Question

The danger of trade dependency is that________.

A) It often leads to the exploitation of developed countries.
B) Political turmoils in a country might affect all dependent countries.
C) It is difficult to end trade activities with current trade partners and find new trade partners.
D) The countries involved in trade often get into rivalry over trade tariff issues.

Answer 1

Trade dependency can lead to economic instability in the dependent country due to political turmoil in the supplier country, uneven benefits skewed towards developed nations, and vulnerability to trade barriers and protectionist measures.

Step-by-step explanation:

The danger of trade dependency is that it often leads to scenarios where political turmoils in a country can significantly affect all countries that are economically dependent on it.

Dependency theory, a part of international trade theory, posits that the benefits of trade often disproportionately go to wealthy nations, while developing nations may end up with exacerbated poverty and minimal developmental growth. These risks are compounded by potential threats such as trade wars, unilateral protectionist measures, and the precariousness associated with specializing in a few commodities or sectors.

Furthermore, dependency can lead to situations where trade barriers and disruptions have severe impacts, forcing countries to scramble for alternative sources or to produce goods domestically, often at a higher cost or lower efficiency.