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
Examples of the most common goods traded between countries
Exam Tip
It is important to recognise that the trading relationship between LDE, EME and HDE countries makes it difficult for LDE countries to achieve significant economic growth due to lack of access to markets and restrictions that prevent them from producing more high-value secondary commodities e.g. EU places higher tariffs on imports of roasted nuts compared to imports of raw nuts which can make it difficult for LDE countries to access the market for processed goods