Monday, April 30, 2018

Global Goods Competition

As the US refocuses on the impacts of international trade through the lenses of many trade agreements, it doesn’t hurt to consider from where our competitors are coming. The US wants to reduce, for example, its trade deficit with China. To do that, either China will have to buy more of our goods or we will have to buy less of theirs.

Today I want to focus on US exports of goods to China and the rest of the world. I am ignoring services exports because we have a surplus in our trade with services. Our trade problem seems to reside in goods. The IMF keeps some good statistics on goods trade, and their best database has some nice detail for the years 2013 to 2017. That’s five years – a long enough time for my buddy Nolan to reach his current age of 5 and long enough to draw some conclusions. My main conclusion is that if the US wants to raise its exports, it is not going to be easy.

The table below contains some relevant data on exports of goods. We see that in 2013, the world exported goods whose value in dollars was a bit more than $18 trillion. Since that time, goods exports did not increase; rather, they fell to a level of $17.7 trillion in 2017. The appetite for goods exports has clearly not grown. It fell by almost half a trillion dollars. Let’s agree that with a shrinking pie and a lot of eager-beaver countries, it won’t be easy to expand US exports of goods.

Comparing the next two lines, we see that as of 2017, advanced nations were selling only a bit more than the sum of all emerging nations. It was about a 60/40 split in 2017, and that split reflects the very strong desire of emerging markets to grow through exports of goods. Advanced nations will not give in easily so the future portends a time wherein both advanced and emerging nations will want to compete with the US to supply the world’s demand for goods.

The countries I chose to compare were based on foods that I love. I also chose ones that are major exporting countries and some with which the US might have a special trade relationship. Notice that with the exceptions of China, Mexico, and South Korea, all these countries shared the experiences of declining goods exports from 2013 to 2017. I am guessing that all those countries will try to do the same thing we are trying to do in the US – find a way to export more.

China’s exports increased between 2013 and 2017. China represented about 12% of the world’s exports in 2013. China was the largest country exporter. But notice even China can’t be too happy with its $67 billion increase in exports between 2013 and 2017. That represented a 3% increase in four years or less than 1% growth per year. Mexico’s was larger at 8% over four years or 2% per year. South Korea's increase was less than 4% per year. Those performances are nothing to brag about at the bar at Tacos Guaymas Mexican Restaurant. So even China, Mexico, and South Korea will not relent in their goals to produce and sell goods to the world.

In 2013, the US was the world’s second largest goods exporter and we claimed 9% of the worlds exports of goods. That’s not bad. But as I have said before, our problem with goods trade is not production or exporting. Our problem is our voracious appetite for buying goods.

Data source:

Goods Exports of Selected Areas
2013 to 2017, in billions of dollars
2013 2017      % of             World      Change
     2013 2013 to 2017
 World 18,193 17,702 100 -491
Advanced Nations 10,685 10,171 59 -514
Emerging Markets 7,509 7,136 41 -373
China 2,210 2,277 12 67
United States 1,579 1,547 9 -32
Germany 1,451 1,441 8 -10
Japan 714 687 4 -27
S. Korea 560 574 3 14
Russia 522 353 3 -169
Canada 465 424 3 -41
Mexico 380 410 2 30
India 314 299 2 -15


  1. With China's population being about 4X the US, the above difference would suggest worrying about the above trade imbalance in goods is sort of meaningless.In fact, as 21st Century develops, I would think the contribution of goods trade would continue to fall for US.

    1. Good point Ed. But politicians won't give up try to slow the process. As the Physiocrats clung to Agriculture, we cling to manufacturing. At some point a rich prosperous nation adept at producing high valued added goods and services might look forward rather than backwards.

  2. Somewhat connected to this issue is the US need to update our approach to Intellectual Property, first on our own turf and then on the world stage. Patent protection is reasonably strong but has been hurt by the watering down of the need to "practice the art" oneself rather than simply to use the patent right to hold up the market place. The other conventions, copyright, trademark/dress, and trade secret, are too weak for the 21st century digital marketplace to have much long term international value.

    1. Well said. I don't think I have much to add. But if one's intellectual property cannot be safe-guarded then I wonder what impact that has on future innovation. Why spend all the money developing something new if it can be stolen in a heartbeat?