It refers to the extent at which one countries economy depends on their interaction with other countries, mainly trade of goods and services from one country to another. It shows how much a countries economic performance affects other countries in the world. It can be considered an outcome of the specialization of an industry. When one country or area of the world holds a monopoly in a specific industry, other countries will rely on them to provide the goods and services that are linked with that industry. This is not always a good thing because in the case of economic sanctions one country or area could be without the products that need, or if the economy of one country plummets then the others may follow.

An example of economic interdependence is the NAFTA. Canada, Mexico and the United States have made an agreement in which they are free to trade with one another without any tariffs on the goods and services. Because of the easily accessible goods, they have become very dependent on one another to obtain the products that they need. The economies in Canada, Mexico and the US also rely on the free trade among themselves.

The chart below demonstrates economic interdependence because it shows that the US and the world’s GDP when graphed show the same trends. This can be linked to economic interdependence because you can see that one country’s GDP shows the same pattern as the worlds GDP, meaning that the overall economy of the world effects economies everywhere due to economic interdependence.

external image USandWorld.gif