A trading nation, also known as a trading powerhouse, is a nation where international trade constitutes a big percentage of its gross domestic product. The United States is a great trading nation. That is the sad but true reality. That sad fact is a reminder that we cannot continue to rely on our ability alone to secure our economic future.
One reason that we have fallen into a trading nation problem is because we rely too much on imported goods to support our import dependency. For example, the United States currently has about $1 trillion in trade surplus with China, but China exports about two-thirds of our total merchandise. Therefore, the United States is importing more from China than it exports to them. That imbalance creates a gap between the two countries and, when the Chinese government devalues their currency to encourage exports, they take their goods off the shelves, reducing our demand for their goods. When this happens the price of our products goes up. The result is higher prices for American consumers and lower revenues for United States businesses.
A second reason that we are a trading nation, at least when it comes to exporting our goods, is because we do not allow our domestic manufacturers the same advantages as the foreign manufacturers that we do. For example, when it comes to automobiles, we don’t let Canadian cars into the United States because they are too dangerous. But, when it comes to motorcycles, we absolutely take them on the planes. Why? Because they are a risk. However, when it comes to Chinese producers of motorcycles, the Chinese government actually encourages them to build more motorcycle units in the hope that they will sell those to the United States, our largest trading partner.
A third reason that we are now a trading nation rather than a manufacturing nation lies in our ability to reduce the cost of our exports. That begins with our ability to develop better technology in the areas of infrastructure, innovation, and marketing. These three areas have played a big role in the success of the American economy over the years. In fact, most of the technological advances that the United States has made over the past 15 years, was actually the result of government research and development. So, we need to continue this level of research and development if we want to continue to attract free and fair trade.
Finally, another reason that we have become a trading nation, is because we are becoming a better neighbor to other countries around the world. For example, when we were trading with countries in the past who did not respect us, we often took advantage of them by buying their products cheap and selling them high. But, now we are able to buy technologies, goods, and services at a reasonable price, and sell them high. That is one way that we have helped our neighbor nations around the world. Indeed, some of the best deals that we have ever had for goods, technology, and services have come from the European Union, Japan, the United States, and Canada. As a result, when our products sell in these markets, we actually make more money than if we sold them in the United States.
All of this means that we need to keep our trading nation on an even keel. That means that we need to be competitive in all aspects of trade. It also means that we must be very careful that we do not start subsidizing our competitors or allowing our companies to buy products at below fair market value, because once that happens, we are taking a very large risk.