Open up markets in the developed world so that LEDC’s can increase trade. This is especially relevant for the production of agricultural goods. Many LEDC’s have a comparative advantage in the production of agricultural goods. By specialising in agriculture they could increase exports to MEDC’s and achieve ‘export led growth’.
This requires the EU to abolish the ‘common external tariff’ on agricultural exports and the US to abolish farm subsidies. The effect of an increase in agricultural exports is shown by an increase in AS If the export multiplier could be of a high value e. . 4 Change in X ? multiplier = change in y $2bm x 4= $8bn Example of tariffs against agricultural imports include tomatoes, snail, wheat, sugar, citrus fruits Evaluation * Increasing trade may mean MEDCs do not have to offer so much foreign aid * LEDCs may be able to repay their debts to MEDCs * Increasing trade links mean a long lasting measure to create growth and development rather than relying in short term fixes such as debt reliefs and foreign aid * However, LEDCs may become even more dependent on ‘primary products’ amd reliant on exports to MEDCs
Typically, there are unfavourable terms of trade for agricultural goods . Diversification LEDCs may seal to diversify their economies in older to reduce dependency on agricultural and other commodities. Diversification may enable an LEDC to grow in a more steady and sustainable way. It also means the different sectors of the economy could grow in a balanced way, that us growth for the primary, secondary and the tertiary sector of the economy. The advantage of diversification also include more value-added in production of goods and services, so increasing natural income and living standard. E. g. il reserves are running out tourism An LEDC may gain by diversifying into tourism.
Advantages include: * Global tourism is a growing industry. International tourism: * 1995: 500m * 2006:;842m * 2020:1,600m There is a high-income elasticity of demand for tourism. It makes sense for LEDC to enter this sector * Some LEDCs have a comparative advantage in the environment (e. g. Victoria falls, exotic animals and rainforests).
It makes sense to exploit their comparative advantages by developing a tourist industry on these wonders. An increase in foreign and domestic investment as firms seek to make profits from tourism. This is an injection to the circular flow of income, boosting AD, output and income via the multiplier process. Shift AD to the right * Job creation Tourism is labour intensive and so many jibs can be created. Also relatively low skills are required to work in tourism- ideal for labour in LEDCs * Tourism can promote gender equality since many jobs are suitable for women, so helping to create financial independence. * Improved government finances through more tax revenue from tourists and labour force. *