Benn Steil


A graphical take on geoeconomic issues, with links to the news and expert commentary.

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Showing posts for "Trade"

Export Ambitions



In his State of the Union address, President Obama set an ambitious goal of doubling exports in five years. To achieve this goal, exports must grow by nearly 15% annually, shown by the red line in the chart above. Since 1965, the only time such a nominal growth rate has been achieved for several years was in the mid-1970s. This growth was driven by high inflation, and was thus in large part a money illusion. In the early 1990s and late 2000s, export growth neared the 15% rate. As illustrated by the gray boxes, in each case the U.S. real exchange rate declined significantly during the period. Thus to realize his export ambitions, the president will likely need significant (and unwelcome) inflation or another major fall in the dollar – or both. Read more »

U.S. Current Account Imbalance: Oil vs. Non-Oil



The U.S. non-oil current account balance started to improve in 2006 after a period of real dollar depreciation beginning in 2002. However, the overall deficit remained high, reflecting the run-up in oil prices. The deficit improved substantially after oil prices collapsed during the financial crisis. As the crisis recedes oil prices have started to rise and the dollar has resumed its fall suggesting the potential for a continued improvement in the non-oil deficit, but deterioration in the oil balance. The net effect is likely to be a worsening of the current account deficit. Read more »

Global Supply Chain



Over the last decade, Asia has developed into a major manufacturing base for the developed world. This relationship has provided mutual benefits: the West has received cheap goods while the East has developed its production capacity more quickly. China, to a significant extent, has been the assembler nation, importing raw materials and intermediate products from the rest of Asia and exporting finished products to the West. This relationship is illustrated in the chart above, which plots China’s imports from Asia and its exports to the U.S. and Europe since January 2000. Recently, however, this relationship has weakened slightly — China is providing more demand for Asian exports than the West is providing for Chinese exports. An important question is whether the strong Asian recovery can continue without a robust recovery in Western demand for Chinese goods. Read more »

Twin Deficits



The U.S. federal deficit has increased significantly since the start of the recession, as tax revenues have fallen and spending has increased. But the trade deficit has actually shrunk, reaching its lowest level for ten years in May. So while the risks associated with dependence on external financing have declined, there are new risks stemming from increased fiscal borrowing. Read more »




The early 1990s witnessed trade tensions between the United States and Japan, even though the U.S. current account deficit stood at about 1% of GDP and Japan is a democracy.  As our chart shows, the world is now trying to manage much larger imbalances, and two of the major surplus countries are not democracies.  Resolving these imbalances may be more difficult because of the dependence on exports in China and Germany, the two leading surplus economies. Read more »

Trade Collapse



The collapse in U.S. trade associated with the current downturn far exceeds the fall in any other post-war recession. It tracks the fall in trade observed in the 1930s, though there are now signs of stabilization. So far this collapse has been driven by economic factors, such as the decline in demand and trade financing, but as the world economy contracts the risk of protectionism increases. Read more »

Trade Troubles


The WTO has forecast that world trade will decline by 9% this year, the largest fall since World War II and the first decline since 1982. The severity of the contraction in world trade not only exceeds the post-WWII recession average, but is also deeper than in any post-war recession. In response, G20 leaders extended their agreement not to impose protectionist trade barriers to the end of 2010 and promised $250 billion in trade finance. Read more »

Trade Troubles


The World Bank is predicting a 2.1% fall in world trade for 2009, the first decline since 1982. As our chart shows, East Asian exports are slowing in tandem with Western world imports. Although G20 leaders pledged to maintain open trade at the November 15th summit, there is concern that politicians will exacerbate the problem by turning inward. Already Russia and India have raised tariffs and China is under pressure to take steps to support exports. Read more »