Chapter 3: Trade and development

Trade – the exchange of goods, services, capital, labour and information between two
parties.
International trade – the exchange of goods, services, capital, labour and information
between countries.
Market – the place where goods and services are bought and sold.

Unit 1: International trade and world markets

 Is trade of goods and services across country borders.

 There is a benefit for both parties: they each gain something which they cannot
produce.
 Example: Richards Bay coal terminal (is a harbour on the Indian Ocean coast of South
Africa, specifically in KwaZulu-Natal) exports coal to India and China.
 Is trade of goods and services across country borders.
 There is a benefit for both parties: they each gain something which they cannot
produce.
 Example: Richards Bay coal terminal (is a harbour on the Indian Ocean coast of South
Africa, specifically in KwaZulu-Natal) exports coal to India and China.
 Without international trade, each nation would have access only to goods, services
and technology that can be produced within its borders.
 Buyers and sellers trade items on the world market.
 The market is not necessarily a physical place, but it is a set of systems and structures
that make international trade possible.

ABOUT OUR WORLD:

South Africa’s main trading partners are China, the USA, Germany, Japan, the UK,
Switzerland, Saudi Arabia, India, the Netherlands and South Korea.

Concepts of International trade and world markets

1. Commodities
 Are the items that countries trade.
 They may be raw materials such as coal and maize, or they may be finished
products such as computers and cars.
 Less Economically Developed Countries (LEDCs) export mainly raw
materials and unfinished goods, so their share of global trade is very small.
 LEDCs also earn less for their exports than More Economically Developed
Countries (MEDCs), because processed commodities fetch higher prices than
raw materials do.
2. Terms of trade
 Is the ratio between the value of exports and imports in a country.
 TOT is calculated by DIVIDING the value of EXPORTS by the value of
IMPORTS and MULTIPLYING the result by 100.
 If imports and exports are equally balanced, TOT will be 100.
 Mauritian TOT for 2010 was less than 100 and therefore it’ll be that the TOT
is ‘unfavourable’.
 When a country earns more from its export than it spends on its imports, it’ll
be that the TOT is ‘favourable’
 Example: Japan, there TOT is favourable because they earned more for their
exports than it spends on its imports.