Trade Mini Peer Presentations
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Group 1: Definition & Why is trade necessary?
Trade balance, surplus & deficit
Group 2: Problems faced by LEDC countries &
trade imbalance
Group 3: Trade blocs, tariffs, quotas
Group 4: Free trade & Arguments for and
against
Activity: Each group will present on their section – it is also really important to take notes
throughout these presentations - this is all really crucial information or the semester exam
Come up with 5 questions to make sure everyone has understood your presentation – you will ask
these at the end
Presentation points to remember:
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Engage the audience
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Try not to use notes
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Everyone in the group must participate
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Think of an interactive and imaginative way to
get the information across
Trade defined:
 The
exchange of goods and
services for money
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Discuss with a partner, and write a few
sentences explaining why trade is necessary
Why trade is necessary ?
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No country is self sufficient in the full range of raw
materials that are needed by its inhabitants. To try to
achieve this, countries must trade with each other
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Trade is the flow of commodities from producers to
consumers, and it is important in the development of
a country.
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Countries that trade with other countries are said to
be interdependent
Trade Surplus & Deficit
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If the value of a countries exports is more than its imports it has a trade surplus and if the
value of the imports is more than the exports then it is a deficit
Trade balance is the difference in value between a countries imports and exports
Activity: Work out the trade balance for countries A, B, C & D, and state whether they have a
trade surplus or deficit
1) Country A exports $560 billion worth of goods to its trading partners each year. In return it
imports $290 billion worth of goods each year.
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Calculate the trade balance of this country. __________________________
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What sort of balance of trade will this country have?____________________
2) Country B exports $200 billion worth of goods to its trading partners each year. In return it
imports $290 billion worth of goods each year.
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Calculate the trade balance of this country. __________________________
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What sort of balance of trade will this country have?____________________
3) Country C exports $720 billion worth of goods to its trading partners each year. In return it
imports $400 billion worth of goods each year.
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Calculate the trade balance of this country. __________________________
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What sort of balance of trade will this country have?____________________
Trade deficits & surpluses
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Trade deficits – does it damage a countries economy?
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The successful American business man and investor Warren
Buffett was quoted in the Associated Press (January 20,
2006) as saying
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"The U.S trade deficit is a bigger threat to the domestic economy than
either the federal budget deficit or consumer debt and could lead to
political turmoil... Right now, the rest of the world owns $3 trillion more
of us than we own of them."
If a country has a deficit – then it is paying other countries a
lot of money- then those countries can use that money to
buy shares in companies from the country they have traded
with
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Trading relationships should be balanced……
According to the economist, John Maynard
Keynes - "If the economic relationships between nations
are not, by one means or another, brought fairly close to
balance, then there is no set of financial arrangements
that can rescue the world from the impoverishing results of
chaos."
Difficulties faced by LEDCs
What are the trade problems for
LEDCs?
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Countries that relay on one commodity can be a problem because:
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Prices and demand for these products fluctuate annually – and the price
paid for these commodities is often fixed by MEDCs
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Overproduction or world recession can also impact prices of these
goods, also stocks of that particular commodity (e.g. a mineral) can also
become exhausted
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Most exports are bought by TNC’s (transnational corporations) so the
profits don’t go back to the producers (its not fair trade)
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LEDCS are not selling high value goods – there is very little value added
to the good through secondary sector industry (manufacturing the
goods)
Reasons for imbalance of trade between MEDC
and LEDC counties
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MEDC’s process primary goods – and add value to them -MEDCs then
export these manufactured goods – which are high in value, whereas
LEDCs only have limited primary goods to sell
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MEDCs also have the high tech quaternary industries, and possess the
skills and technology to develop high value products
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MEDCs retain profits within their countries and the profits don’t go
back to the LEDCs
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LEDCs often only relay on the export of two or three products
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Trade is hindered by poor internal transport networks
Who has the largest share of the
worlds trade?
Examples of countries imports and
exports
You can clearly see that Sierra Leone – an LEDC really relies on the
export of minerals, whereas MEDCs exports and imports are more
similar to each other
Trading Blocks
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Nations belonging to a mutual trade pact and agree to give each other
reduced trade tariffs while imposing trade barriers and restrictions to
nonmember nations.
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Some trade blocks such as the EU have also developed close political
ties, as well as a common currency, the Euro
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Within these trading blocks countries trade with each other freely. This
makes for a large market, increasing the number of customers for
businesses, and strengthen the alliances between those nations
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An alliance is an agreement between two or more parties, made in order
to advance common goals and to secure common interests
Trading Blocks
Make sure you know some of these trading blocks!
Tariffs & Quotas
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Tariffs are taxes or custom duties paid on imports. The exporter has to
pay a percentage of the value of the goods to the importer.
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Tariffs can be used to raise money, and they increase the price of
imported goods in order to make them more expensive, and less
competitive
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Tariffs increase the costs of imports (they may be imposed to by
countries to encourage a trade balance) or protect home made products
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Quotas limit the amount of goods that can be imported. Quotas tend to
restricted to primary goods to they work against LEDCs
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These both go against free trade
Free Trade
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Free trade: Trade between nations without
protective customs tariffs and quotas.
Discuss the arguments for and against free trade
Arguments for free trade
Arguments against free trade
Free Trade: Arguments for and against
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Free trade: Trade between nations without
protective customs tariffs and quotas.
Arguments for free trade
Arguments against free trade
1) It's important to protect the economy of your
country – free trade can mean that products will
1) It will deliver the greatest
be bought from overseas rather than made at
Good to the greatest amount
home
Of people (the utilitarian argument)
2) Other nations might treat their workers who
2) Countries that depend on
make products they export unfairly – their rights
each other for trade, rarely go
cannot be guaranteed.
to war ( this is called the Dell Theory 3) Foreign companies can buy up companies
of Conflict Prevention)
within ones own country- this could be seen as a
threat to national security
3) Countries can develop through
Trading- exporting what they have, 4) Free trade does not mean fair trade- and
And importing what they don’t have countries producing primary products don’t
benefit as much as the countries manufacturing
them
The world is spiky!
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Check out the distribution of indicators throughout the
world:
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E:\CURRENT\IB Psych\IB Psy G 12
08_09\comparitive
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http://creativeclass.com/rfcgdb/articles/other-2005The%20World%20is%20Spiky.pdf
Quick Quiz
1) Why can trade deficits be a big problem for nations?
2) What did John Maynard Keynes say about the
importance trade balance?
3) Who has the largest share of the worlds trade?
4) What are tariffs?
5) What are quotas?
6) What are trading blocks?
7) Identify three trade blocks
8) Identify two arguments in support of free trade and
three arguments against free trade