are countries who have joined together to increase the level of trade between them by cutting tariffs and discouraging trade with non-members.
The advantages for LICs are:
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Foreign Direct Investment (FDI)
Some countries and TNCs choose to invest money into LICs to increase their own profits. This can result in development of infrastructure and industries.
Benefits for the TNCs |
Benefits for the LICs |
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