Interdependence

Interdependence between countries means that they are dependent on one another in some way.

For example, many developing countries are dependent on developed countries for manufactured goods or aid.

Developed countries are dependent on developing countries for primary products such as steel and iron.

Developing countries are also dependent on developed countries for income from tourism, whilst developed countries require developing countries to provide the climate and hospitality for some holiday destinations.

In this way, countries can be said to be interdependent.

The greatest volume of trade occurs between developed, capital-rich countries, especially between industrial leaders such as Australia, Canada, France, Germany, Japan, the United Kingdom, and the United States.

What causes trade inequality?

Highly industrialised countries need lots of cheap raw materials and energy supplies.

They produce a wide variety of manufactured goods using these raw materials.

Their populations can afford to eat foods or buy goods not produced in their own country.

Children watering banana plants with large grey watering cans

Trade groupings, such as the European Union, encourage trade within the trade grouping, by making it easy to cross borders without paying customs duties.

Rich, influential developed countries often act together, for example the EU or the North American Free Trade Agreement. They dictate the terms of trade. 40 per cent of the trade in Canada, Mexico, and the US occurs within the NAFTA partnership.

Transport links have improved within these trade areas. Motorways, high speed trains and tunnels now link EU countries together. This allows for quicker and easier movement of goods between countries.

For poor, developing countries, the situation is different.

They tend to have:

  • little manufacturing industry and little money to develop it
  • many of the population are poor farmers, including subsistence farmers
  • there are no powerful trading groupings
  • poor or non-existent communications and infrastructure

Often poor countries rely on only one or two raw materials such as Ecuador which grows bananas.

When the price or demand for bananas falls, the country’s income can be badly affected.

This means countries may need to turn to borrowing and increasing their debts. This limits their ability to buy imports.

Ecuador has previously been involved in 'banana wars' with the EU. This was an ongoing dispute over import tariffs. In July 2014, agreement was reached to improve tariff conditions. The Association of Banana Exporters of Ecuador (AEBE), described the agreement as wonderful. This should come into effect by 2015.