Continuing our series in which we’ve been examining the results of trade between the U.S. and its major trading partners, we now turn to South Korea. South Korea is an extremely densely populated nation, with 1,257 people per square mile – fifteen times as densely populated as the U.S. It’s also a relatively wealthy nation with purchasing power parity per capita of $25,125.
My theory predicts that the U.S. would have a relatively large trade deficit in manufactured goods with such a nation if we were to give them free access to our market which, for all intents and purposes, we do. So let’s take a look at the actual results. Here’s a graph depicting our balance of trade with S. Korea, broken into several major categories of products:
And, as expected, a large trade deficit in manufactured goods is exactly what we have. In fact, at $365, our per capita trade deficit in manufactured goods with S. Korea is almost twice as bad as China’s. Their leading export to the U.S. is autos. In 2008, they exported $11.3 billion worth of cars and parts, while importing only $0.8 billion from the U.S. Like the Japanese autos that preceded them by a few decades, the S. Korean entry into the U.S. auto market was one more example of proof that Americans will buy anything, no matter how poor the quality, if the product is cheap enough. In spite of the fact that Korean cars were famous for parts literally falling off as they were driven off the dealers’ lots, they got a toe-hold in the American market and slowly improved their quality, carving out yet another piece of the American market that left that much less for domestic automakers.
S. Korea is currently licking their chops over the prospect of a free trade agreement with the U.S., signed by the nations’ respective trade representatives in June of 2007, awaiting ratification by Congress. But Democrats have been staunchly opposed to this deal and Obama has vowed not to sign it as written. They’d be wise to not sign it. In fact, if they had any sense at all, they’d impose stiff tariffs on S. Korean manufactured products to compensate the U.S. for their inability to provide access to an equivalent market. The U.S. derives absolutely no benefits whatsoever from trade with S. Korea. They are a parasitic economy that is a drain on our manufacturing base and a drain on our nation’s finances.
We’ve now examined trade with eight of our largest trading partners and, in each case, the results have closely aligned with what would have been predicted by my theory. Next up: Ireland. Although Ireland isn’t as large as these other countries, they were at the very top of our list of per capita trade deficits in manufactured goods in 2006, and I’m anxious to see what, if anything, has changed. Stay tuned.