Friday, February 10, 2012

Total U.S. Trade Sets New Record High in 2011

Total U.S. international trade (exports + imports) set a new record of $4.76 trillion in 2011 (see chart above), as both annual exports ($2.1 trillion) and imports ($2.66 trillion) reached record high levels last year, according to today's BEA report.

Other highlights include:

1. Total international trade increased in 2011 by 14% compared to 2010 ($4.175 trillion), and was 35% above the recession-related cyclical low of $3.53 trillion in 2009.  Adjusted for inflation, the increases were 10.5% vs. 2010 and 28.6% vs. 2009.

2. Compared to the previous all-time record high in 2008, total trade for the U.S. last year was above that previous record by 8.7% in nominal terms and by 4% adjusted for inflation. 

3. U.S. exports exceeded $2 trillion for the first time ever last year and increased by 14.5% from 2010 and by 33.5% from the recession-related cyclical low in 2009. 

4. U.S. consumers and businesses purchased a new record high volume of $2.66 trillion worth of consumer products, raw materials and inputs from the rest of the world, which was an increase of 13.8% from the previous year, and 36% more than in 2009.

Bottom Line: What is already getting the most media attention about today's trade report is the "bad news" that: a) the U.S. trade deficit increased in December and for the year, b) the trade deficit with China "soared to a record high" last year, and c) the reason for the trade deficit with China is because it "deliberately undervalues its currency to give its companies Americans an unfair a generous price advantage."  

What won't receive much (any?) media attention is the good news that the total U.S. trade activity (Exports + Imports) set a record high in 2011, reflecting the improvement in both the U.S. and world economies last year.  Foreign consumers and producers purchased a record volume of "Made in the USA" exports, and American consumers and producers purchased a record volume of "Made Outside the USA" imports, which is a positive sign of worldwide economic recovery and vibrancy. 

As Dan Griswold pointed out last year on his blog:

"Politicians and commentators love to focus on the deficit, as though it were a scorecard of who is winning in global trade, but the real measure is the total volume of trade. As economies expand, so does trade, both imports and exports. Exports help us reach new markets and expand economies of scale, while imports bless consumers with lower prices and more choices, while stoking competition, innovation, and efficiency gains among producers."

Related: See "Made on Earth: How Global Economic Integration Renders Trade Policy Obsolete," by Cato's Dan Ikenson, and also Don Boudreaux's post "Made on Earth."


At 2/10/2012 10:34 AM, Blogger Jon Murphy said...

Always a good sign when trade increases!

At 2/10/2012 11:18 AM, Blogger Benjamin Cole said...

I hope the globe's central bankers concentrate on growth, growth and more growth.

A peevish fixation on inflation---really an perverted obsession---is embedded into the DNA of people who have the compulsion to be central bankers. They are not real estate developers or entrepreneurs.

When the goal in life of central bankers is the chimera of price stability, instead of robust economic growth, it can be very hazardous to the wealth of nations.

At 2/10/2012 11:41 AM, Blogger morganovich said...


and you evidence for that is what?

remember the 80's? that was inflation targeting.

remember the 70's? that was growth targeting.

are you seriously going to claim the 70's were a better decade of economic performance?

At 2/10/2012 11:46 AM, Blogger Jon Murphy said...

Look, trying to target either inflation or growth is like trying to catch a minnow with your bare hands: you'll be at it a long time and all you'll have to show is a tiny fish.

Can we please move beyond this constant bickering about inflation?

At 2/10/2012 12:33 PM, Blogger morganovich said...


then how do you target and control money supply?

i think you are quite wrong about not being able to target inflation. it's been done very successfully in many places including the US.

you just need an independent central bank with a tight mandate.

i'm not sure how you come to the conclusion that doing so is so difficult.

on what are you basing that?

At 2/10/2012 1:35 PM, Blogger Jon Murphy said...

on what are you basing that?

Market forces. I believe that any action to steer markets, either through price controls, inflation targeting, growth targeting, whatever, is ultimately doomed to failure.

Even if we were to have a purely independent central bank, I do not believe these experts would be able to target a specific level of inflation successfully or any extended period of time. It's the knowledge problem.

There are ample controls to inflation in the market process. Just as prices allow for effective allocation of resources, I believe allowing interest rates to adjust naturally, exchange rates to float, and true incentives (as opposed to artificial ones) to rule the day, inflation will, in the long run, be better controlled. That's not to say there won't be shocks or bouts on inflation or deflation, but I think growth would be better fostered in a market system. It works for everything else, why not this?

At 2/10/2012 2:02 PM, Blogger sethstorm said...

It doesn't give US citizens an advantage unless you're a masochist.

There is no cardinal sin for buying something made in your own nation. Yet economists seem to think it is one.

At 2/10/2012 2:18 PM, Blogger morganovich said...

"Even if we were to have a purely independent central bank, I do not believe these experts would be able to target a specific level of inflation successfully or any extended period of time. It's the knowledge problem."


but it's happened. they have successfully done just that. look at volcker. look at the bundesbank. these are excellent examples of successful long term inflation targeting and resulted in vibrant, expanding economies.

inflation targeting is quite easy.

you set a band, and alter rates and money supply growth as you near edges.

you speak of market processes to control inflation, but that's simply not true unless monetary policy is constrained.

inflation is predominantly a monetary phenomenon. look at the 70's, or the 30's in hungary or argentina or zimbabwe.

you have not addressed the issue of how to target money supply. someone is "printing" it. (generally the central bank) they need to decide how much.

so how are they to do that?

historically, all the best results have come from targeting inflation.

the US tried to target growth under burns and miller. the result was double digit inflation and economic malaise (stagflation).

volcker fixed it and moved to strict inflation targeting. that led to 2 decades of excellent growth and prosperity. greenspan began undoing this and set off a major bubble and then another in trying to clean up the first one, bringing us a decade of low/zero growth depending on whether you believe his version of cpi or not.

the evidence here is actually very, very clear.

compare the bundesbank to the results of places like italy.

inflation targeting is simple, achievable, and effective. the evidence is quite robust.

"market" controls for inflation are worthless absent constrained monetary policy.

i really do not understand either your assumption that inflation targeting is somehow too difficult or the mechanism by which you propose to establish money supply.

At 2/11/2012 4:06 PM, Blogger Jon Murphy said...

Hey Morganovich,

Sorry it took me so long to respond. You may never actually see this comment if you have moved on.

But anyway, you're starting to sound like one of them big government types :-P

At the risk of incurring your wrath, the same arguments you just made are the same ones that those in favor of government intervention in markets make.

At 2/11/2012 9:59 PM, Blogger VangelV said...

Market forces. I believe that any action to steer markets, either through price controls, inflation targeting, growth targeting, whatever, is ultimately doomed to failure.

Market forces? How the hell can you have market forces control anything when you have elastic money? Note that the greatest economic achievements have always come during periods where inelastic commodity backed money was the norm. They only way to actually be successful would be to take away from the central banks the power to inflate the money supply at will. Back the money supply with a redeemable commodity like silver or gold and you will have economic stability and prosperity. Keep playing games and assume that some men who meet in secret are incorruptible and benevolent and we will keep getting what we deserve.

At 2/11/2012 10:57 PM, Blogger jorod said...

This comment has been removed by the author.


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