The first answer is that we've got to stop thinking of it being a “country” that trades. The people within a country, yes. Organizations of companies inside it, yes. But the country itself doesn't trade.
Maybe when the government buys aircraft or something. But nearly all trade is between people and organizations that just happen to be inside some lines on the map, not a country doing something.
Therefore, because it's just people doing their own thing, it's not really for us to determine how much of it is done. It's all up to them -- the buyers and sellers.
But we can still go further than this.
Recent statistics show that China is the major trading partner of Bangladesh (21% of total trade) and then India and the US each about 8.5% -- India slightly ahead. The question we might want to ask ourselves is, well, is that about right?
The standard theory of trade revolves around the “gravity model.” This works just like gravity and the planets -- bigger and closer has more effect than smaller and further away.
So, the standard guide is that an economy will trade more with a larger economy and also more with one that is closer.
So, a large economy that's close to us - China - should be a major trading partner. This seems obvious enough.
The US is a long way away but it's also a very large economy so that seems fine.
India is a very much smaller economy than either of those two yet it's right next door. That too seems fine.
Which is about as far as most applications of this gravity model get. We should note that when people really calculate this, we find that the gravity model really does work. This really does explain global trade numbers.
Except -- we do not mean mere geographical position when we talk about distance here. We mean, instead, economic distance.
This is influenced by geography, yes, but isn't quite the same thing. What we really mean here is: “How difficult is it to do the trade over this distance?” So, transport links matter.
In medieval Europe, for example, it was the sea and rivers that were the easy transport routes. So there could be -- and often was -- more trade between coastal Spain and coastal Italy than there was between the coast and 100 miles inland in either country.
The roads were so bad, compared to water transport, that the economic distance over 500 miles on water could be shorter than that over 50 miles on land.
We can also add in things like language as a barrier to trade, or whether the kings are at war. In this modern world, we also have to think about laws -- tariffs, customs posts, differences in standards that block trade.
It's this last part that we can change. Which is the thing that really makes this concept of economic distance different from geographic distance. We can change economic distance by just changing our own barriers to trade.
Do note that this is an area of economics where there's no right answer. Not one that we can point to and say: “This number should be this.” But once we translate the gravity model to the correct concept of economic - not just geographic - distance, Bangladesh probably doesn't trade enough with India.
Yes, it's a smaller economy than China and the US, but it is also right next door. If that's true -- I would say it is even as others could argue that I'm wrong -- then one of the easy ways to make Bangladesh richer is simply to make it easier to trade with India.
Sort out the land ports, make it easier and faster to clear goods through customs, lower the tariffs, and so on. But then I think Bangladesh should do that anyway, so it's not exactly a difficult conclusion for me to reach.
Tim Worstall is senior fellow at Adam Smith Institute in London.