America’s Top 20 Customers of Made-in-the-USA Products

December 6, 2011

In a previous post we looked at a list of America’s 20 worst per capita trade deficits in manufactured products.  Today we look at the other end of the spectrum – our top 20 trade surpluses in manufactured products.  In per capita terms, these are the people of the world (other than Americans themselves) who are America’s best customers for American made products.  You may be surprised.  Here’s the list:

 Top 20 Surpluses, 2010

The nations that you see high-lighted in yellow are net exporters of oil.  More about that in a minute.  First, though, it’s important to note that, unlike the list of our worst per capita trade deficits, which was dominated by densely populated countries (only 3 were less densely populated than the U.S.), this list is dominated by sparsely populated countries. 

But there are some notable exceptions, beginning with the top 2 countries – Qatar and United Arab Emirates (UAE).  In general, sparsely populated nations are rich in natural resources and maintain balances of trade by trading those resources for manufactured goods, including American products.  But Qatar and UAE are rare exceptions.  They are very tiny, densely populated nations who just happen to be literally afloat on a sea of oil.  Thus, in spite of their dense populations, they still have large surpluses in those resources that they can trade for manufactured goods, just like the more sparsely populated larger nations, rich in resources, like Canada and Australia.  Kuwait and Brunei are two more examples who appear on the list – tiny, densely-populated nations afloat on a sea of oil, just like Qatar and UAE. 

That leaves four other nations on the list who are more densely populated than the U.S. – Belgium, Panama, The Netherlands and Lebanon.  Panama is easy to explain.  They are only slightly more populated than the U.S. and derive the lion’s share of their wealth, which they’re then able to trade for American manufactured goods, from an unusual source – operation of the Panama canal. 

That leaves only Belgium, The Netherlands and Lebanon – very tiny nations and the three most densely populated nations on the list, by far – as the only remaining anomalies.  The first two are among the wealthiest nations on earth.  And even Lebanon ranks close to the top third of nations in terms of purchasing power.  How do these nations defy the population density bugaboo that makes virtually every other densely populated nation on earth dependent on manufacturing for export?   

First of all, it’s important to note that these three are very tiny nations who, combined, are smaller than the state of Indiana.  Together they make up only 0.07% of the earth’s land mass while the remaining 17 nations on the list account for over 18%.  Nations so small as these tend to have unusual economies that are heavily skewed toward services, especially financial services, and they then trade those services for manufactured goods.  It’s the very reason that I rolled the data for tiny city states like Singapore, Liechtenstein, Luxembourg, San Marino and others into the data for the larger, surrounding countries. 

Regarding Lebanon’s economy, the CIA World Fact Book has this to say:

The Lebanese economy is service-oriented; main growth sectors include banking and tourism.

Tourism?  Really?  While few Americans aside from those with family ties would choose to travel to Lebanon, it seems that their Mediterranean beaches are a big draw for people in that part of the world.  And this is actually the reason that I excluded tiny island nations from my study of population density and per capita consumption.  All have very unique economies dependent on tourism, and they trade tourist dollars for American-made products.  It’s also the same reason that Belize appears on this top 20 list.  While not an island, it too is a small country heavily dependent on tourism. 

In the final analysis, aside from the anomalies of these three tiny, densely populated countries and a few tiny major oil exporters, low population densities dominate the list of nations with whom the U.S. has surpluses in manufactured goods.  The combined population density of the 20 nations on this list is only 20 people per square mile.  Compare that to the list of our top 20 trade deficits, where the combined population density was 343 people per square mile.  The contrast is so stark it bears repeating:  20 people per square mile vs. 343 people per square mile (four times the population density of the U.S.).

If the president wanted to make real progress on restoring a balance of trade, he’d drop his goal of doubling exports and instead focus on boosting free trade with sparsely populated nations while implementing tariffs on imports from densely populated nations. 

Now that we’ve looked at both ends of the trade spectrum, we’ll next consider the entire trade picture for 2010.  Stay tuned.

Trade Deficit in Manufactured Goods Jumps, as Exports Fall Faster Than Imports

November 14, 2008

The Census Bureau released the figures for the September, ’08 trade deficit yesterday.  Forget about the headline number, the drop from $59.1 billion in August to $56.5 billion.  That was all due to falling oil prices.  The real story is that, once again defying economists predictions that the falling dollar would help our trade deficit, the deficit in non-petroleum goods actually jumped last month.  Exports of non-petroleum goods (basically, manuctured goods), fell by $7.0 billion while imports fell by $5.2 billion, adding $1.8 billion to the deficit and raising the deficit in manufactured goods to $35.6 billion.  That’s an annual rate of over $427 billion. 

Also, during the month of September, the trade deficit with China, where the value of the yuan has risen more than 20% over the past year, soared to a new record of $27.8 billion, from $25.3 billion in August.  And the deficit with Japan rose to $5.6 billion from $4.8 billion in August.  One of the few bright spots was a decline in the deficit with Mexico, falling from $5.9 billion in August to $4.9 billion in September.

Also, it’s important to note that the headline number represents the total trade deficit, including our surplus in services.  Take out that surplus and you’re left with a “goods” trade deficit of $69.6 billion, up from $67.7 billion in August.  That’s an annual goods deficit of $835 billion. 

It should also be noted that the headline trade deficit figure is a “seasonally adjusted” number.  The actual goods trade deficit in September, not seasonally adjusted, was $76.0 billion, vs. the reported $69.6 billion.  I wasn’t able to find the methodology that Census uses for doing its “seasonal adjustments,” but I’m sure that it involves factoring out seasonal rises and declines in the prices of some goods.  But one has to wonder if it opens the door to manipulating the data to make it appear better than it really is.  You may think, “Naaah, the government wouldn’t play tricks on us like that, would they?”  Maybe.  Maybe not.  But it’s a fact that the government has a long history of adjusting methods for tracking data in a self-delusional quest to make the economy appear rosier than it is, in order to prop up consumer confidence. 

The important take-away from this data is that, contrary to what other economists tell you, we cannot rely on the falling dollar and other currency valuations to cure our trade deficit.  It won’t work because, as I’ve pointed out over and over, the trade deficit has nothing to do with currency valuations.  It has everything to do with the relative state of over-supply of labor among our trading partners.  You can never compete your way out of a trade deficit with a nation more over-supplied with labor than your own.  They’ll match you dollar for dollar on every cut in cost and every improvement in productivity, all in a more desperate bid to keep their bloated labor forces occupied.  The only way to eliminate the deficit is by making their products more expensive at the point of entry into the U.S., and that means tariffs!

By the way, free trade cheerleaders love to jump all over reports like the one just released for September, when they show a month-to-month improvement in the trade deficit, and bally-hoo them as proof that we just need to stay patient and let adjustments in currency valuation work their magic.  Well, here’s a chart of the monthly data going back two years, taken straight from the Census Bureau’s FT900 report.  (Click on the following link.)


Do you see even an iota of improvement?  I sure don’t!

By the way, in case you were wondering why oil prices have fallen so dramatically, the data contained within the FT900 report from the Census Bureau provides the answer.  Oil imports fell off a cliff in September.  In September of last year, we imported 391.6 million barrels of oil.  This year that fell to 339.0 million barrels.  Although oil imports have fallen almost every month of 2008 vs. 2007, they dropped precipitously in September.  I suspect that the October drop will be even greater.  The lesson here is that there is nothing like high prices to drive energy efficiency.