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Hi there!
Brooke Medina here.
In some ways it's hard to believe it was only three years ago that we were in the midst of a global pandemic and toilet paper and hand sanitizer were flying off shelves as we stayed glued to our screens, trying to make heads or tails of Covid and the implications it was to have on our world. And little did we know at that time that a year thereafter, the Evergiven would get stuck in the Suez Canal, further disrupting the world's exceedingly fragile global supply chains. And it was just last year that the US was facing a dire and frightening infant formula shortage.
The strain the pandemic placed on global trade, not to mention the challenges arising from Russia's war against Ukraine, have caused the US to reassess who it trades with and what it exports and imports. A recent piece at the Visual Capitalist outlines our largest trading partners, breaking down what goods we send out to sea and which we bring back home.
We export our goods, such as oil, natural gas, airplane engines, and soybeans, all across the world, but our largest trading partners are those right on our borders: Canada and Mexico.
We primarily send machinery, vehicles, mineral fuels, and plastics to both Canada and Mexico. Geographically, it makes sense that the nations to our north and south would be our primary trading partners. But it also adds up when considering our free trade agreements with these countries, first through NAFTA, which was enacted in 1994, and then USMCA, which updated the former agreement in 2020.
Both of these trade agreements had room for improvement, but the principle that governed their creation was a desire to establish mutually beneficial trade, so that each country could rely on their partner's comparative advantage. Comparative advantage "is an economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners."
We live in a political moment where a growing number of politicians are clamoring for "industrial policy," a wrongheaded notion that if we just reshore production of goods here in the US, we'll never want for things like toilet paper or formula. Unfortunately, that's not what history has taught us. In fact, industrial policy has already been tried multiple ways at multiple points in history to very lackluster and murky results.
So, let's keep friendly trade relationships with our allies, leaning into our comparative advantages as a nation that is brimming with innovators, entrepreneurs, and hard workers. We will be better prepared for any curve balls the economy sends our way if we work with our neighbors to find mutually beneficial arrangements.
Esse Quam Videri,
Brooke
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