I feel bad that I’m just now reporting on 2010 trade data. But I think I can be forgiven when you realize the work involved in compiling the data for 163 countries. First of all, the data for imports and exports (which wasn’t available until late February) must be downloaded from spreadsheets found on the Census Bureau web site – a total of 326 spreadsheets. Then, the results from each must be compiled on a separate spreadsheet. Then, updated data for population and per capita purchasing power parity data must be extracted for each individual nation from the CIA World Fact Book site. Finally, the data must be sorted, analyzed and tabulated. In the meantime, there’s a matter of eating, sleeping and enjoying life. Still, I hope to be able to report 2011 data in a more timely fashion following its release in late February of 2012.
So, having made all of my excuses, here we go. It’ll take several posts to cover the analysis of this data, but I want to begin with a list of the top 20 per capita trade deficits in manufactured goods in 2010. In case you’re new to this site, I express the trade results in per capita terms – that is, the deficit divided by the population of the nation in question – in order to put all nations on the same footing. It’s the only way to make this a meaningful analysis of the effectiveness of trade policy with each nation, instead of being merely a measure of the sheer size of each nation.
So here’s the list:
There are a number of points to be made about this list:
- Only three of these twenty nations are less densely populated than the U.S.: Sweden, Estonia and Finland. Among the top ten, only Sweden – at number 9 – is less densely populated.
- The average population density of the top ten is 558 people per square mile, more than 6-1/2 times more densely populated than the U.S.
- This list is loaded with wealthy nations, disproving the theory that large trade deficits can be blamed on low wages. The average purchasing power parity (PPP) per capita for these nations is $26,650. Only three of these nations have PPP less than $10,000. Of the top ten nations, only one – Costa Rica – has a PPP of less than $20,000. The average for the top ten is $32,800.
- For all of the uproar about the size of our deficit with China, when expressed in per capita terms it’s only the 16th largest. Our deficit with eleven other nations is at least twice as bad. The point is that our huge trade deficit with them is exactly what we should have expected when the same trade policy that was already a proven failure with other densely populated nations around the world was applied to a nation with one fifth of the world’s population.
- Since 2006 (when this data was first presented in Table 7-2 of Five Short Blasts), the deficit with Ireland has dramatically worsened and is now 26 times worse than our per capita deficit with China, in spite of some growth in the latter as well. Why is the per capita deficit with Ireland so large? Pharmaceuticals. Because of favorable tax treatment, Ireland is America’s drug manufacturer of choice. And, perhaps because of that favorable tax treatment, Ireland’s budget deficit is the largest in the world (as a percentage of GDP) and is a major factor driving the Euro zone to the brink of collapse.
- Of the three nations on the list less densely populated than the U.S., two of them – Sweden and Finland – may not be there much longer as the effects of population density become more pronounced with each passing year. Sweden has fallen from number two in 2006 to number nine in 2010. Finland has fallen from number 13 in 2006 to number 15 in 2010. Estonia is a newcomer to the list. Imports of telecommunications equipment from Estonia exploded in 2010, increasing 40-fold from just the year prior. (My guess is that someone in Europe relocated a telecommunications plant to Estonia to take advantage of their nearby port facilities and cut their shipping costs.)
- Other newcomers to the list, all densely populated, include Costa Rica, Slovakia and Cambodia. As recently as 2008, the U.S. had a record surplus of trade in manufactured goods with Costa Rica. But in two years, that’s changed dramatically as imports of computers and semiconductors from Costa Rica have exploded. Clearly, some company (companies) have recently relocated to Costa Rica. No doubt, some CEOs wanted to enjoy the lavish resort facilities nearby during their visits.
- Since 2006, when our per capita deficit with Malaysia was the 8th largest, Malaysia has fallen completely off the list to its current rank as 26th.
To summarize, the disparity in population density between the U.S. (with a population density of 85 people per square mile) is clearly, by far, the driving force behind these trade deficits. Seventeen of these twenty nations are more densely populated than the U.S. Sixteen are at least twice as densely populated. Ten are at least four times as densely populated. By contrast, while all have lower PPP than the U.S. (at $47,000), few could be considered “low wage” nations where wages are low enough to offset the costs of transportation and logistics.
In the next post, we’ll take a look at America’s top 20 per capita surpluses in manufactured goods to see how population density may affect that end of the trade spectrum as well.