Trading Relationships (AQA A Level Geography)

Trading Relationships

• 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

Impacts of Trade in Metals

• 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