Trading nation

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A trading nation (also known as a trade dependent economy, or an export oriented economy) is a country where international trade makes up a large percentage of the total economy.

Smaller nations (by population) tend to be more trade-dependent than larger ones. To some extent all countries rely on trade, but the importance of trade varies substantially between countries. In 2008, the most trade-dependent OECD member was Luxembourg, where trade was worth 313.08% of GDP, while the least trade-dependent was the United States, where trade made up 30.41% of GDP.[1]

Trading nations tend to favour free trade policies and economic integration, or at least seek market access for their products (they may also seek some form of protectionism for their own industries). The most desired markets to access are the largest ones.

Canadian news columnist Andrew Coyne in 2012 described countries with free trade with both the EU and USA as a "select group" including Colombia, Israel, Jordan, Mexico, Morocco, and Peru. Also he described South Korea, Chile, and Singapore as "buccaneering free traders" and the only countries that rivaled Canada in "scale and scope of the trade agreements" they had signed (roughly 75% of Canada’s trade is tariff free). Specifically, South Korea has a free trade agreement with the United States and India, and is negotiating with China and the European Union. Chile has free trade agreements with the US, the EU, Japan, China and Mexico — but not India or Korea. Singapore has agreements with the US, Japan, India, China, and Korea — and is in negotiations with the European Union. Mr. Coyne argues that if Canada is able to successfully complete agreements with the major trading blocs (EU, China, and India), then some 90-90% of Canada's trade would be tariff free, and unilaterally abolishing any remaining tariffs would then make sense.[2] Small countries or city-states which are extremely reliant on international trade are sometimes called entrepôts. These typically engaged in the re-export of products produced elsewhere, or finance and services (see offshore financial centre). Modern-day examples include Hong Kong, Singapore, and Dubai.

Both developed and developing countries may rely on trade. Many developing nations pursue a policy of export-oriented industrialization, which they hope will lead to export-led growth. Roughly speaking, there are three types of exporting economies: commodity exporters, manufacturing exporters, and services exporters, although most countries are not purely one or the other.

Commodity exporters include countries with large deposits of natural resources or large amounts of farmland, with populations too small to use all their own resources. The trade of many commodity exporters is dominated by a single commodity. Most least developed countries are reliant on agricultural exports. A 1998 statistical review by the FAO showed that 32 developing countries were relied on a single commodity for more than half of their agricultural export earnings.[3] Agricultural exporters are generally members of the Cairns Group which lobbies for more market access. Fossil fuel exporters, such the OPEC countries, are an important and influential, sub-set of the commodity exporters group.

Manufacturing exporters include many densely populated countries where human labour is the most important resource. They include wealthy countries such as Germany and Japan, as well as developing nations like China.

Services exporting countries include hubs of international finance, tourism, healthcare, education, and so on. Many highly developed countries export services.

Some countries export all of commodities, manufactures, and services. For example, Canada is regularly described as a trading nation as its total trade is worth more than two-thirds of its GDP (the second highest level in the G7 after Germany),[4][5][6] which includes all sectors of the economy.

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