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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.
The pattern of world trade
A trade surplus means that the value of exports is greater than imports creating a trade surplus. A trade deficit is when there are more imports than exports.
Usually, MEDCs export valuable manufactured goods such as electronics and cars and import cheaper primary products such as tea and coffee. In LEDCs the opposite is true. This means that added to their existing debts, it gives them little purchasing power and they remain in 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 an LEDC. However sometimes MEDCs impose tariffs and quotas. 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 MEDCs favour.
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