UBS’s head of Asia-Pacific economics argues that the real global trade imbalance isn’t U.S.-China, it is U.S.-oil. As shown below, current account surpluses from fuel exporting-nations have been a far larger driver of total global trade imbalances coming from emerging markets.
China’s current account surplus (in blue) has been large in recent years, as a percentage of the global economy, but it has been dwarfed by fuel exporters (in green):
Looking at the movements from the late 1990s through 2006, when the overall U.S. deficit worsened from 2 per cent of GDP to nearly 7 per cent of GDP at the trough, a full three percentage points of that adjustment came from other advanced economies and from fuel imports; only two percentage points came from China and other non-fuel emerging markets. And the recent drop in the U.S. deficit had almost nothing to do with China; again, it was oil prices and developed trade that explains the entire swing over the past 18 months.
Thus the U.S. could use a little less finger-pointing at China… and a lot less foreign oil usage… if it really wants to correct its global trade imbalance.
This is a huge argument against U.S. trade protectionism since protectionism would miss the largest cause of America’s trade deficit while only hurting U.S. export prospects by pissing off trade partners.
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