ABSTRACT:
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. Trading nations tend to favor 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 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. There are three types of exporting economies: commodity exporters, manufacturing exporters, and services exporters, although most countries are not purely one or the other. Importance of Trade The importance of trade has long been established in the economic literature as a main driver for economic growth and development. It is also acknowledged that the relationship between trade and development is a complex one, and that there is no guarantee that trade will automatically lead to economic growth for developing countries. In order to increase the likelihood of this happening, trade and industrial policies ought to be tailored to reflect the different vulnerabilities and potential strengths of each country.