UNIT 13 TRADE AND COMMERCE IN THE WORLD
UNIT 13: TRADE AND COMMERCE IN THE WORLD
Key Unit Competency:
By the end of this unit, I should be able to evaluate the impact of trade and commerce
on the sustainable development of different countries in the world.
Introductory activity:
For different reasons, many countries come together and create regional
bloc such as European Union or East African Community. Conduct your own
research and answer the following questions.1. Identify different regional integrations operating with Rwanda.13.1. Definition, types of trade and factors influencing international
2. What advantages does a country benefit from being a member of atrading bloc?
trade.
Learning activity13.1
Madame Kayitesi buys goods in large quantities from Inyange Industry. She
owns one of the biggest shops in her village. Her products are bought by the
local people and she takes some to the nearest markets in her district. Some
of the products made by Inyange industry are exported overseas.
1. Identify the major imports of Rwanda
2. Mention the types of trade indicated in the passage.
3. Explain the factors influencing trade between Inyange industry and
overseas countries.
13.1.1. Definition of key terms
Trade: Is the activity of buying and selling or exchange of goods and services within
a country or between countries. It also occurs between two individuals through the
exchange. Trade is part of commerce.
Commerce: Is the activity of buying and selling of goods and services, especially
on a large scale or quantity. It goes along with the activities such as insurance,
transportation, warehousing, advertising that completes that exchange. Commerce
stands as a wide system that includes legal, economic, political, social, cultural and
technological systems that are in operation in any country or internationally.
Trade is simply the exchange of commodities, and this can take place at many
levels. The earliest form of trade was probably “barter trade” in which one type of
commodity was exchanged for another of equal value.
The present trade is based on the exchange of goods and services for money. It
includes the following forms:
a. Internal trade: This is the exchange of commodities within a country. It
is also known as domestic trade. Traders normally need to exchange what
they have with what they don’t have. It includes:
• Whole sale
This occurs when traders buy goods in bulky from both the manufacturers and
importers. They then break them into smaller units and sell them to kiosk owners,
hawkers, shopkeepers and supermarket;
• Retail trade
This is where traders buy goods from the wholesalers and sell them in detail to
the individual customers.
b. International trade: This type of trade occurs between different nations of
the world, on a global scale. Its rationale lies in the fact that no country can
produce everything that it needs. It therefore has to acquire what it cannot
produce from others through trade. It involves:
• Bilateral trade: it is a trade between two countries.
• Multilateral trade: it is a trade between many countries, through the exchanging
imports where goods and services bought and brought into the country, and
exports where goods and services are transferred to another country for sale.
13.1.2. Factors influencing international trade
The type and volume of trade that takes place at any level in any place is influenced
by a number of factors. The most important factors are:
• Capital: This is the greatest single factor influencing trade. Money is the engine
that runs trade. Traders require capital to establish their businesses, purchase
their wares and transport the commodities. Where capital is inadequate the
volume of trade will also be low.
• Demand and supply: For trade to take place there must be sufficient demand
and good chain of supply of the items.
• Transport and communication: Trade depends highly on efficient means of
transport and communication. For example, manufactured goods and other
trade items need to be transported to the market. Traders also need to move
from one place to another to effect various trade related transactions. Traders
have to further communicate while placing orders and while establishing the
market situation.
• Trade barriers: This includes the quota system for international trade, where
a country may impose limits on imports and exports. They also include tariffs
and duties levied on goods, which if increased may discourage the importation
and exportation of some goods.
• Government policy: This is where the government influences trade in certain
commodities through taxation. For example, the government levies heavy
taxes on certain goods such as cigarettes and alcohol.
• Creation of trading blocs: The creation of regional common trading markets
enhances trade due to increased cooperation between the member countries.
Trade is further promoted because the market is usually expanded.
• Political climate of a country: Political problems such as wars affect both
internal and external trade because wars discourage foreign investors and
at times destroy industries; whereas good diplomatic relationship between
countries encourages foreign investments.
• Population factors: population size, structure, distribution and the diversity
between peoples affect the types of goods traded and the volume of
international trade.
• Differences in natural resources: Natural resources are not evenly distributed in
the world. This is mainly due to differences in climate, sols, relief and geologicalfactors.
Application Activity 13.1:
Discuss how the following factors influence international trade in Rwanda:
1. Regional integration
2. Government policy3. Population
13.2. Causes of low levels of international trade in Developing Countries
and importance of international trade in the development
Learning activity 13.2
Most of the industrial products used in developing countries are imported
from Europe, USA, ASIA etc. African countries also export agricultural
products to the rest of the world but the gap between imports and exports
in less developed countries still remains big.
1. Identify the products exported by European countries in Africa.
2. Outline the major exports of Rwanda to the developed countries.
3. Explain the causes of this inequality between exports and imports.
13.2.1. Causes of low levels of international trade in Developing Countries
The following are the major factors causing the low levels of international trade in
Developing Countries:• Access to foreign markets: The foreign markets are dominated by the goods
and services from developed countries because they have better quality and
produce more quantity of goods.
• Inadequate and insufficient domestic supply on the international market: this
causes the increase in prices and this affects the final consumers.
• Most of the developing countries export unprocessed products due to
shortage of industries or low level of technology. These unprocessed products
also called raw materials are undervalued on international markets.
• Most of the developing countries and other low-income countries export bulk
products such as horticulture products, fruits, vegetables and animal products.
These perishable products account the risks to be damaged in transport
process.
• Developing countries have also been concerned with the growing importance
of free trade areas and customs unions in recent years, which now cover
virtually all their major export markets, including Europe and North America
since most of the major regional trading arrangements do not include them,
• Implications of anti-competitive practices by private enterprises in restricting
the market access of developing countries to industrialized countries.
• Quota policy on the international market is negotiated only among the
developed countries and developing countries must follow their resolutions.
• Capital inflows: the growing constraints on foreign aid and the difficulties in
attracting increased foreign private financing and investment are affecting thegrowth prospects of countries lagging behind in global integration.
• Financial liberalization in developing countries has mainly comprised the13.2.2. Importance of international trade in development
reduction or removal of allocative controls over interest rates and lending, the
introduction of market-based techniques of monetary control and the easingof entry restrictions on private capital
International trade helps in development as follows:• Foreign trade and economic development: Foreign trade plays a very important
role in the economic development of any country. Therefore, economic
development of a country depends in part on foreign trade.
• Foreign exchange earnings: Foreign trade provides foreign exchange which
can be used to reduce poverty. The foreign earnings are obtained through
exportation of products especially agricultural products by developing
countries.
• Market expansion: The demand factor plays very important role in increasing
the production of any country. The foreign trade contributes to expand the
market and encourages producers.
• Foreign investment: Besides the local investment, foreign trade encourages
investors to invest in those countries where there is a shortage of investment.
• Increase in national income: Foreign trade increases the scale of production
and national income of a country. To meet the foreign demand, we increase
the production on large scale so Gross National Product (GNP) also increases.
• Price stability: Foreign trade helps to bring stability in price level. All goods
which are not sufficient, have high prices. Those goods are imported and
goods which are surplus can be exported. This stops fluctuation in prices.
• Specialization: There is a difference in the quality and quantity of various factors
of production in different countries. Each country adopts the specialization in
the production of specific commodities, in which it has comparative advantage.
So all trading countries enjoy profit through international trade.
• To improve quality of local products: Foreign trade helps to improve quality of
local products and extends market through changes in demand and supply as
foreign trade can create competition with the rest of the world. The country
competes with the foreign producers in foreign trade so it improves the quality
and reduces the cost of production.
• Import of capital goods and technology: The inflow of capital goods and
technology in the less developed countries has increased the rate of economic
development, and this is due to foreign trade. Foreign trade is also responsible
for spreading of knowledge and learning from developed countries to underdeveloped countries.
• Better understanding: Foreign trade provides an opportunity to the people ofApplication activity13.2:
different countries to meet, discuss, and exchange views and ideas related to
their social, economic and political problems.1. Assess the role of international trade in the economic development of13.3. Major financial centers and trading blocs of the world
Rwanda
2. Suggest ways of reducing the gap between low exports and highimports in developing countries.
Learning activity 13.31. Make research and explain the objectives of International Monetary Fund13.3.1. Major financial centers
(IMF).
2. Using specific examples, explain how the trading blocs improve theeconomic development of member countries.
A financial centre is a location that is home to a cluster of nationally or internationallya. The main global financial centres
significant financial services providers such as banks, investment managers, or
stock exchanges. A prominent financial centre can be described as an International
Financial Centre (IFC) or a global financial centre and is often also a global city.
Today, the two largest financial centres of the world in terms of volumes of capital
circulating are London and New York. In 2017, the top ten world financial centre
were London, New York City, Hong Kong, Singapore, Tokyo, Shanghai, Toronto,
Sydney, Zürich and Beijing.
The power of a financial centre depends on its history, role and significance in
serving national, regional and international financial activity. There are three prime
factors for success as a financial centre: a pool of money to lend or invest; a decent
legal framework; and high-quality human resources. The big financial centres alsohost the world biggest financial institutions like IMF, World Bank, etc.
• Amsterdam. Amsterdam is well known for the size of its pension fund market. It
is also a centre for banking and trading activities. Amsterdam was a prominent
financial centre in Europe in the 17th and 18th centuries and several of the
innovations developed there were transported to London.
• Chicago. The Illinois city has the «world’s largest [exchange-traded] derivatives
market» Dubai. The second largest emirate in the United Arab Emirates is a
growing centre for finance in the Middle East, including for Islamic finance.
• Dublin. Dublin, in Ireland, is well known because of its International Financial
Services Centre, “IFSC”). It is a specialized financial services centre with a focus
on fund administration and fund domiciling. It also conducts activities such as
securitization and aircraft leasing.
• Frankfurt. Frankfurt attracts many foreign banks which maintain offices in the
city.
• Hong Kong. As a financial centre, Hong Kong has strong links with London and
New York City. It developed its financial services industry. Most of the world’s
100 largest banks have a presence in the city. Hong Kong is a leading location
for initial public offerings, competing with New York City.
• London. London has been a leading international financial centre since the
19th century, acting as a centre of lending and investment around the world.
London continues to maintain a leading position as a financial centre in the
21st century, and maintains the largest trade surplus in financial services
around the world. London is the largest centre for derivatives markets,
foreign exchange markets, money markets, issuance of international debt
securities, international insurance, trading in gold, silver and base metals and
international bank lending. London benefits from its position between the Asia
and U.S. time zones, and has benefited from its location within the European
Union.
• Luxembourg. Luxembourg is a specialized financial services centre that is the
largest location for investment fund domiciliation in Europe, and second in
the world after the United States. Three of the largest Chinese banks have their
European hub in Luxembourg (ICBC, Bank of China, China Construction Bank).
• Madrid. Madrid is the headquarters to the Spanish company Bolsas y Mercados
Españoles, which owns the four stock exchanges in Spain, the largest being
the Bolsa de Madrid. As a financial centre, Madrid has extensive links with
Latin America and acts as a gateway for many Latin American financial firms to
access the EU banking and financial markets
• Milan. The city is Italy’s main centre of banking and finance.
• New York City. Since the middle of the 20th century, New York City, represented
by Wall Street, has been described as a leading financial centre. New York
City remains the largest centre for trading in public equity and debt capital
markets, driven in part by the size and financial development of the U.S.
economy. The NYSE and NASDAQ are the two largest stock exchanges in the
world. Several investment banks and investment managers and the three
major global credit rating agencies which are Standard and Poor’s, Moody’s
Investor Service, and Fitch Ratings, have their headquarters in New York City.
• Paris. It is home to the Banque de France and the European Securities and
Markets Authority. Paris has been a major financial centre since the 19th
century. The European Banking Authority is also moving to Paris in March 2019.
• Seoul. South Korea’s capital has developed significantly as a financial centre
since the late-2000s recession. Seoul has continued to build office space with
the completion of the International Financial Center Seoul in 2013. It ranked
7th in the 2015 Global Financial Centres Index, recording the highest growth
in rating among the top ten cities.
• Shanghai. This is one of Chinese and world financial centre. It competes with
New York and London. China is generating tremendous new capital and stateowned
companies in places like Shanghai.
• Singapore. With its strong links with London,[82] Singapore has developed into
the Asia region’s largest centre for foreign exchange and commodity trading,
as well as a growing wealth management hub. It is one of the main centres for
fixed income trading in Asia.
• Sydney. Australia’s most populous city is a financial and business services hub
not only for Australia but for the Asia-Pacific region. Sydney is home to two
of Australia’s four largest banks, the Commonwealth Bank of Australia and
Westpac Banking Corporation and to the Australian Securities Exchange.
• Tokyo. Tokyo emerged as a major financial centre in the 1980s as the Japanese
economy became one of the largest in the world. As a financial centre, Tokyo
has good links with New York City and London.
• Toronto. The city is a leading market for Canada’s largest financial institutions
and large insurance companies.
• Zurich. Zurich is a significant center for banking, asset management including
provision of alternative investment products, and insurance. Switzerland is not
a member of the European Union, then Zurich is not directly subject to EU
regulation.
• Other emerging financial centers are cities such as Mumbai, São Paulo, Mexico
City and Johannesburg, etc.
b. Examples of the financial institutions that make a city a powerful financial
center
The International Monetary Fund
The International Monetary Fund (IMF) was created in1945 and has Washington D.C.
as the Headquarter. It began with 45 members.
The aims of IMF are to promote international economic cooperation and international
trade, strives to help stabilize exchange rates among member countries. IMF takes
a lead in advising member countries and ultimately helps to avoid financial crises.
This includes developing standards that member countries follow, such as providing
adequate foreign exchange reserves in good times to help provide for increased
spending during recessions. The IMF also provides loans to help its members tackle
balance of payments problems, stabilize their economies and restore sustainable
economic growth.
The World Bank
The World Bank or the International Bank for Reconstruction and Development
(IBRD) was founded in 1944. Its headquarter is in Washington D.C.
It was set up with the aim of reconstructing the war-affected economies of Europe
(during the Second World War) and assisting in the development of the less
developed countries of the world.
Today, the World Bank is more concerned with the development of member
countries especially the developing ones. It gives loans for the purchase of capital
goods necessary for development. In so doing, the World Bank concentrates on
loans for projects that are clearly profitable. The World Bank’s current focus is onachievement of the Millennium Development Goals (MDGs)
13.3.2. Trading blocs and regional integration
A trade bloc is a type of inter-governmental agreement, often part of a regional
inter-governmental organization, where regional barriers to trade,
(tariffs and nontariffs barriers)
are reduced or eliminated among the member states.
a. Advantages of trading blocs and regional integration
• Foreign direct investment: An increase in foreign direct investment results
from trade blocs and benefits the economies of participating nations. Larger
markets are created, resulting in lower costs to manufacture products locally.
• Economies of scale: The larger markets created via trading blocs permit
economies of scale. The average cost of production is decreased because mass
production is allowed.
• Competition: Trade blocs bring manufacturers in numerous countries
closer together, resulting in greater competition. Accordingly, the increased
competition promotes greater efficiency within firms. Generally, increased
competition leads to increased volume of trade.
• Trade effects: Trade blocs eliminate tariffs, thus driving the cost of imports down.
As a result, demand changes and consumers make purchases based on the
Geography Senior Six Student Book 365
lowest prices, allowing firms with a competitive advantage in production to
thrive. All these advantages translate into greater economic strength for the
block.
• Market efficiency: The increased consumption experienced with changes in
demand combines with a greater amount of products being manufactured to
result in an efficient market.
• Increased regional specialization.
• Strengthens political unity among member states.
b. Disadvantages of trading blocs and regional integration
Limited fiscal capabilities: Some regional integration agreements that involve
the creation of a common currency most notably the European Union’s lead to
fiscal crises. Without regional integration, individual countries can control the
supply of their own currency to suit the nation’s economic conditions. When a
higher entity controls that currency -- as is the case with the EU’s Euro, individual
countries have no power to vary the strength of their currency when their
economy weakens.
Cultural centralization: Regional integration has a final non-economic
disadvantage. Especially strong integration like the European Union can lead
to the loss of unique minority cultures within a region. The European Union
has a series of languages that it deems to be the official languages of the EU
government. These do not include minority languages spoken by remote
communities in Europe.
Loss of sovereignty: A trading bloc, particularly when it is coupled with a political
union, is likely to lead to at least partial loss of sovereignty for its participants
Concessions: No country wants to let foreign firms gain domestic market share
at the expense of local companies without getting something in return. Any
country that wants to join a trading bloc must be prepared to make concessions.
Interdependence: Because trading blocs increase trade among member
countries, a natural disaster, conflict or revolution may have severe consequences
for the economies of all participating countries.
c. Factors affecting regional integration• Homogeneity of the goods produced among the member states can hinderd. Problems affecting international trade
trade. If countries produce the same goods, there is no need to trade amongst
each other. This situation is seen among East African countries which produce
almost the same agricultural products such as maize, sugar etc. this undermines
trade among them.
• Some countries may have experienced a shortage in foreign exchange. They
may not have enough foreign money to trade and buy from other countries.
This may be because they do not earn enough from their exports.
• Countries may have different ideologies. They may not be comfortable with
their cultures or opinions. This makes it difficult to synchronize / harmonize
their economic strategies.
• In the trading blocs, trade is undermined by poor transport and communication.
This is experienced mainly in developing countries. This makes it difficult to
trade and move from one country to another.
• For business to flourish there must be a peaceful environment. Therefore, if a
member state is experiencing political instability, it will affect trading relations
in the whole bloc. This undermines trade among the member states.
• Some countries have trading partners who are not in the trading bloc. They
prefer to trade with them rather than the member states of the bloc. These
outside partner could be former colonial master which member states have
closer trading ties with.
• Member states could experience lack of funds or capital. They are unable to
pay for goods ordered. This interferes with the functionality of the trading bloc.
• Member states may not use the same language. There will be a language
barrier among them making it difficult to communicate. This will make trading
in the block more difficult and hinder economic integration.
• Countries in the bloc may have different levels of development. Countries
that are more developed will benefit more from the common market. The less
developed countries will feel unfair trading practices against them.
• In trading blocs, especially Africa, the member countries sell unprocessed
primary goods. This limits trade because there are limited manufactured
goods in the market.
• There is interference from developed countries that are not in the trading bloc.
They impose conditions that limit trade among the member states. This willundermine the union.
Trade, like other human activities faces some problems which may occur at regional
as well as international level. They could be economic, social, political, environmental
and cultural in nature.
• Protectionisms: There are ways of implementing a protectionist policy, and
every country in the world protects some of its goods.
• Tariffs: The effect of high tariffs is to make imported goods equally or more
expensive than home-produced articles.
• Quotas: If tariffs are ineffective in halting the inflow of cheap foreign goods,
countries may resort to imposition of quotas. By a quota system a country
refuses to import more than a specified quantity of a certain commodity.
• Subsidies: The government of a country may pay subsidies or give tax relief, in
order to stabilize home prices. This involves assistance to home industry rather
than penalization of foreign producers.
• Trading blocs: In recent times trade has been modified by the formation of
economic unions such as EEC (European Economic Community). Though
tariffs are broken down between the member nations and there is greater flow
of the trade amongst them.
e. Possible solutions to problems of international trade.
• Joining and enforcing trading blocs like EAC, EEC.
• Common market or grouping which not only reduces tariffs and other
restrictions within the group but at the same time raises tariff barriers against
outsiders.
• Construction and rehabilitation of infrastructure.
• Political negotiations and discussions to reduce and ultimately end political
instability and insecurity so that a favorable trading atmosphere is created.
• Improving the quality of manufactured goods so that they are attractive and
competitive on the international market.
• Foreign investment to diversify domestic economy within countries. This may
overcome the problem of similarity of goods on the market.
• Tariffs: The effect of high tariffs is to make imported goods equally or more
expensive than home-produced articles.
• Quotas: If tariffs are ineffective in halting the inflow of cheap foreign goods,
countries may resort to imposition of quotas. By a quota system a country
refuses to import more than a specified quantity of a certain commodity.
• Subsidies: The government of a country may pay subsidies or give tax relief, in
order to stabilize home prices. This involves assistance to home industry rather
than penalization of foreign producers.
• Trading blocs: In recent times trade has been modified by the formation of
economic unions such as EEC (European Economic Community). Though
tariffs are broken down between the member nations and there is greater flow
of the trade amongst them.
e. Possible solutions to problems of international trade.
• Joining and enforcing trading blocs like EAC, EEC.
• Common market or grouping which not only reduces tariffs and other
restrictions within the group but at the same time raises tariff barriers against
outsiders.
• Construction and rehabilitation of infrastructure.
• Political negotiations and discussions to reduce and ultimately end political
instability and insecurity so that a favorable trading atmosphere is created.
• Improving the quality of manufactured goods so that they are attractive and
competitive on the international market.
• Foreign investment to diversify domestic economy within countries. This mayovercome the problem of similarity of goods on the market.
Application activity 13.3
a. Discuss why should Rwanda make trade with other countries.
b. Analyse the challenges faced by Rwanda in carrying out trade with other
countries.
c. “Gains from international trade are mostly beneficial to rich countries”.
Discuss.
d. Suggest what the city of Kigali can do to become an international financial
center?
13.4. Case studies
13.4.1. Regional integration
Learning Activity13.4:
1. Describe the major objectives of EAC.
2. Analyse the challenges faced by ECOWAS member states in implementing
its objectives as a regional bloc.
a. The East African Community
The East African Community (EAC) is an intergovernmental organization composed
of six countries in the African Great Lakes Region of Eastern Africa. The country
members are: Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda. The
headquarters of EAC is at Arusha in Tanzania.
The organization was founded in 1967, collapsed in 1977, and was revived on 7 July
2000. In 2008, after negotiations with the Southern Africa Development Community
(SADC) and the Common Market for Eastern and Southern Africa (COMESA), the EAC
agreed to an expanded free trade area including the member states of all three
organizations. The EAC is an integral part of the African Economic Community.
In 2010, the EAC launched its own common market for goods, labour and capital
within the region, with the aim of creating a common currency and eventually a full
political federation. In 2013, a protocol was signed outlining their plans for launchinga monetary union within 10 years.
Aims of EAC
• To revive free movement of people, goods, money, and services.
• To create common (tax) tariff.
• To create large market for goods and services.
• To promote regional cooperation.
• To improve communication.
• To share electricity.
• To promote industrialization in the region
b. Economic Community of West African States
The Economic Community of West African States (ECOWAS). Established on May
28 1975 via the treaty of Lagos, ECOWAS is a regional grouping with a mandate of
promoting economic integration in all fields of activity of the constituting countries.
Member countries of ECOWAS include Benin, Burkina Faso, Cape Verde, Cote d’
Ivoire, The Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria, SierraLeone, Senegal and Togo
• It has increased technological exchange among the member states.
Objectives of ECOWAS
• To promote economic cooperation
• To uplift living standards of member states
• To achieve and maintain economic stability of member countries
• To enhance free movement in member states without immigration formalities.
This regional organization has achieved the following:
• ECOWAS has frozen all customs and tariffs on goods originating within West
African and this has led to industrial growth, pooling of resources through
joint ventures by certain member states.
• It has decreased prices among the member states of some products like
petroleum.
• There has been an improvement of communication in the region.
13.4.2. Trading Blocs
1. Organization of Petroleum Exporting Countries
The Organization of Petroleum Exporting Countries (OPEC) is an organization
of oil-producing countries. It controls 61 percent of the world’s oil exports and
holds 80 percent of the world›s proven oil reserves. OPEC’s decisions have a
huge impact on prices. The country members are: Algeria, Angola, Ecuador,
Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United
Arab Emirates and Venezuela.
OPEC’s three goals
• To keep prices stable. It wants to make sure its members get what a good
price for their oil. Since oil is a fairly uniform commodity, most consumers base
their buying decisions on nothing other than price.
• To adjust the world’s oil supply in response to shortages. For example, it
replaced the oil lost during the Gulf Crisis in 1990. Several million barrels of
oil per day were cut off when Saddam Hussein›s armies destroyed refineries
in Kuwait. OPEC also increased production in 2011 during the crisis in Libya.
• To coordinate and unify the petroleum policies of its member countriesand ensure the stabilization of oil markets.
2. The European Union
The European Union (EU) is a union of 28 independent states based in Europe.
It is the largest single common market in the world. The European Union has a
common currency, the euro, which is acceptable in all member states. EU helps
in promoting trade, agriculture and creation of employment.
Member states of the EU are Austria, Netherlands, Hungary, Belgium, Portugal,
Latvia, Denmark, Spain, Lithuania, Finland, Sweden, Malta, France, Poland,
Slovakia, Germany, Slovenia, The United Kingdom, Greece, Ireland, Italy, TheCzech Republic, Estonia, Luxembourg and Cyprus.
13.4.3. The Patterns of World Trade
The volume of trade, the direction of trade and the types of goods involved in the
trade vary greatly between different continents and individual countries.
i. Main Commodities involved in the World trade:• Food stuffs; grains, beverages, fruits, meat, spicesWestern Europe, North America and Japan are the major importers of raw materials
• Raw materials; fibres, rubber, timber, vegetable oils, metals and other minerals
• Fuels; coal, petroleum, natural gas
• Manufactured goods; textiles, machines, chemicals etc.
and foodstuffs. They are the major producers and exporters of manufactured goods.
These developed countries have invested heavily in developing countries which arethe main suppliers of agricultural raw materials, minerals and oil.
ii. Major Trading Zones of the World:Application activity 13.4.
The world’s major trading zones are:
• Western Europe: this is the most industrialized and the most densely populated
regions of the world. Its annual volume of trade is the largest in the world. More
than a third of the world trade is concentrated in European Union member
states.
• North America: Its foreign trade is second only to that of Western Europe. USA
has the largest economy in the world. The country has varied economy, rich
mineral resources, large concentration of industries and has heavily invested
in many developing countries. The other notable country of North America
which has been expanding its trade with USA and Western Europe is Canada.
• China: Has the second largest economy in the world after the USA. The country
has also one of the fastest growing economies in the world. It has expanded
its foreign trade in recent years. China has greatly increased its investments in
developing countries.
• Latin America: It is a major producer of food stuffs, minerals and a major
importer of manufactured goods
• Africa; The continent is less industrialized than other continents. Its main
exports to the industrialized countries are minerals and tropical raw materials.
Major imports are; manufactured products, consumer goods and mining
equipment.
• Southern continents: Australia and New Zealand are highly developed but
with a relatively small volume of world trade. The main exports are agricultural
products.
• Japan: It has the third largest economy in the world. The country is highly
industrialized. Its main exports include; manufactured goods, including steel,
ships, electrical goods and machinery, automobiles and chemicals. Its main
imports are oil from the Middle East, raw materials from Africa, Asia, Australia
etc.
• South-East Asia: This is an important trading zone. It produces tropical raw
materials such as; tin, rubber, timber, palm oil, petroleum from Malaysia and
Indonesia. Other important raw material producing areas from this region are;
Philippines, Burnei, Burma and Thailand.
• Middle Eastern states; This region possess more than half of the world’s
petroleum reserves. Crude oil and Natural gas are the main exports. In somecountries of the region oil represents 85 to 95 per cent of exports.
1. Describe the major aims of OPEC.End unit assessment2. Explain how ECOWAS member states have benefited from this integration.
1. Draw the map showing the member countries of E.A. C.
2. Conduct your own research to identify different regional integrations
operating with Rwanda and show their main objectives.
3. Examine the role of regional integration in the social, economic development
of Rwanda.
4. Analyse the reasons for low level of international trade in developing
countries.
5. What types of major commodities are involved in the international trade?
With reference to any two major commodities from different parts of the
world, explain geographical conditions which favour their production
and state two major countries for each of the commodities which import
them in large quantities.
6. With reference to either Western Europe or Africa discuss the geographicalbackground of its export trade.