I’m continuing to update the U.S. trade data I used in Five Short Blasts. Now that I’ve completed an analysis of our largest trading partners (see https://petemurphy.wordpress.com/2009/03/18/population-density-vs-balance-of-trade/), I decided to return to an alphabetical analysis of the nations of the world. The Czech Republic and Denmark were the next two with whom we have trade balances of some significance – in excess of a billion dollars per year. Also, since both of these are members of the E.U. (European Union), I though it would also be interesting to analyze the E.U. as a whole, something I didn’t do in the book. (Look for upcoming posts about trade with the remaining members of the E.U. and the E.U. as a whole.)
The following charts depict our balance of trade with the Czech Republic and with Denmark:
As you can see, in 2008 we had a significant trade deficit in manufactured goods with both countries – $1.18 billion with the Czech Republic and $3.28 billion with Denmark. But the only way to evaluate the significance of these trade deficits, in comparison to other nations, is to put them into per capita terms. The Czech Republic is a nation of 10.22 million people and a population density of 207 people per square mile. Denmark has 5.43 million people and a population density of 326 people per square mile. By comparison, the U.S. has a population densityof 85 people per square mile.
Doing the math, this yields per capita trade deficits in manufactured goods of $115 per person and $604 per person for the Czech Republic and Denmark respectively. By way of comparison, our per capita trade deficit in manufactured goods with China, a nation with a population density of 359 people per square mile, is $207 per person.
Once again, we find that these results are exactly what the theory I’ve presented in Five Short Blasts would predict, that we would have a trade deficit in manufactured goods with nations more densely populated than our own.
Supporters of unfettered free trade and apologists for its sometimes unwelcome consequences like to blame imbalances on things like low wages, currency manipulation and a lack of labor and environmental standards. So it’s worth noting here that none of these can be a factor since both are members of the E.U. and both are relatively wealthy, with per capita purchasing power parity of $26,100 and $37,400 for the Czech Republic and Denmark respectively. (And it’s been growing fast in the Czech Republic, following the collapse of the Soviet Union.)
It’s also interesting to note that Denmark’s economy has been stagnant for the last few years, in spite of the fact that it’s population continues to grow at an annual rate of 0.28%, while the Czech Republic’s economy has been growing rapidly in spite of the fact that it’s population is declining at an annual rate of -0.09%. So much for the myth that population growth is a necessary component of economic growth.
Stay tuned for similar analyses of remaining E.U. nations not already covered.