I’ve resumed my slow slog through all of the U.S. trade data and just finished New Zealand. New Zealand is a fairly small country, but a relatively wealthy, developed one. With combined imports and exports of over $3 billion, I thought it was worth a look. With a population density less than half that of the U.S., the new economic theory I proposed in Five Short Blasts predicts that the U.S. should enjoy a trade surplus in manufactured goods with New Zealand. Is that what we have? Let’s take a look. The following chart displays the balance of trade with New Zealand for five major categories of trade: food products, energy raw materials (primarily oil and gas), metals & minerals, lumber and manufactured products.
As you can see, as the theory predicts, we have a nice trade surplus in manufactured goods with New Zealand. But that surplus is offset by deficits in food and lumber products. Thus, we trade manufactured products for natural resources. This is exactly how free trade is supposed to work to both nations’ benefit when both are relatively comparable in population density, unlike the disastrous results we get when trading with badly overpopulated nations.
Yet another data point in support of the theory. What a shame that economists have closed their minds to the consequences of population density. They’re completely missing the most powerful relationship in the global economy and thus continue to make a mess of it.