Trade is the exchange of goods and services between one country and another.
Goods bought into a country are called imports, and those sold to another country are called exports.
A trade surplus means that the value of exports is greater than imports. A trade deficit is when there are more imports than exports.
Usually, MEDCs [MEDC: A More Economically Developed Country (MEDC) has high levels of development based on economic indicators such as gross domestic product (the country's income). ] export valuable manufactured goods such as electronics and cars and import cheaper primary products such as tea and coffee. In LEDCs [LEDC: A Less Economically Developed Country (LEDC) has low levels of development, based on economic indicators, such as gross domestic product (the country's income). ] the opposite is true. This means that LEDCs have little purchasing power, making it difficult for them to pay off their debts or escape from poverty.
The price of primary products fluctuates on the world market which means that workers and producers in LEDCs lose out when the price drops. The price of manufactured goods is steadier which means that MEDCs always benefit.
Increasing trade and reducing their balance of trade deficit is essential for the development of LEDCs. However, sometimes MEDCs impose tariffs and quotas on imports. Tariffs are taxes imposed on imports, which makes foreign goods more expensive to the consumer. Quotas are limits on the amount of goods imported and usually work in the MEDC's favour.
Interdependence between countries means that they are dependent on one another in some way. For example, many LEDCs are dependent on MEDCs for manufactured goods or aid. MEDCs are dependent on LEDCs for primary products such as steel and iron. LEDCs are also dependent on MEDCs for income from tourism, whilst MEDCs require LEDCs to provide the climate and hospitality for some holiday destinations.
This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.