In order to understand the concept of Trading Nation, it is important to have an understanding of what a nation, and nation-less countries are, at least in theory. A nation is defined by Wikipedia as “a political unit of distinct independent states, which can extend their political system over wider geographical areas than any other nation in the world.” In other words, a trading nation is simply a nation where international trade makes up the largest percentage of its gross domestic product. And, in this global, interdependent world, it is more important than ever to know how to “traded” the markets.
Now, I would like to take this idea even further than mere political theory. Let’s take into consideration the most important aspect of trading: which currencies should you trade, and which ones should you avoid trading? Canada is noted as having the most lucrative oil export and import markets. And yet, much of that money, much of that energy, and all of that growth is channeled through the US dollar, which is the “white collar” currency.
So, while Canada does enjoy a very advantageous economic position vis-a-vis its major suppliers across the world, it is doing so at the expense of its most precious export, its dollar. And its ability to do that is seriously handicapping its ability to trade with its key trading partners and fellow importing nations. Its energy sector is perhaps even more important than the oil export market, yet, for some reason, Canada seems to prefer to do business with the oil exporters, and not the users. Why? Because, apparently, it’s easier to sell oil to the Americans or the Europeans than it is to sell them our own oil, especially when the latter is our biggest competitor in the energy sector.
So, given this rather fundamental (and somewhat ironic) fact, does Canada enjoy an advantage in its international trade? It surely does, as the current global financial crisis has done much to shake the confidence of many traders, including those of us here in the United States. With fears of an impending recession running high, the ability to secure long term profits and build for the future, while having the means to properly address any potential eventualities, is now of utmost importance.
And that’s exactly where a very unique trading nation stands today. Unlike the United States, Canada has been careful to diversify its sources of revenue and its domestic markets. Rather than try to rekindle dwindling exports to the United States, its government has pursued an approach which focuses on promoting its domestic manufacturing industry. In addition, rather than trying to protect exports from competition, its government has invested heavily in innovative and extensive research programs aimed at improving the competitiveness of its industrial sector.
As a result of all this, Canada’s trading position vis-a-vis the rest of the world is quite enviable. The country’s commitment to free trade and economic integration has made it a strong competitor in the global arena, even as it works diligently to strengthen its ties to the United States. So while you may have concerns about the sustainability of specific exporting practices, the reality is that Canada’s comparative advantage is derived from a combination of factors which make it a powerhouse in the international trade scene. For example, despite having fewer goods and services exports than the United States, Canada has a far more flexible system for entering into the global markets. And its willingness to be a member of the Trans-Pacific Partnership (T pact) and the World Trade Organization (WTO) means that it is one of the most open economies in the developed world.