Back in June, I published a list of America’s 20 Worst Trade Partners. We saw that the list was heavily dominated by nations more densely populated (most were far more densely populated) than the U.S. Which begs the question: who are America’s best trading partners and what role, if any, does population density play in that list? So, using the per capita balance of trade in manufactured goods as our criteria once again, here’s the list: Top 20 Surpluses, 2011
Here are the key take-aways from this list:
- The list is dominated by two groups of nations:
- Net oil exporters. Regardless of their population density, net oil exporters are flush with U.S. dollars to spend on U.S. goods. Net oil exporters tend to be large nations with small populations, leaving them with a surplus of oil. But the list includes four very unique countries, all very tiny and with relatively large populations for their size, but literally afloat on seas of oil: United Arab Emirates, Qatar, Kuwait and Brunei.
- Low population density countries. Aside from the four net oil exporters mentioned above, only three of the remaining 16 nations are more densely populated than the U.S.: Belgium, the Netherlands and Panama. Panama is the least densely populated of the three, and enjoys a unique situation. They are flush with U.S. dollars, like net oil exporters, but their dollars are derived from operation of the Panama Canal.
- While the average population density of America’s 20 worst trade partners was 491 people per square mile, the average population density of America’s 20 best trade partners is only 191 per square mile. But here’s a piece of data that really drives home the difference between the two groups: the total population density of America’s 20 worst trade partners (their total population divided by their total area) is 350 people per square mile. The total population density of America’s 20 best trade partners is 22 people per square mile. America’s 20 worst trade partners are 17 times more densely populated than America’s 20 best trade partners.
- In terms of wealth, the average Purchasing Power Parity (PPP) of America’s 20 best trade partners is $32,630, nearly identical to the average PPP of America’s 20 worst trade partners ($33,770) – further evidence that wages (as measured by wealth) play no role in determining global trade imbalances.
- Canada is second only to United Arab Emirates on the list of our best trade partners. Canada has two things going for them: they’re both a net oil exporter (in fact, America’s biggest source of imported oil) and they enjoy a very low population density. By contrast, Mexico, our other NAFTA trade partner, is America’s 14th worst trade partner. They too are net oil exporters, but they’re 15 times more densely populated than Canada.
- Five South American nations appear on the list. Not a single South American nation appears on the list of America’s 20 worst trade partners. Why? Not a single South American nation is more densely populated than the U.S.
Finally, it’s worth noting here how the countries of these two lists would be impacted by the population density-indexed tariff structure I proposed in Five Short Blasts to restore a balance of trade in manufactured goods. Of our 20 worst trade partners, all but two – Sweden and Estonia – would have been subjected to such a tariff. Not a single nation on the list of our 20 best trade partners would be subjected to a tariff – either because of their low population density or because they are already net importers of American manufactured goods. This would also leave our largest sources of imported oil free of tariffs. The point is that the U.S. would have nothing to fear in terms of retaliatory tariffs.
Now, having examined these two lists of our best and worst trade partners, and the obvious role that population density plays in determining those lists, how much sense does it make to ignore it and apply the same free trade policy to both groups of nations?