Those of you who have read Five Short Blasts may remember that, of America’s top twenty per capita trade deficits in manufactured goods, only two defied my theory by being with nations less densely populated than the U.S. And strangely, both were with neighboring countries – Finland and Sweden. (See Table 7-2 on page 128.) In fact, our 2nd worst per capita trade deficit in manufactured goods in 2006 was with Sweden, a nation with a population density of 53 people/square mile, at $860. Number thirteen on the list was Finland, a nation with a population density of 40 people/square mile, at $301. (For reference, the U.S. population density is 85 people/square mile.) Since both nations are less densely populated than the U.S., my theory predicts that we should actually have something close to a balance of trade with each nation in manufactured goods, or even a surplus.
So, upon updating my data through 2008, I was excited to discover that the trade deficit in manufactured goods with both nations has shrunk, moving more in line with what my theory predicts. Here’s the charts depicting the balance of trade with each:
In the case of Sweden, our trade deficit in manufactured goods has shrunk from $8.48 billion in 2006 to $6.65 billion in 2008. This drops our per capita trade deficit in manufactured goods with them to $736; not a big move, but a move in the right direction.
In the case of Finland, our trade deficit in manufactured goods shrank by over half, from $1.71 billion in 2006 to $0.75 billion in 2008, dropping the per capita trade deficit in manufactured goods to $143 which, if other nations stay about the same, would drop Finland completely out of the top twenty per capita trade deficits in manufactured goods.
Our trade results with these two nations were an anomaly that I couldn’t explain when I wrote Five Short Blasts, other than to say that, when dealing with nations of roughly equal population density, we will naturally have some surpluses and some deficits. So it’s exciting to me to see that trade results with both of these nations are moving in the right direction, and I wanted to share that with you.
It’s also a good time to reiterate that, because Finland and Sweden are less densely populated than the U.S., I believe in free trade with both nations, regardless of whether or not we have a trade deficit with them. Free trade in natural resources and free trade between nations of roughly equal population density is indeed very beneficial. It is only badly overpopulated nations who should have their manufactured goods subjected to the population density-indexed tariff structure that I proposed in Five Short Blasts.