History teaches pretty clearly that relying heavily on exports of raw materials isn’t a great formula for long-term national economic success. That’s one big reason that the release last week of the full-year 2017 U.S. trade statistics tells such a depressing story. Because that’s exactly what the United States has been increasingly engaged in.
The best measure of such trade performance is net exports, or trade surpluses. These data show which goods and services a country sells overseas most proficiently – and therefore which goods and services they’re likely to produce most successfully. Were this not the case, trade could not possibly – as the prevailing comparative advantage theory holds – foster the most efficient possible global division of labor.
And according to the new annual trade statistics, America’s greatest comparative advantage is in commodities. Here’s a list of the top ten trade surpluses run in goods by the United States in 2017, and their magnitude. (For the wonky, these are categories from the six-digit level of the North American Industry Classification Series (NAICS) – the main system now used by the U.S. government for slicing and dicing the national economy. The six-digit level is the one that does the best job of distinguishing between final products and their parts and components – which is critical given how much American and global trade now takes place in the latter, due to the development of global supply chains.)
1. Petroleum refinery products: $34.39 billion
2. Special classification provisions: $23.50 billion
3. Soybeans: $21.25 billion
4. Plastics materials and resins: $15.31 billion
5. Liquid natural gas: $14.60 billion
6. Waste and scrap: $12.19 billion
7. Non-anthracite coal & petroleum gases: $9.22 billion
8. Motor vehicle bodies: $9.18 billion
9. Corn: $8.99 billion
10: Non-poultry meat: $7.38 billion
Six of these ten are commodities, and “special classification provisions” – which are mainly “exports of articles imported for repairs etc.; imports of articles exported and returned, unadvanced; imports of animals exported and returned” – might as well be.
To be sure, aerospace products, especially commercial aircraft, should be at or near the top of this list. But because Boeing doesn’t want final products and parts and components broken out in trade data, it’s no longer possible to find apples-to-apples figures for these products. And even their inclusion would produce a raw materials-heavy list.
Here’s the list of the top ten trade surplus items ten years ago, in 2007 (when these disaggregated aerospace numbers were still reported publicly):
1. Aircraft: $39.54 billion
2. Semiconductors & related devices: $22.71 billion
3. Waste and scrap: $17.69 billion
4. Plastics materials and resins: $15.32 billion
5. Aircraft parts and auxiliary equipment: $13.46 billion
6. Soybeans: $9.92 billion
7. Special classification provisions: $9.84 billion
8. Corn: $9.84 billion
9. Miscellaneous basic organic chemicals: $9.70 billion
10. Oil and gas field machinery & equipment: $8.54 billion
Only three of the sectors on this list are commodity sectors, and adding the special classifications trade surplus makes four of ten low value sectors.
Here’s another way to look at this comparison. In 2007, the U.S. manufacturing trade deficit (the flip side of course of the above surpluses) accounted for 76.99 percent of the overall merchandise deficit on a Census basis. The 2017 figure? 116.50 percent.
There’s a first time for everything, and maybe the United States will prove the exception to this rule about the value of manufactures versus commodities trade. Maybe what’s decisively important that two of the new commodities items on the 2017 list were energy items (liquid natural gas and non-anthracite coal and petroleum gases). But with energy-heavy countries like Saudi Arabia frantically trying to diversify their economies, that seems doubtful. As to the question of a comparative advantage in commodities providing a durable foundation for American prosperity – the burden of proof surely remains with the optimists.