Effect of Population Density on Trade Sets Record in 2013

Each year I vow to publish this analysis in a more timely manner and, it seems, that each year it gets tougher to do.  But this is a massive undertaking, so I hope you’ll cut me some slack.

First, a little about my methodology is in order.  For each nation, I tallied the imports from and exports to that nation for hundreds of end-use-code product categories.  For example, here’s a link to the web site that tallies the imports from China:  http://www.census.gov/foreign-trade/statistics/product/enduse/imports/c5700.html.  That’s just the imports.  There’s another page for exports to China.  Those are then combined, and the end use codes that represent manufactured products are identified and tallied.  Population data is taken from the CIA World Fact Book web site, and is up-to-date through 2013.  So, with all of that said, I think you can understand the difficulty involved in compiling this data for 166 countries.*

This chart, updated through 2013, shows the U.S. balance of trade in manufactured products with the half of nations above the median population density, and the other half of nations below the median population density: Deficits Above & Below Median Pop Density.  In 2013, with the half of nations below the median population density (182 people per square mile), the U.S. enjoyed a surplus of trade in manufactured products of $147 billion.  (It should be noted that the U.S. population density is approximately 87 people per square mile.)  In stark contrast, the U.S. suffered a trade deficit in manufactured goods with the half of nations above the median population density of $634 billion – a record.  And the disparity between the two figures – $781 billion – is also a record.  The same number of nations.  A huge contrast in results.  And, the longer the U.S. continues to pursue free trade policy that ignores the role of population density, the worse the disparity becomes.

It’s also interesting to note that the half of nations above the median population density occupy only 25% of the earth’s land mass.  This means that the U.S. has a surplus of trade in manufactured goods of $147 billion with 75% of the earth’s land mass (outside the U.S.).  With the remaining 25% – the densely populated 25% – the U.S. has a trade deficit of $634 billion.

This data is undeniable proof of a powerful relationship between population density and trade in manufactured products, a relationship first revealed in Five Short Blasts.  Without some mechanism (like tariffs) to counter the effect of population density, it’s a near certainty that trade with very densely populated nations will yield a large trade deficit and result in the loss of many manufacturing jobs.

In upcoming posts I’ll dig deeper into the 2013 data for more evidence of the role of population density in trade, and to examine whether the other popular scapegoats – low wages and currency exchange rates – play any role at all.

In the meantime, I’ll also begin compiling the 2014 data!

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* Small island nations are excluded from the study, since they enjoy unique economies, usually based on tourism.  Also excluded are tiny city-states.

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