When I published Five Short Blasts in 2007, the most recent trade data available was for 2006. At that time, the U.S. enjoyed a small trade surplus in manufactured goods of about $1.1 billion with Peru. But, overall, we had a trade deficit with Peru thanks to high imports of metals and minerals.
So, as I continue my slog through the 2008 data, I found the evolution of trade between the U.S. and Peru to be particularly interesting. Because Peru is less densely populated than the U.S. – with 56 people per square mile vs. 85 for the U.S. – Peru is one of those countries that would remain completely free of tariffs under my population density-indexed tariff plan for manufactured goods.
So what’s happened since 2006? Take a look:
As a result of rising prices for metals and minerals, our overall trade balance with Peru deteriorated from 2002 to 2006. But from that point, their increased wealth enabled them to import a lot more manufactured products from the U.S. In 2008 we had a slight overall trade surplus with Peru, thanks to our exports to Peru almost tripling in just two years. The U.S. is Peru’s largest trading partner.
Once again, we see that free trade with nations similar in population density to the U.S. is a win-win situation for both nations, in stark contrast to what happens when we attempt to apply the same free trade policy to those that are much more densely populated.