A trading nation is generally a nation where foreign trade makes up almost a majority of its gross domestic product. If a nation has high levels of foreign trade than it is expected to have a strong economic performance and be able to attract investors and other nations with similar attributes to invest in the nation. The trading nation also acts as a clearing house for trade so that country’s currency can be bought and sold freely in the international market. This allows the nation to gain access to other nations resources which would otherwise be unavailable to it due to high barriers to trade.
A few years ago I had the privilege of being invited as an invited speaker to participate in a three day workshop organized by the Canadian Chamber of Commerce in Beijing on the topic of “Exporting Goods – The Chinese Way”. The theme of the event was to train members of the chamber of commerce on the practices that can help promote trade relations between China and Canada. I was interested enough to write a paper on the topic and sent it along to the chamber of commerce. During the workshop I gained some useful insights into the practices that are necessary if one wants to successfully facilitate and promote trade relations with China.
One of the important concepts that I learned during the workshop was the concept of balancing the trade equation: meaning that while there are advantages to having high levels of exports into a trading nation like Canada, there are certain disadvantages to doing so as well. In this regard I explained to the participants that although Canada has a very solid agricultural sector with a number of high value-added agricultural products, it depends greatly on the amount of exports and imports of those products from the United States, the European Union and other such countries. Given that we know that China is becoming a major exporter of goods, we need to be aware of the negative impact that such high levels of imports can have on our trade balance.