Once more in 2010 China and Germany performed brilliantly with regard to total merchandise exports and imports. They both achieved lavish balance of trade surpluses — 202 billion current US$ by Germany and 183 by China. By comparison, the United States, in spite of their sizable merchandise exports, marginally bigger than Germany's, are unable to reverse the large trade deficit trend, notwithstanding the steadily weakening dollar value.

The scatter chart shows in red the regression line of imports on exports. Those economies that are to the right of (below) the red line finished 2010 with a surplus of exports on imports. Apart from the big economies such as Germany, China, Japan and Russia, the surplus group includes oil-rich nations such as Saudi Arabia, UAE and Norway, and a few effective exporters like Korea and the European Belgium, Denmark, Ireland, Netherlands, Sweden and Switzerland. Russia, China or the oil producing countries are blessed with a treasure chest of natural resources that places them in a favorable position for merchandise exporting. But the same cannot be said of Ireland, Switzerland, the Netherlands or Japan, which are inherently "poor" countries, forced to import almost everything from energy to raw materials, before they can even dream of manufacturing merchandises for trading. Notwithstanding these limitations, they provide enough evidence that an economy does not have to live on a rent to be rich.

On the left of (above) the regression line, appear those players that imported more merchandises than they were able to export, thus registering a merchandise trade deficit. These include the United States, with an out-of-scale merchandise deficit of 690 US$ billion (current). In constant dollars (2005=100), the US merchandise balance of trade improved by 25% between 2005 (deficit of 832 US$ billion) and 2010 (deficit of 623 US$ billion). This is due to a faster growth of exports (average annual growth rate of 5%) than imports (1% growth rate). The differential may derive from the shrinking value of the US dollar : in December 2005 it was worth 0.8443 Euro, but only 0.7546 Euro, or 11% less, in December 2010. Whatever the causes, the fact remains that the huge US merchandise trade deficit is unaffordable — it is all by itself bigger than the sum of all other deficits in the table of 40 leading exporters/importers.

Most of the largest European economies show also a significant merchandise trade deficit. Clearly, the performances of Germany, Netherlands, Ireland and a few other small European countries cannot keep the European Union afloat, when the likes of the United Kingdom, France, Italy, and Spain have a rotten merchandise trade behavior, getting worse every year. In fact, the 27-member European Union finished 2010 with a 190 billion US$ (current) merchandise trade deficit.

A negative trade balance, does it matter ? Generally speaking it is bad news. To use a mundane analogy, it is as if I buy more from the supermarket than what I am paid for my regular work. Unless I have a bank account generating additional income, or a caring old aunt sending me a check to complement my wages now and again, I submerge in debt and find myself in dire straits. The negative balance of trade of the United States, France, Italy, Spain or United kingdom is very unhealthy for their external debt positions, and a heavy liability for their overall economic standing. Remedies exist, but apart from services or transfers surpluses — equivalent to the above-mentioned analogy of the bank account or the old generous aunt — they may taste bitter. Fundamentally, they revolve around three primary moves. First, boosting the numerator, the merchandise exports, which requires strong and creative industrial capability. Second, shrinking the denominator, the merchandise imports, by disheartening the nation's appetite for foreign merchandises. Third, mixing a shrewd cocktail of the first two. Alas, none of the aforementioned countries shows any inclination to try and do what is required.

The 2008 subprime-triggered financial crisis, and the ensuing — and worsening — global economic crisis, instead of putting some sense in the heads of British, French, Italian or Spanish trade policy-makers, only opened the deficit gates wider. If Sweden, Belgium or Switzerland could build their surplus in that time frame, why couldn't those big economies do likewise ? Still another failure that adds to the miseries currently afflicting the European Union project. This unhealthy trade situation has been going on for so long that one can only wonder whether it is due to incompetence or to utter lack of concern by European leaders. In any case, they deserve a proper retribution.

Sources: WTO - World Trade Organization.

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