Trading Economics: A Guide to Economic Statistics for Practitioners and Students

7 Global Trade Statistics

Every man lives by exchanging.

Adam Smith¹

The economic relationship that a country has with the rest of the world – the balance of payments – and the share of international trade in a country's GDP and how that is measured are among the most important and useful ways of understanding the prosperity of a country and of nations.

What you find is that those countries that trade the most with others – those that are most open to international trade – are also the richest. That, of course is why coastal cities and island communities or nations do so well even when they have few natural resources of their own and why many of the richest countries and cities have excellent waterway systems and coastal hubs, which facilitate trade both internally and externally. It has been said of the Great Lakes in the US that if they were not natural they would have been created in order to facilitate trade within the US, which gives it the economies of scale that help it to be such a prosperous economy.

Ricardo's theory concerning the reason why more trade creates wealth for everyone involved demonstrated immense insight. Baldly put, he stated that it is still economically beneficial for countries to trade, even if everything their domestic economy produces is better than what is produced by their potential trade partners in absolute terms, because there will still be relative differences. This insight remains central to our understanding of the intrinsic value of open ...