Economic Interdependence of Nations

International trade has increased economic interdependence of nations. Modern industries are dependent upon a variety of raw materials all of which cannot be conveniently and economically produced in any one country. If the flow of imported raw materials is distributed in any way, production in industries dependent on them will be seriously dislocated. At present goods are not exported merely because there is a surplus for exports. Often goods are produced specifically to satisfy export demands. Sometimes exports are encouraged to obtain essential imports. During the period of acute dollar shortage, the UK exported Scotch whisky to the USA, not because there was a surplus but to obtain dollars. Even now a substantial portion of the production of Scotch whisky is earmarked for export. Once the production pattern of a country has been adjusted to producing surplus for exports, any dislocation in its export markets will create serious problem for it and its people by seriously reducing their purchasing power. And if the prosperity of the particular industry is affected, other industries would not remain unaffected. Not only that, international trade also transmits economic disturbances from one country to other countries.

The extent of dependence upon international trade differs from country to country. Among the leading nations, the UK is highly dependent upon foreign trade. It needs to import not only half of its supplies of food but also nearly all the raw materials needed by the industry. Therefore, it must export a major portion of its manufactures in order to pay for heavy imports. Its need to export increased after World War II due to the liquidation of most of its foreign investments and a consequential reduction in invisible income. Belgium exports 45% of its gross national product and about 65% of all its industrial output. Similar is the case with South Korea and most West European countries. The USA, Russia and China are among the countries least dependent upon foreign trade. But even they depend upon imports for a variety of foodstuffs and raw materials which they do not produce in adequate quantities. In case of the USA even though total US imports constitute only a small percentage of US aggregate national consumption , there are many important commodities in respect of which the USA is a large importer, i.e. natural rubber, tin, coffee, asbestos, chromite, tungsten raw silk, carpet wool, jute, tea, nickel, cocoa, manganese and spices. Similarly in the case of exports, even though merchandise exports constituted only 8% of her gross national product in 1980, a substantial percentage of the production of a number of industrial and agricultural products is exported.

It is extremely difficult to analyze all the influences which go to determine the percentages shown above. Yet certain facts stand out fairly clearly. Certain countries most dependent upon international trade like the Netherlands, Norway, Belgium and Denmark are small and fairly wealthy countries. The countries least dependent upon foreign trade form an oddly assorted collection – the USA, Russia, India and China. Their great size with wide range of domestic resources is responsible for their relatively high degree of self-sufficiency. The group contains both the richest and the poorest of countries. The correlation between income per head and dependence on international trade is positive, and though small, is just large enough to be statistically significant.

Global interdependence is in the interests of both the rich countries (the North) and the poor countries (the South). While the South looks to the rich North for more aid, and technology, the North is increasingly dependent on the supply of raw materials and cheap labor from the South.

Third World products make up about 60% of the total weight (787 kg) of a Renault-5 car. Parts such as body work, steering and suspension, engine block, gear box and brakes using steel and cast iron depend on 80% of the iron ore from the Third World, engine and gear box (25% bauxite) , wiring (60% copper) , galvanized panels and carburetors (26.5 zinc), tires, windows, door seals and hoses (100% latex rubber), interior fittings, steering wheel, windows and light (50% wood, leather, paper, flax and sand) and fuel lubricants, brake fluid dash board, bumpers , protective side panels and paint (100% petroleum and plastics from the Third World ) .