Trade involves the sale and purchase of goods, services or information:
imports are goods purchased from abroad and brought into a country
exports are goods purchased by other countries and sent to them
the balance of trade is the difference between the money earned from exports and that spent on imports
Usually, high-income countries (HICs) export valuable manufactured goods such as electronics and cars and import cheaper primary products such as sugar and tea.
In low-income countries the opposite is true. This means that low-income countries earn little and spend more, giving them a negative balance of trade. The countries are forced to borrow money to pay for imports and can go into debt.
The price of primary products fluctuates on the world market. Prices are set in HICs and producers in LICs lose out when the price drops. LICs are very dependent on the world-trade system yet they have little control over how it operates.
HICs control world trade through trade tariffs, subsidies and trade quotas:
Tariffs are taxes imposed on imports. This can make imports more expensive than goods manufactured in the home country.
Quotas are limits on the amount of goods imported. This stops some countries exporting their goods to richer countries.
Subsidies are a government policy to encourage the export of goods through direct payments, low-cost loans, tax relief or government-financed international advertising (which artificially make HIC goods more marketable).