America’s Worst Trade Partner

No, it’s not China.  Our largest trade deficit, by far, is with China, but China is also a very, very large country that accounts for one fifth of the world’s population.  And it’s not Japan or Germany, with whom we suffer our second and third largest trade deficits.  Obviously, I need to define my criteria for “worst trade partner.”  I’m putting this into per capita terms.  That is, man-for-man, citizen-for-citizen, which country sucks more trade dollars out of Americans’ pockets than any other?

The hands-down winner is Ireland.  In 2012, every man, woman and child in Ireland was $5,012 wealthier because of Ireland’s $24 billion per year trade surplus with the U.S.  And Ireland has fewer than five million people.  That’s over $20,000  per year for every family of four.  And every family in America is poorer because of it.  But that’s actually an improvement over 2011, when our per capita trade deficit with Ireland set a record of $6,244.  Here’s a chart of our balance of trade with Ireland since 2001:  Ireland Trade.  The improvement in our balance of trade with Ireland in 2012 was due entirely to a slowdown in imports of pharmaceuticals from Ireland.

To put the size of our per capita trade deficit with Ireland in perspective, it’s seven times worse than our per capita trade deficit with both Germany and Japan.  And it’s almost twenty times worse than our per capita deficit with China. 

Ireland is almost twice as densely populated as the U.S., which accounts for some of this trade imbalance.  (There is a strong correlation between the population density of our trading partners and our trade imbalance with them, both in terms of whether the imbalance is a surplus or deficit, and how large the imbalance tends to be.)  But that doesn’t explain such an enormous imbalance with such a small country.  Ireland offers huge tax incentives to foreign corporations to set up shop there.  Pharmaceutical manufacturers in particular have taken advantage of it.  Never mind the fact that this tax policy bankrupted Ireland and landed them on the list of EU “PIIGS” (Portugal, Ireland, Italy, Greece and Spain).  Like those other nations, they have the EU to bail them out.  This situation constitutes a blatant unfair trade practice.  But, as with all unfair trade practices, the U.S. simply turns a blind eye. 

So, the next time you’re sick and at least try to take a little comfort in thinking that your spending for pharmaceuticals may be helping some American workers and the American economy, think again.  Our trade policy with Ireland is a good part of the reason that all of us are becoming increasingly dependent on the federal government to provide us with health care.

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