A trading nation is a nation in which international trade constitutes a high percentage of its gross domestic product. The currency of such a nation usually is convertible into that of another nation’s currency. While trading nations have free trade, they also enjoy low barriers to entry for foreign investment. This means that companies in these nations may choose to establish their headquarters there, and may even choose to establish their trading operations there.
The reason behind China’s rise as a trading nation, and the importance of that rise, is simple – it is now the largest consumer of most of the world’s goods and services. At the same time, China manufactures by the thousands all over the world. In addition to its heavy manufacturing output, China’s economy is based on the sale of commodities at a very high rate. Its commodities sales far outpace those of its neighbors.
In recent years, China has turned to the world for help in managing its internal problems, but its trade strategy has remained largely the same. China has chosen to import and export mainly raw materials such as coal and petroleum, and to build vastroads, dams and bridges in other nations with the help of bank loans and cheap world raw materials. While these strategies have helped China to expand its trade, they have also been a severe hindrance to the development of other nations. The Chinese government has long opposed foreign direct investment in any nation, especially in the sphere of business, fearing that it might upset the delicate economic balance and lead to political instability in that nation.
One of the reasons that the United States has been unable to fully develop its relationship with China is the fact that China has become a very big trading nation, trading nearly twice as much as the United States does. For this reason the United States has been trying to encourage Canadians and other countries to increase their exports to China, and to purchase Chinese manufactured goods. This strategy seems to be having some success. Statistics from the U.S. Bureau of Economic Analysis indicate that over the past five years Canada has been the top buyer of Chinese goods. Between 2021 alone, Canadians bought almost thirty six thousand vehicles from China.
However, despite the growth of Canada’s economy, the recent global economic crisis has seriously hurt the Canadian economy, causing unemployment and a credit crunch in many parts of the country. At the same time, a sudden slowdown in Chinese exports has caused the Chinese currency to fall against all currencies, resulting in a depreciation which has caused many exporters to either increase their imports or to cut down on their exports. The result is that while Canada has benefitted from the increased import rates and the rising prices of its exports, at the same time the United States has suffered a great loss in its trading deficit with China. This predicament has been seized by the Obama administration, which has taken action by increasing its exports and import duties and recently launched an antidumping law, which has so far proven to be relatively successful in limiting the damage to the United States economy by Chinese dumping.
On the other hand, some economists are warning that such measures might not work for long, as China will continue to bring forth new goods that it can market cheaply, damaging the interests of American businesses that have been counting on those exports to boost their own economy. Meanwhile, the United States is looking for a way out of the current economic dilemma, but have been unable to find one that would satisfy their needs. For now, the best solution is to strengthen the already existingNAFTA, boost our manufacturing base, increase exports of manufactured goods, and promote stronger ties between the two countries through the Global Markets Initiative, or GMA. By so doing, the United States can regain the lost global trade advantage and maintain its free trade advantage – which it should strive for anyway, given that it is the only country in the world that is currently providing a very open and free trade environment for its consumers. Now is the time for Canada to take advantage of this situation and become a significant player on the global trading scene.