Global Trade Trends

While economists have many different ways of observing trade trends (think about looking at GDP changes), one of the best ways is to isolate a specific area and observe that to gain a good picture of it. One such area is the Port of Los Angeles and the clues that it provides about American international trade as a whole.

Luckily for us, this port was pretty thoroughly analyzed by the Economist. The first observation is the sheer scale of trade that occurs at this place: 5,000 vessels and the port has a capacity of 8,000 twenty-foot-equivalents (roughly thirty miles worth of stuff at any given time on one ship)! It is these economies of scale that make sea-trade so much more effective than air-trade. However, the expensive things are still sent via air due to time and safety concerns. This is why the average value of cargo sent by sea is only $6.43 whereas it was $102.78 via air in L.A.

After that it is worth noting how disproportionate the trade deficit is for the US as roughly half the containers that arrive full to L.A. leave completely empty.  This is what prompted President Obama to call for a doubling of American exports within 5 years. The location of these trade changes is very interesting as well. Most notable (as shown by the graph in the article) is the decline of Europe in both exports and imports while China has significantly increased in U.S. imports without a corresponding increase in exports. Perhaps that specific trade imbalance is what leads to the overall trade imbalance for the U.S.

Worryingly, trade deficits like this are what lead to Europe’s difficulties with productivity and economic policies. Further, due to the rise of non-traditional trade routes, the United States may be losing their spot as the center of trade. In fact, some analysts say Africa could be playing a larger role as the China-Brazil connection becomes more important.  Further, the Panama Canal is expanding which would eliminate the need for countries to unload their goods in the U.S. and ship them cross country by ground transit as they could then take their goods to the final destination entirely by sea.