Common Characteristics of Developing Countries [ECONOMIC DEVPT.

1) Lower literacy levels 2) Low incomes, which imply low living standards and poverty. Low incomes occur due to lower quality of human capital. 3) Over dependence on primary products with an exception to oil. 4) High infant mortality rate due to poor nutrition, poor health care and poor education. 5) High-income inequality due to corruption, weak taxation and legal frameworks and uneven development. 6) Lack of specialization 7) Low living standards 8) High population growth rates and high dependency rates

Trade Creation v/s Trade Diversion [ECONOMIC INTEGRATION]

When a country joins a custom union (an arrangement in which member countries have free trade amongst themselves and common external tariffs), there are gains and losses. Two possible outcomes of such integration will be:

i) Trade Creation Trade creation occurs when the entry of a country into a customs union leads to the production of a good or a service transferring from a high-cost producer to a low-cost producer e.g. when the UK joined the EU in 1973, it may have had comparative advantage over France (a member of EU) in the production of lawn mowers. However, as a non-member of the EU, the EU has placed the tariff on UK lawn mowers.

With the tariff on UK lawn mowers in place, France could produce 0Q2 lawn mowers and Q2Q3 lawn movers from UK. On entering the EU, the tariff on UK lawn movers in abolished and UK can now make full use of its comparative advantage. French production fall from 0Q2 to 0Q1 representing regained world efficiency and imports increase to Q1Q4. There are therefore Q3Q4 more lawn mowers demanded representing a gain in consumer surplus and thus trade has been created for UK.

There is also a movement from high-cost to low-cost producers since UK producers who have a comparative advantage in the production of a good are now producing Q1Q2 lawn mowers, which were produced by relative inefficient French producers. ii) Trade Diversion Trade Diversion occurs when entry of a country into the trade union leads to a production of a good or service transferring from a low cost to a high cost producer e.g. before the UK joined the EU it had been producing textiles itself and importing textiles from Thailand which had comparative advantage in the product. However, when the UK joins the EU, it has to place tariff on Thai textiles.

Before the entry into the EU, UK could produce 0Q1 meters of cloth and import Q1Q4 from Thailand. On entering the EU is forced to impose the same tariffs on Thai text lines making them to become expensive than UK textiles. UK will now produce 0Q2 textiles and import Q2Q3 from EU. There is an overall fall in quantity demanded of textiles represent the loss of consumer loss. There is also a movement from low-cost to high-cost producer since the relatively inefficient UK producers now produce Q1Q2 meters of textiles.

Millennium Development [ECONOMIC DEVPT.]

Eradicate extreme poverty and hunger Reduce child mortality Achieve universal primary education Ensure gender equality and empower women Ensure environmental sustainability Develop global partnership for development Improve maternal health Combat for aids, malaria and other diseases

SMART Specific, Measurable, Achievable, Realistic and Time-constrained