BLOG

MY PERSONAL JOURNEY

Does a Trading Nation Exist?

A trading nation, also called a trading hub, is a nation in which international trade accounts for a major proportion of its gross domestic product. More often than not, a trading nation has the most diverse and fastest-growing domestic economy in the world. However, it is not entirely a free-market economy; quite the opposite, in fact. In fact, in most cases a nation’s central government plays a role in the direction of its national economy. The key to a successful trading nation lies in its ability to successfully utilize the unique attributes that make it a desirable trading nation, and in turn, attract investment capital from all around the world.

Trading Nation

To arrive at this conclusion, two important concepts are needed to be examined, namely, free trade and gravity models. First, let us take a look at free trade. This concept is based on the idea that markets do not function with free competition as they would when competition is scarce. When there is plenty of competition, prices go down, and consumers go for bargains. But when there is very little or no competition, consumers tend not to shop, and prices rise.

Free trade then, is the process by which a nation allows for the exportation and import of goods that have been manufactured domestically, while charging duties and taxes on those same goods that have been imported. Conversely, a trading nation, in order to be a highly prosperous trading nation, must be able to keep its prices competitive. The concept of gravity comes into play here: the closer a nation’s products and services are to those of other nations, the more value there is to be extracted from them, and consequently, the more exports are encouraged. A nation that sees itself as being a high-value provider will encourage the export of those things that are considered to be low-value.

Thus, in order to be a highly prosperous trading nation, it must be able to keep its costs competitive. However, the current tendency is that many trading nations feel that they are able to fill every available void (both economic and social) by importing large quantities of goods and services from the United States and using those imports to drive down the cost of what they sell. The result is lower prices on items that have been imported, but which have been successfully re-exported.

This means that a good part of the goods that are bought and sold internationally are not produced in the United States, but rather in other countries. And, even when these goods are domestically produced, they are often produced with little attention to quality control. This causes the overall quality level of those goods to fall below standard and leads to the current problems with the international trade deficit. Many economists argue that the current deficit problem is much worse than it seems, because the amount of goods imported that are re-exported doesn’t make up the whole deficit, so we are actually running a deficit on goods and services that are coming back from other countries! A Trading Nation, on the other hand, would take more pride in its international trade and would therefore use its purchases power to ensure that its purchases of domestically produced goods meet the standards that it requires, and thus boost its own economy.

So, it seems clear that a Trading Nation is in fact a nation that promotes its own international trade. A Trading Nation would therefore be interested in having low import tariffs and low export duties on all items that it buys and sells. It would use its purchasing power to ensure that its domestic production meets high standards and encourages manufacturers to build products that the consumer wants. Such a system would ensure the long term prosperity for the United States of America and the wider global trading system that we operate.