Trading Relationships (AQA A Level Geography)

• Trading relationships between HDE, EME and LDE countries tend to follow a similar pattern.
• Most trade takes place between HDE countries for various reasons:
  • They specialised in producing high-tech products that require money and expertise
  • They are wealthier so people have more disposable income to spend on goods
  • They are more likely to have trade agreements facilitating trade
  • They have better infrastructure to make trade quicker and easier
• EME countries are becoming more important to global trade for several reasons:
  • They have lower labour costs making it cheaper to manufacture products – this attracts FDI
  • They are experiencing rapid economic growth which is creating demand for more products as incomes rise
  • They often have large and growing populations which are creating new consumer markets
• These factors help to explain why China is now the world’s largest exporter of goods and second-largest importer of goods
• LDE countries are least likely to participate in global trade for various reasons:
  • They are less likely to be well-connected with infrastructure to manufacture and transport goods
  • They have lower GDP meaning they lack the capital to invest in infrastructure and their consumer markets are smaller due to lower disposable income
  • They are more likely to be suffering political instability which could deter FDI
• LDE countries mainly trade with EME and HDE countries
  • Although they are starting to trade more, growth has been much slower than for EME countries
• LDE countries rely mostly on the export of primary commodities whereas HDE and EME countries rely more on the export of secondary commodities

Examples of the most common goods traded between countries

• There has been a dramatic increase in demand for metals, driven mostly by EME countries such as China which now dominates consumption of iron ore, copper, steel and other metals
• This has led to a shift in trading relationships, with EME countries becoming more influential and able to manipulate trade to their advantage
• This has caused a global shift in metal extraction from HDE countries to EME and LDE countries, particularly African countries such as Zambia
• It has also caused metal production to decline in HDE countries
• When China’s economic growth slowed, Chinese steel companies had a huge surplus of steel which they looked to export by selling at low prices – this is known as ‘dumping’
• It contributed to a further decline in steel industries in UK, Europe and USA

Trade in Copper

• China is the world’s largest importer of copper, accounting for over 40% of global imports (three times more than Japan, in second place)
• This gives China significant bargaining power and causes global copper prices to fluctuate as demand in China rises and falls
• China imports copper from all over the world, though its largest sources are Chile, Peru and Mexico
• China has also invested heavily in African mining in countries such as Zambia to help meet demand
• This is leading to the development of new trading routes and relationships with exports from LDE countries increasing