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Contents

Concept of Development and Underdevelopment ..................................................................... 2

Political Control in Trade ............................................................................................................ 3

WORLD TRADE ORGANIZATION (WTO) ........................................................................... 4

Trade Routes: ................................................................................................................................ 5

Major Shipping Routes for Global Tarde/ Maritime Shipping Lanes: ................................... 9

Free Ports ..................................................................................................................................... 14

Multinational Company ............................................................................................................. 15

Dispute Over Resources: ............................................................................................................ 17

Sharing of International River: ................................................................................................. 18

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Concept of Development and Underdevelopment

Development is a process that creates growth, progress, positive change or the addition of
physical, economic, environmental, social and demographic components.

The purpose of development is a rise in the level and quality of life of the population, and the
creation or expansion of local regional income and employment opportunities, without damaging
the resources of the environment. Development is visible and useful, not necessarily
immediately, and includes an aspect of quality change and the creation of conditions for a
continuation of that change. The international agenda began to focus on development beginning
in the second half of the twentieth century.

Underdevelopment refers to the low level of development characterized by low real per capita
income, wide-spread poverty, lower level of literacy, low life expectancy and under utilization of
resources etc.

The state in underdeveloped economy fails to provide acceptable levels of living to a large
fraction of its population, thus resulting into misery and material deprivations. Such countries are
characterized by relative development gap in comparison to developed countries. There are two
main features of underdevelopment as follows:

1. Underdevelopment is a relative concept

2. Underdevelopment sustains absolute poverty.

Underdevelopment is a Relative Concept

The concept of underdevelopment is a relative one because it is the comparison of quality of life
between the economies that differentiates them in underdeveloped and developed.

 Underdevelopment Sustains Absolute Poverty

Although, concept of underdevelopment is a relative concept but it sustains absolute poverty.

Absolute poverty refers to the state of poverty wherein the people fail to fulfill even their basic
needs in terms of food, clothing and shelter. In fact, they are a class of people who are always
striving to survive. Thus, underdevelopment and absolute poverty go together or
underdevelopment sustains absolute poverty.

Main features of Underdeveloped Economies: It is difficult to find an underdeveloped

economy representing all the representative characteristics of underdevelopment. While most of
them are poor in nature, they have diverse physical and human resources, socio-political
conditions and culture.
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Some of the common characteristics displayed by most of the underdeveloped countries in the
world include

 low per capita income

 low growth in per capita income
 economic inequalities; low level of living
 low rate of capital formation; old techniques of production
 low productivity; high rate of growth of population
 higher dependency ratio; underutilization of natural resources
 large scale unemployment and underemployment
 dominance of agriculture in economy
 backwardness in infrastructure and so on.

Political Control in Trade

While the past century has seen a major shift toward free trade, many governments and
politicians continue to intervene in trade. Politically, a country’s government may seek to protect
jobs or specific industries. Some industries may be considered essential for national security
purposes, such as defense, telecommunications, and infrastructure—for example, a government
may be concerned about who owns the ports within its country. Some governments use trade as a
retaliatory measure if another country is politically or economically unfair. On the other hand,
governments may influence trade to reward a country for political support on global matters.
Governments have several key policy areas that can be used to create rules and regulations to
control and manage trade.

Tariffs. Tariffs are taxes imposed on imports. Two kinds of tariffs exist—specific tariffs, which
are levied as a fixed charge, and ad valorem tariffs, which are calculated as a percentage of the
value. Many governments still charge ad valorem tariffs as a way to regulate imports and raise
revenues for their coffers.

Subsidies. A subsidy is a form of government payment to a producer. Types of subsidies include

tax breaks or low-interest loans; both of which are common. Subsidies can also be cash grants
and government-equity participation, which are less common because they require a direct use of
government resources.

Import quotas and VER. Import quotas and voluntary export restraints (VER) are two
strategies to limit the amount of imports into a country. The importing government directs import
quotas, while VER are imposed at the discretion of the exporting nation in conjunction with the
importing one.
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Currency controls. Governments may limit the convertibility of one currency (usually its own)
into others, usually in an effort to limit imports. Additionally, some governments will manage
the exchange rate at a high level to create an import disincentive.

Local content requirements. Many countries continue to require that a certain percentage of a
product or an item be manufactured or “assembled” locally. Some countries specify that a local
firm must be used as the domestic partner to conduct business.

Antidumping rules. Dumping occurs when a company sells product below market price often in
order to win market share and weaken a competitor.

Export financing. Governments provide financing to domestic companies to promote exports.

Free-trade zone. Many countries designate certain geographic areas as free-trade zones. These
areas enjoy reduced tariffs, taxes, customs, procedures, or restrictions in an effort to promote
trade with other countries.

Administrative policies. These are the bureaucratic policies and procedures governments may
use to deter imports by making entry or operations more difficult and time consuming.

WORLD TRADE ORGANIZATION (WTO)

“The World Trade Organization is ‘member driven’, with decisions taken by

general agreement among all member of governments and it deals with the rules of
trade between nations at a global or near-global level. But there is more to it than
that.”
 Intergovernmental organization which regulates the international trade.
 Officially commenced on 1st Jan 1995 under the Marrakesh Agreement.
 Signed by 123nations in 1994
 WTO had replaced GATT (General agreement on Tariffs and Trade)
 They deal with agriculture, textiles and clothing, banking, telecommunications,
government purchases, industrial standards and products safety, food sanitation
regulations, intellectual property and much more.
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Fig: Structures of WTO

ROLE OF WTO

 The main goal of WTO is to help the trading industry to become smooth, fair, free and
predictable. It was organized to become the administrator of multilateral trade and
business agreements between its member nations. It supports all occurring negotiations
for latest agreements for trade. WTO also tries to resolve trade disputes between member
nations.
 Multilateral agreements are always made between several countries in the past. Because
of this, such agreements become very difficult to negotiate but are so powerful and
influential once all the parties agree and sign the multilateral agreement. WTO acts as the
administrator. If there are unfair trade practices or dumping and there is complain field,
the staff of WTO are expected to investigate and check if there are violations based on
the multilateral agreements.

Trade Routes:
According to Geography, trade route is an area or proscribed passage by land or sea used by
merchants and caravans for economic purposes. An overland route connects multiple points by
land, and originally was traversed by caravans, or merchants who traveled in groups for
convenience and protection.
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A trade route is a logistical network identified as a series of pathways and stoppages used for the
commercial transport of cargo. The term can also be used to refer to trade over bodies of water.
Allowing goods to reach distant markets, a single trade route contains long-distance arteries,
which may further be connected to smaller networks of commercial and noncommercial
transportation routes. (WIKIPEDIA).

A trade route is a route, often covering long distances, that is used by traders. (Collins English
Dictionary).

Major trade routes in the Eastern Hemisphere (1000 to 1500 A.D. )

Eastern Hemisphere Trade Routes

1. Trade Connects Continents

• During the Medieval Period, several major trading routes developed in the Eastern
Hemisphere.
• These trade routes connected Europe, Africa, and Asia. Major trade patterns of the
Eastern Hemisphere from 1000 to 1500 A.D.

Fig Eastern Hemisphere in the Middle ages Source: Studylib

 Silk roads across Asia to the Mediterranean basin:

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Fig: Silk roads across Asia to the Mediterranean basin Source: Studylib

 Maritime Routes across the Indian Ocean:

Fig: Maritime Routes across the Indian Ocean Source:Studylib

 Trans-Saharan routes across North Africa:

Fig: Trans-Saharan routes across North Africa Source: Studylib

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 Northern European links with the Black Sea:

 Western European sea and river trade: The Danube River connected Western
Europe with the Black Sea region.

 South China Sea and lands of Southeast Asia:

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Major Shipping Routes for Global Tarde/ Maritime Shipping Lanes:

There is potentially an infinite number of maritime shipping routes that can be used for maritime
shipping, but the configuration of the global system is relatively simple. The main axis is
a circum-equatorial corridor linking North America, Europe, and Pacific Asia through the Suez
Canal, the Strait of Malacca, and the Panama Canal. These routes support the bulk of the traffic,
but numerous other routes exist (namely for coastal shipping), depending on the origin and the
destination of the maritime shipment.

Fig: Main Maritime Shipping Routes Source: Port Economics, Management and Policy

Maritime routes are shaped by obligatory points of passage, which are strategic locations that act
as chokepoints. Physical constraints (coasts, winds, marine currents, depth, reefs, ice) and
political borders also play an essential role in shaping maritime routes.
Due to geography, geopolitics, and trade flows, specific locations play a strategic role in the
global maritime network. They are labeled as chokepoints and can be classified into two main
categories:
 Primary chokepoints. The most important since they offer limited cost-effective maritime
shipping alternatives, which would seriously impair global trade if disrupted. The first
type of chokepoints concern connectors along major oceans and seas. Among those are
the Panama Canal, the Suez Canal, and the Strait of Malacca, which are key locations in
the global trade of goods and commodities. The Suez Canal blockage of 2021 is such an
example.
 Secondary chokepoints. Support maritime routes that have alternatives but would still
involve a notable detour. These include the Magellan Passage, the Dover Strait, the
Sunda Strait, and the Taiwan Strait.
These eight routes are the busiest shipping lanes for ocean cargo vessels:
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 The English Channel

 Strait of Malacca
 Panama Canal
 Suez Canal
 Bosphorus Strait
 Strait of Hormuz
 The Danish Straits
 Saint Lawrence Seaway

1. The English Channel:

 Each day, more than 500 vessels cross the 350-mile-long English Channel — widely
considered the busiest shipping lane in the world and a critical route in the European
shipping network.
 Cargo vessels, carrying everything from oil to wheat, share the channel with passenger
ferries, fishing vessels, pleasure craft and even the occasional swimmer.
 The body of water separates England from France and connects the North Sea and the
Atlantic Ocean.

Fig: The English Channel Source: World Atlas

2. Strait of Malacca:

 A narrow, 580-mile stretch of water between the Malay Peninsula and the
Indonesian island of Sumatra, the Strait of Malacca is the shortest sea route
between India and China.
 It’s one of the most heavily traveled shipping channels in the world and is a major
route for oil transport and goods like Indonesian coffee, coal and liquified natural
gas.
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Fig: Strait of Malacca Source: U.S Department from Defense Report

3. Panama Canal:

 Completed in 1914, the Panama Canal is ranked as one of the seven

wonders of the modern world by the American Society of Civil
Engineers
 It’s one of the most important international waterways, with more than 14,000 ships
navigating it each year.
 The canal uses a system of three locks to raise the elevation of ships so they can travel
across Gatun Lake (which is 85 feet above sea level) to reach the Pacific Ocean, a
process that takes 8-10 hours.
 In comparison, bypassing the canal and traveling around Cape Horn at the southern tip of
South America would take 2 weeks.

Fig: Panama Canal Source:Carlos Boya, 2011

4. Suez Canal:
 Providing the fastest crossing from the Atlantic Ocean to the Indian Ocean,
 the Suez Canal in Egypt is one of the world’s most heavily used shipping lanes.
 It was completed in 1869 and is the first canal that directly links the
Mediterranean Sea to the Red Sea.
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 Because the narrow passage can’t support two-way lanes, a trip through the 120-
mile-long Suez Canal takes about 16 hours, with an average of 100 vessels
completing the crossing each day.

Fig: Suez Canal Source: Global Risk Insights Know your World

5. Bosphorus Strait:

 Also known as the Strait of Istanbul, this narrow, natural strait in northwestern
Turkey is 19 miles long and links the Black Sea with the world’s oceans.
 It’s one of the most important routes for transporting oil to regions including Asia
and Western and Southern Europe.
 An estimated 48,000 ships move through the Bosphorus Strait each year.

Fig: Bosphorus Strait Source: World Atlas

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6. Strait of Hormuz:

 The Strait of Hormuz is located in the waters of Iran and Oman in the Persian
Gulf.
 Roughly 21 million barrels (or about one-third) of the world’s sea-traded oil
passes through the strait every day, headed primarily to Asian markets like India,
China, Japan, Singapore and South Korea.
.

Fig: Connection Routes,Strait of Hormuz Source: TRTWorld

7. The Danish Straits:

 With approximately 70,000 ships moving through them each year, the Danish
Straits are some of the most trafficked channels in the world.
 They’re made up of a system of three channels — the Oresund, the Great Belt and
the Little Belt — that interlink the North Sea and Baltic Sea, and they provide a
key pathway for oil shipping between Russia and Europe.

Fig: The Danish Strait Source: Wikipedia

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8. Saint Lawrence Seaway:

 Extending more than 2,300 miles from the Atlantic Ocean through Canada to
the head of the Great Lakes, the St. Lawrence Seaway — also called
“Highway H2O” — serves as a critical North American trade route.
 It was built in 1959 as a binational partnership between Canada and the U.S.
and continues to operate that way.
 The St. Lawrence Seaway is not a single waterway; it’s a system of locks,
channels and canals extending from Montreal, Quebec to Lake Erie. It
connects to more than 100 ports and commercial docks within the eight Great
Lakes states, as well as the Canadian provinces of Ontario and Quebec.
 It’s also a critical network for transporting goods between North America and
60 overseas markets, with more than 160 million metric tons of general cargo
moving across the seaway each year.

Fig: St. Lawrence Hydrographic system Source: Britannica

Free Ports

Free ports are a special kind of port where normal tax and customs rules do not apply. These can
be airports as well as seaports. At a free port, imports can enter with simplified customs
documentation and without paying tariffs.
Businesses operating inside designated areas in and around the port can manufacture goods using
the imports and add value, before exporting again without ever paying the full tariff on the
original goods they imported – although a tariff may be payable on the finished product when it
reaches its final destination, including if that destination is in the same country outside the free
port.
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Taxes are only paid if the goods leave the free port and are moved elsewhere in the UK.
Otherwise, they are sent overseas without the charges being paid.
The UK had seven free ports between 1984 and 2012. Locations included Liverpool,
Southampton and the Port of Tilbury.

The locations of England's eight new free ports were announced at the March 2021 Budget:
 East Midlands Airport
 Felixstowe and Harwich
 Humber region
 Liverpool City Region
 Plymouth
 Solent
 Thames
 Teesside

Multinational Company
A multinational company (MNC) is defined as a business entity that operates in its country of
origin and also has a branch abroad. The headquarter usually remains in one country, controlling
and coordinating all the international branches.
Examples: Gradually, MNCs have expanded globally, especially in Asian countries. Many
multinational companies identify immense growth opportunities in South Korea, India,
Philippines, Malaysia, Bangladesh, etc. As per a report issued by the Confederation of Indian
Industry (CII) and Ernst & Young (EY), India is highly desirable amongst multinational
companies due to the abundant labor and policy reforms.
Characteristics:

 A multinational company has its headquarter in one country and a branch or subsidiary in
at least one foreign country.
 The global business operations are managed and controlled centrally, i.e., from the head
office located in the home country. Regional offices abroad manage business operations
as per the established norms of the headquarter.
 There could be several branches, subsidiaries and outlets as per the size of the entity.
 Multinational corporations can be categorized into four different types: decentralized
multinational corporations, centralized global corporations, international companies, and
transnational enterprises.
 While the first purpose of multinational corporations is profit maximization, these
companies also diversify their business operations to seek cost advantage and acquire
enriched resources and cheap labor.
 Many MNCs are a source of economic development, employment generation and
community development.
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Types of Multinational Company

Given below are the four main kinds of multinational corporations we across every day:

1. Multinational Decentralized Corporation: Every branch office has a decentralized

management structure with no central chain of command for decision making.
2. Global Centralized Corporation: A centralized firm manages and controls the
international units from the headquarter in the home country.
3. International Company: In this, the global branches adhere to the parent company’s
technology or R&D. All the research work for new product development and
improvisations occurs in the headquarter.
4. Transnational Enterprise: It is a blend of all the above three forms of MNCs. The parent
company guides but not controls the functioning of its global branches.

Advantages:

1. Goods and Services: MNCs bring goods and services to the foreign country, thus giving
the local customers variety. Besides, they also bring in innovative products suited to local
needs that serve their requirements better.
2. Job creation: multinational companies create jobs whenever they enter new borders as
they employ the local workforce. Top multinational companies in the US, such as Apple,
Amazon, Microsoft, etc., gave jobs to over 1 million people between 2000-2018.
3. Growth and Development: Especially due to CSR requirements, MNCs also uplift the
societal makeup by contributing to the country’s income, development and growth.
Developing countries and MNCs often team up with foreign direct investments (FDIs). It
has financed many development projects to eliminate poverty and job shortage.
4. Cost Efficiency: Companies eye foreign countries where the labor and raw materials are
cheap. Some countries have lower tax rates; together, it brings down the cost.
5. Business Expansion: The obvious benefit for the company is the massive business
extension by allowing access to a willing new market. Coupled with cost-efficiency, it
makes their empire grow immensely.
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6. Global Brand Recognition: The presence across several countries improves brand image
and identity among the worldwide consumers. With higher product demand, consumer
satisfaction and wide acceptability, the price of the product rises.
7. Diversified Work Culture: An MNC has a cosmopolitan work culture since the
employees belong to different parts of the world but work together for attaining the
company’s goals and vision.

Criticisms:
Many multinational companies are often criticized for exploiting the cheap labor in foreign
countries by paying meagre wages. Moreover, back home, it causes a shortage of jobs.
There have been accusations of flouting workplace safety and environment protection norms.
Some researchers say MNCs account for nearly a fifth of carbon emissions globally. A few years
ago, many American companies shifted their headquarters to a country with a lower tax rate to
pay fewer taxes. It had troubled policymakers, urging them to find a quick solution.
From the company’s perspective, many of them struggle to flourish if the foreign land has high
duties and tax rates. Moreover, any political and economic disturbances could shake their
foundations too. Besides, if there is volatility in the currency of the two countries, the company
could face loss.

Dispute Over Resources:

Disputes over natural resources – such as land, fresh water, minerals or fishing rights – are
ubiquitous. When resolved peacefully, as is most often the case, such disagreements are an
essential part of progress and development.
However, resource disputes can also trigger violence and destruction, particularly in states with
weak governance, high levels of corruption, and existing ethnic and political divisions. Bitter
disagreements over the distribution of Iraq’s oil wealth among Sunni, Shia and Kurdish regions,
for example, have contributed to the fragmentation of that country. In the Darfur region of
Sudan, disputes between pastoralist herders and farmers over livestock migration routes and
watering holes have become a violent flashpoint for wider cultural, ethnic and religious
differences.

At a broad level four types of resource dispute can present a general challenge to national
stability:

 Secessionist conflicts in which resource-rich regions seek to split away from the rest of a
country
 Disputes over resources as part of a new national compact (i.e. in the context of a peace
agreement or new constitution)
 Grievances over standalone projects such as mines and hydroelectric dams
 The cumulative impact of multiple small-scale clashes, typically over land, livestock or
fresh water.
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One of four potentially contentious issues is typically at the heart of these national or sub-
national resource disputes:

 Ownership of the resource

 Allocation of power for managing access to or developing the resource
 The distribution of resource revenues; and environmental and social damage caused by
extracting the resource.

There are three ways in which the international community needs to improve its capacities if it is
to play a more effective role in the resolution of violent national and sub-national resource
disputes.

 Developing more sophisticated analytical competency is the first component. This

entails the ability to understand the social, political and institutional context; to work out
what the driving issues are; to get to know how different stakeholders are involved in, or
affected by, the dispute; and to find ways to measure outcomes and impacts of dispute
resolution.
 The second component is improving process competency. This involves the ability to
design effective processes, to negotiate, to coordinate, to communicate with stakeholders
and to work in diverse teams.
 The third component is enhancing leadership and management competency. In the
context of resource dispute resolution, this comprises skills of collaborative leadership,
facilitation and mediation. The international community often has little, if any, coercive
power to force an agreement. Rather, it needs to build a consensus among stakeholders at
the national level on the need to resolve resource disputes, and provide the tools that can
help them do so.

Sharing of International River:

Political units, of course, have origins other than control over river water resources. A river does
not know the geographical or state boundaries that have been created by human beings. While
flowing its natural course, a river may pass through one political unit to another, or from one
country to another. The use or misuse of water in the upstream countries affects its quantity and
quality in the downstream countries. Downstream nations can influence the flow of water by
building large scale dams, with effects spilling over the borders. Now, new international legal
principles are being developed to address the transboundary river-sharing issues.
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Table:Distribution of International River and Lake Basins by Regions:

Region Number
Africa 57
Europe 40
North and Central America 48
South America 33
South America 36
Total 214

Source: CNRET (1978)

When countries are jointly dependent on the same river, upstream with drawl, pollution or
management can lead to ‘upstream-downstream’ conflicts or cooperation. The increasing
demand of this resource threaten to increase the number of disagreements between the users in
the near future.

Conflicts are going to between the riparian states in different parts of the world. Some of these
conflicts have received wide coverage: in the Jordan river basin between Israel and Arab
countries, in the Nile river basin between Egypt, Sudan and Ethiopia, in the Tigris- Euphrates
river basin between Turkey, Syria and Iraq, in the Danube river basin between Hungary and
Slovakia, and in the Ganges river basin between India, Bangladesh and Nepal.

Table: Countries with More Than Half of Their Total River Flow Originating Outside Their
Borders (%)

Country Share of Total Flow

Originating Outside Borders
Egypt 97
Hungary 95
Mauritania 95
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Botswana 94
Bulgaria 91
Netherlands 89
Gambia 86
Cambodia 82
Romania 82
Luxembourg 80
Syria 79
Congo 77
Sudan 77
Paraguay 70
Niger 68
Iraq 66
Albania 53
Uruguay 52
Germany 51

Source: Gleick (1993), WRI(1991), Reprinted by permission.

The list of occasional disagreements between riparian countries over water sharing is a long one,
including those over the river Indus between India and Pakistan, over the Colorado between the
USA and Mexico, over the Salween/ Nu Jiang between Burma and Chaina, over the Mekong
between Cambodia Laos, Thailand and Vietnam, over the Parana between Argentina and Brazil,
over the Lauca between Olivia and Chile, over the Great Lakes between Canada and USA, over
Lake Chad between Nigeria and Chad, over the Rhinebetween France, the Netherlands,
Switzerland and Germany, over the Maas and Schelde between Belgium and Netherlands,and
over the Szamos between Hugary and Romania.

However, some of the sharing arrangements have begun to crumble under increasing demands
for water.
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