Buck up, little campers. Things are getting better! At least that’s one conclusion you could draw from the most recent trade deficit numbers for 2011. The results are that the nation’s trade deficit has reached the highest level since the economic crash a few years ago. Why is this good news? The short version of the story is that Americans are buying more. Unfortunately, the lion’s share of what we buy comes from other countries, so any economic rebound seems to come prepackaged with an assumption that the trade balance shifts away from our favor.
For 2011, exports of $2,103.1 billion and imports of $2,661.1 billion resulted in a goods and services deficit of $558.0 billion, $58.0 billion more than the 2010 deficit of $500.0 billion. For goods, exports were $1,498.2 billion and imports were $2,235.3 billion, resulting in a goods deficit of $737.1 billion, $91.2 billion more than the 2010 deficit of $645.9 billion. For services, exports were $604.9 billion and imports were $425.9 billion, resulting in a services surplus of $179.0 billion, $33.2 billion more than the 2010 surplus of $145.8 billion.
But there is a hidden bug – or, more correctly… a feature – in these numbers which goes largely unreported. Our trade deficit would fall into much less alarming territory if you subtracted out the massive imbalance we suffer for having to import so much of our energy products.
But while economists may look to shifting trade deficit data as a sign of American’s spending power, there’s also another major component that isn’t discussed as often. That’s the part about high oil prices and oil imports and how they impact the trade deficit. In fact, more than half of the total 2011 trade deficit – 59.4% can be attributed to oil imports. Imported oil has long accounted for so much of the trade deficit that economists often refer to the non-oil trade deficit as a measure of shorter-term trends in the economy.
Other manufactured goods are certainly a concern, but those need to be handled separately when considering trade policies with all of our various partners. As the article notes, however, the percentage of the deficit resulting from oil imports has actually risen every year since 2002 and it’s spiking now. The cumulative effect of this is that any gains made in other areas – durable goods, housing, domestic manufacturing – are muted by losses incurred shipping American dollars overseas for oil and other energy products.
This is a relatively easy fix.. a rare instance in modern politics. Many of the factors affecting trade ratios rely on events which are beyond the control of the federal government, except in narrow, tangential ways. However, domestic production is one arena where the White House can play a huge role if they are so inclined. Sadly, the current occupant shows no such intentions, as demonstrated by the Keystone XL debacle and Canada’s subsequent decision to take their business to China.