Reducing Inequalities in World Trade (SQA National 5 Geography): Revision Note

Case Study: The European Union

• The EU is one of the world’s largest trading blocs

• It was set up in the 1950s to increase trade and economic growth in the 6 original member nations

• It has expanded over time, reaching a peak of 28 members before the UK left the bloc in 2020 (Brexit)

Advantages for member nations

• Improved access to markets

  • Countries have access to a larger market, so they can increase their volume of exports

    • The EU has a total population of around 440 million

  • Trade is easier and cheaper because members can sell goods without paying tariffs

• Increased foreign investment

  • Being a member of a trade alliance encourages investment from TNCs

    • By setting up factories within a trade bloc, the TNC will be able to access the market without needing to pay tariffs

• Economic growth

• Demand for products grows as exports increase

  • This creates new business and job opportunities and increases tax revenue

• Cheaper products

  • Consumers can buy goods at lower prices, as there are no tariffs, making trade more expensive

• Flexibility of labour

  • Free movement of people allows people with citizenship in one EU country to live in another EU country

    • This enables companies to recruit skilled labour more easily and allows workers to seek out the best job opportunities

• Reduced trade barriers

  • The EU works to reduce trade barriers, making it easier, quicker and cheaper to trade

    • It has removed many of its internal border controls, allowing people and goods to move freely between countries

    • The Euro is the EU’s single currency used by 21 member nations 

Disadvantages for member nations

• Membership costs

  • Countries have to contribute to the EU budget and may receive less than they put in

    • All countries pay the same proportion of their national income, so wealthier countries contribute more

• Loss of national power

  • Member countries may have less control over decisions and policies

    • E.g. they are unable to limit immigration from other EU nations 

• Social tensions

  • The rise in EU immigration may lead to tensions between local people and migrants

• Increased competition

  • Stronger economies may benefit more as smaller economies struggle to compete

Case Study: The cocoa industry in Côte d’Ivoire

• Cocoa is farmed in hot and humid climates in places like West Africa and Southeast Asia

• Côte d’Ivoire is the world’s largest cocoa producer and exporter

  • It accounts for 79% of total cocoa production and 65% of total Fairtrade cocoa sales

• Many cocoa farmers live in poverty, even though the chocolate industry is worth billions of dollars

• In 2023, over 300,000 cocoa farmers in Côte d’Ivoire were working with Fairtrade

Positive impacts on people

• Higher income

  • Farmers receive a minimum guaranteed price, protecting them from large price fluctuations

  • Having a more stable income means that farmers can support their families and plan for the future

• Fairtrade Premium

  • The Fairtrade Premium is an extra sum of money paid to producers

  • It is invested back into local businesses and communities to improve social, economic and environmental conditions

  • E.g. funding schools and healthcare, or implementing sustainable farming practices

• Improved working conditions

  • Producers have fairer worker rights to ensure safer working conditions

  • Child labour and forced labour are banned

• Empowerment of small-scale farmers

  • Fairtrade encourages farmers to form co-operatives

  • This increases their bargaining power when negotiating with large buyers

  • They can also pool resources to afford better tools and equipment

  • By working together, they can share knowledge and understanding to increase production and improve quality

• Gender equality

  • Fairtrade standards work to empower women and promote female participation and leadership

  • They work to address the causes of inequality to create more inclusive communities 

Negative impacts on people

• Higher prices for consumers

  • Fairtrade products are often more expensive

  • This reduces demand and limits the size of the market

• Cost of certification

  • Getting certified can be difficult and expensive for producers, especially for small farmers and those in remote areas

• Incomes may not rise significantly

  • Many farmers are only able to sell a portion of their goods at Fairtrade prices, with the rest being sold at market price

    • In Côte d’Ivoire, just under a third of the cocoa produced is sold as Fairtrade

• Persistent gender inequality 

  • Women continue to face discrimination and may have limited access to resources 

    • The number of female Fairtrade cocoa farmers in Côte d’Ivoire remains low, accounting for just 9%

• Continued use of child labour

  • Although child labour is banned by Fairtrade, this is difficult to enforce

    • In 2020, it was estimated that more than 1.5 million children under the age of 17 years were working on cocoa farms in Côte d’Ivoire and Ghana   

Positive impacts on the environment

• Sustainable farming practices

  • Fairtrade promotes environmentally friendly farming practices and organic farming

  • Training is provided to help producers to use more sustainable farming techniques

• Strict environmental standards

  • Harmful chemicals are banned and pesticide and fertiliser use are discouraged

    • Natural methods are used to develop nutrient-rich soils and wildlife is encouraged to help control pests and diseases

    • This reduces water pollution and helps to protect biodiversity

• Environmental protection

  • Deforestation and habitat destruction are discouraged

    • Farmers are taught agroforestry techniques that allow them to grow crops in the shade of trees 

Negative impacts on the environment

• Enforcement of environmental standards

  • It can be difficult to enforce environmental standards consistently

  • While organic farming is encouraged, it is not always required

• Pressure on land

  • Guaranteed prices can encourage farmers to expand production, which may result in deforestation and habitat loss

• Transport emissions

  • Shipping Fairtrade goods globally results in large greenhouse gas emissions, which contribute to climate change

Case study: Agroforestry in Ethiopia

• Agricultural commodities such as coffee generate most of Ethiopia’s export earnings

• Most of the population works in farming and agroforestry is widespread

• Trees provide shade for coffee bushes, and additional crops like bananas and avocados can be planted

Advantages

• Maintains habitats and biodiversity

• Increases productivity and household income

• Produces a wider range of products, reducing vulnerability to pests and price fluctuations

• Improves soil fertility and reduces the need for irrigation

• Natural predators control pests, so there is less need for pesticides

Disadvantages

• Newly planted trees take several years to become established and produce an income

• Farmers may be tempted to clear land to grow more crops to increase profits in the short-term

Make sure you are able to outline the strengths and weaknesses of each approach to reduce trade inequalities. You may be asked to refer to named examples in the exam, so make sure you learn some facts about each case study.