Why is world trade unequal, how does globalisation connect countries, and how can trade be made fairer?
The patterns and inequalities of world trade between developed and developing countries, the role of globalisation and multinational companies, and strategies such as fair trade and trade agreements used to reduce the inequalities.
An SQA National 5 Geography answer on trade and globalisation, covering the patterns and inequalities of world trade between developed and developing countries, the role of globalisation and multinational companies, and strategies such as fair trade used to reduce the inequalities.
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What this dot point is asking
The SQA wants you to describe the patterns and inequalities of world trade between developed and developing countries, explain the role of globalisation and multinational companies, and describe and comment on strategies such as fair trade and trade agreements used to make trade fairer.
Patterns and inequalities of trade
Globalisation and multinational companies
MNCs often locate factories in developing countries:
- Benefits - they bring jobs, wages, training, investment and new infrastructure.
- Drawbacks - wages are often low, working conditions can be poor, and most profits flow back to the company's home country rather than staying local.
Reducing the inequalities
Several strategies aim to make trade fairer:
- Fair trade - guarantees producers a fair minimum price plus a community premium for schools, water or health care, cuts out some middlemen, and requires safe conditions and no child labour.
- Trade agreements and trading groups - countries join groups (such as the EU) or sign agreements to trade more freely with each other.
- Reducing tariffs and debt relief - lowering import taxes on goods from developing countries and cancelling some debt frees money for development.
Examples in context
Example 1. Fairtrade coffee and cocoa. Farmers in countries such as Ghana and Kenya selling through Fairtrade receive a guaranteed price and a premium for community projects, reducing the impact of falling world prices.
Example 2. Multinational factories in Asia. Clothing and electronics MNCs locate factories in countries such as Bangladesh and Vietnam for low labour costs, bringing jobs but raising concerns about wages and conditions.
Try this
Q1. Name the type of product (raw materials) that many developing countries rely on exporting. [1 mark]
- Cue. Primary products.
Q2. State one way fair trade helps producers. [1 mark]
- Cue. A guaranteed minimum price (or a community premium, more money to producers, better conditions).
Exam-style practice questions
Practice questions written in the style of SQA exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
SQA N5 style5 marksExplain why many developing countries do not benefit fairly from world trade.Show worked answer →
A 5-mark Explain answer wants developed reasons, so build the case for trade inequality step by step.
Many developing countries rely on exporting a few primary products (raw materials such as coffee, cocoa or copper), which sell for low prices, so they earn little.
The prices of raw materials are unstable and can fall suddenly, so a country's income is unreliable.
Developed countries buy these cheap raw materials, process them into manufactured goods, and sell them back at much higher prices, so most of the profit stays in the developed world.
Developed countries may also put tariffs (taxes) on imported manufactured goods, making it hard for developing countries to sell anything but raw materials.
This means developing countries often import more than they export (a trade deficit) and fall into debt. Markers reward each reason (reliance on cheap primary products, unstable prices, value added in the developed world, tariffs, trade deficit) clearly explained.
SQA N5 style4 marksDescribe how fair trade can help producers in developing countries.Show worked answer →
A 4-mark Describe answer rewards four clear ways fair trade helps, each developed.
Fair trade guarantees farmers a minimum, fair price for their crop, so their income does not collapse if world prices fall.
It pays an extra sum (the fairtrade premium) to the community, which can be spent on schools, clean water or health care.
It cuts out some middlemen so more of the money reaches the producers themselves.
It encourages safe, sustainable working conditions and bans child labour, improving workers' lives. Markers reward each distinct benefit (guaranteed price, community premium, more money to producers, better conditions) described clearly.
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Sources & how we know this
- National 5 Geography Course Specification (C833 75) — SQA (2025)
- National 5 Geography - Course overview and resources — SQA (2025)