Why Is Canada a Good Trading Nation?
A trading nation is simply a nation in which international trade constitutes a large percent of its gross domestic product. The term comes from the fact that a trading nation must balance its foreign portfolio, including its currency pairs, with its domestic stock and bond portfolios. As such, trading nations tend to be strong economies that enjoy low inflation rates and low interest rates on their loans. This is a nation that can offer the current account holder some very attractive opportunities.
For example, Canada has traditionally been a very strong importer of energy, specifically crude oil. As such, Canada’s energy prices are very low relative to those of the United States, and have sent a lot of goods into the US. At the same time, however, we have seen that Canadian companies have really been able to take advantage of the booming “buy American” sentiment in the last few years. In particular, natural gas and crude oil exports have risen sharply, allowing many American consumers to enjoy cheaper energy at the pumps. If we continue to see this trend over the coming years, it can only mean that Canada will become a dominant exporter of both energy and goods.
Another advantage that a trading nation enjoys as an exporting nation is its proximity to the global markets. If you look at the last several years, China has increasingly become a major exporter of both industrial raw materials and services. Canada, in particular, enjoys an excellent trade relationship with China, one that is rapidly improving. Given these factors, it is little wonder that there is a real desire for international trade and investment in Canada.