In my last post, we looked at a list of America’s worst per capita trade deficits (in manufactured goods) in 2018 and found a strong correlation with population density. Nearly every nation on the list was much more densely populated than the U.S. Conversely, there was virtually no correlation with low wages, as measured by those nations’ “PPP” or Purchasing Power Parity.
Now it’s time to look at the other end of the spectrum – America’s best per capita trade surpluses in manufactured goods. If population density is a factor in driving trade imbalances, then this list should be populated with more sparsely populated nations. Here’s the list: Top 20 Per Capita Surpluses, 2018.
Well, we do indeed see many nations that are more sparsely populated, but there are some very densely populated nations on this list too. Many of them can be explained by the fact that they’re net oil exporters and, as we established in my post from October 23rd about our largest trade surpluses, oil exporters use their “petro-dollars” to buy American-made goods. In that same post, we also noted that The Netherlands and Belgium appear on this list because they take advantage of their location to make themselves into European trading hubs and, as such, are a destination for American goods that will ultimately be distributed throughout Europe.
Still, there is solid evidence that population density plays a major role in driving trade imbalances on this list, just as it did on the list of our worse deficits, but this time driving surpluses in our favor. Here are more observations that support that:
- The average population density on this list is 216 people per square mile, compared to an average of 540 people per square mile for the nations on the list of our largest per capita trade deficits. The population density of the nations on the list as a whole – total population divided by total land mass – is only 22 people per square mile. Compare that to the population density of the twenty nations on the list of our biggest per capita deficits, which is 377 people per square mile.
- The average PPP for the nations on this list is $45,995. Factor Qatar out of this list and the average drops to $41,842 – nearly the same as the average PPP of $39,040 for the nations on the list of our biggest per capita deficits. So which seems more likely to be driving trade imbalances – the 1600% disparity in population density or the 18% disparity (leaving Qatar in the average) in PPP?
- Over the past ten years, our per capita surplus in manufactured goods with the top twenty nations has grown by 84%. Meanwhile, our per capita deficit with our worst trading partners has grown 114%. Our trade deficit is eroding the manufacturing sector of our economy, leaving us with fewer and fewer products to export.
That’s the two ends of the trading spectrum, a total of forty countries with whom we have the biggest per capita deficits and per capita surpluses in manufactured goods. It’s already pretty strong evidence that trade imbalances are driven almost entirely by population density and by very little else. But what about the other 124 nations that are included in the study? Will the correlation look as strong when we throw them all together? Stay tuned, that’s coming up next.