Examining Trade Dependency - Applied Examples
We were discussing trade dependency in our Year 13 Economics class today and drew on real world data from countries such as Bangladesh, Zambia and Vietnam. I've linked to a short video of the key points from the session.
Benefits of exports for an emerging / developing country such as Bangladesh
- Exports generate funds to pay for imports
- Exports create jobs and can help lift per capita incomes which then reduces absolute poverty
- Exports are an injection into the circular flow which can have positive multiplier & accelerator effects
Risks/ downsides for emerging / developing countries who have a high trade dependency on a narrow range of products / export markets
- Makes an economy more vulnerable to external economic shocks and recessions in trade partners
- Country is more exposed to volatile global commodity prices – affecting trade balance / jobs
- Environmental aspects from over-production
Strategies that a country might use to reduce trade dependence
- Investment in the human capital of the labour force – to increase / expand their capabilities
- Use foreign direct investment to broaden (diversify) a country’s industrial / export base
- Use of selective import controls to promote industrialisation / import substitution
In this revision video we examine the extent to which countries are dependent on exporting a narrow range of products and to only a limited number of countries. Often, a high level of trade dependency can act as a barrier to sustainable growth and development.