U.S. Foreign Trade: A Tale of Two Worlds

When I wrote Five Short Blasts, one of the key pieces of evidence I presented in support of my claim that the U.S. balance of trade in manufactured products is heavily influenced by the disparity in population density between the U.S. and its trading partners was Figure 7-4 on page 125.  This was a chart that compared America’s balance of trade in manufactured goods for those nations above the median population density to those nations below the median population density.  The difference in results was truly striking.

I’ve now updated that chart to include the results for 2011:  Deficits Above & Below Median Pop Density.

As you can see, it seems that, with each passing year that the U.S. adheres to the blind application of free trade policy, the effect of population density is intensifying.  With the half of nations with population densities below the world’s median population density, the U.S. has a surplus of trade in manufactured products of $153 billion.  However, with those nations more densely populated – same number of nations – it had a trade deficit of $577 billion.  Both figures are the highest since I began tracking this data. 

And here’s a piece of data that may be even more striking.  If we sort the nations of the world by population density and begin totaling the U.S. balance of trade in manufactured goods, starting with the least densely populated nations, and simultaneously begin totaling the land surface area of these nations, the U.S. has a trade surplus in manufactured goods with 86% of the land surface area of the earth (excluding the U.S. itself and Antarctica).  (We didn’t have a surplus with all of these nations, but the total remains on the surplus side of the tally sheet.)  At that point, the U.S. has a trade surplus in manufactured goods of $82 billion, and a trade deficit with the remaining 14% of the earth’s land surface area of $505 billion! 

Only when we reach China does the balance of trade turn negative.  Our trade deficit with China accounts for $302 billion of that deficit.  Now, China occupies 8% of the worlds land mass (again, excluding the U.S. and Antarctica).  That means that with the last 6% of the world’s land mass, the U.S. still has a trade deficit of $203 billion.  Included in that 6% of land mass are Japan, Germany, South Korea, Taiwan and India – some of the most densely populated nations on earth. 

America’s trade results are truly a tale of two worlds – the positive experience we have with the vast majority of the world (in terms of land mass) – vs. the horribly negative and destructive results we experience with the 14% of the world that is so badly overpopulated.  Yet, as we have for the last 65 years – since the signing of the Global Agreement on Tariffs and Trade in 1947 – we stubbornly and stupidly contine in our efforts to apply the same free trade policy to both worlds, hoping that, some day, free trade with overpopulated nations will yield different results.  Einstein once famously said that the very definition of insanity is doing the same thing over and over and expecting different results.  The application of free trade theory to overcrowded nations is truly insane.

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