Is International Trade so Important?

With current emotions in many countries around the world apparently running strongly on nationalistic, parochial, even isolationist lines these days, is trade really so important? Trade, in its simplest form, is the exchange of one skill or commodity for another, or several others, and originated at the individual human level; that is even more evident today. It expanded to eventually encompass whole countries for roughly the same reason, is basically exchanging ‘commodities’ – resources, agricultural products – for manufactured items and sets of skills, and these days even exchanging the latter as items manufactured and skill sets have widened considerably. As the table below shows, nothing has changed to the present day, and if a balance is to be maintained, then little will change in the near future.

So of course the answer to the headline question is ‘yes,… and no!’ Simply based on earnings from exports, clearly many countries are still dependent on international trade for a significant proportion of their national income. One might assume that this applies particularly to smaller countries with one or two items, only, of significant importance, but a recent assessment by the World Trade Organisation(WTO) indicates that this assumption is at least an over-generalisation. Some countries are large enough to be virtually self-sufficient, but for a variety of reasons effectively choose not to be, to the extent where, now, decreasing their involvement in international trade could well prove to be disastrous for the country’s economy.

The WTO has measured the importance of singular items, or groups of similar items, based on monetary value and the percentage of a country’s total exports that these represent, to countries around the world, as of 2014. Below is a table of the 30 countries which are most heavily dependent on a single or a relatively narrow group of products, led in percentage of the country’s total by Nigeria, and in value by the second largest economy in the world, China. Oil features heavily in the top part of the table, but is balanced in the lower part by manufactured goods, including electronics and pharmaceuticals. Some figures should be quite alarming for the respective countries; for some, the problem has already been highlighted regarding demand for and price of individual commodities, particularly oil. Even for the USA – not on the list but with some apparently decrying the loss of jobs to other countries – export of industrial machinery represents 14% of the country’s total income, so how many jobs would be in jeopardy if the US was to withdraw into glorious isolation!?

Rank	Country	Commodity	%	$US billion
1	Nigeria	Oil	97	95
2	Venezuela	Oil	93	66
3	Bangladesh	Clothing	88	30
4	Saudi Arabia	Oil	85	290
5	Qatar	Oil	83	65
6	UAE	Oil	68	138
7	Norway	Oil	58	61
8	Russia	Oil	52	168
9	Hong Kong	Electronics	48	250
10	Taiwan	Electronics	42	116
11	Jamaica	Inorganic chemicals	38	650m
12	Colombia	Oil	36	66
13	Indonesia	Oil	32	38
14	Greece	Oil	31	9
15	Malaysia	Electronics	30	60
16	Switzerland	Gemstones, precious metals	30	89
17	Chile	Copper	28	18
18	South Korea	Electronics	27	140
19	Ireland	Pharmaceuticals	26.4	31.5
20	China	Electronics	26.3	600
21	Mexico	Vehicle parts	26	90
22	Australia	Iron ore	25	50
23	Finland	Machinery, telephones	25	9
24	New Zealand	Dairy, eggs, honey	24	9
25	Egypt	Oil	23	7
26	Japan	Vehicles	21	134
27	Italy	Engineering products	20	93
28	Germany	Vehicles	19	250
29	Canada	Oil	19	78
30	Argentina	Food waste, animal fodder	19	11

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