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Last week I posed a question. The German trade surplus was up, the US deficit was down, emerging markets saw exports jump, as did China. That means someone else, somewhere in the world, must have seen imports rise, and must have either seen their deficit get worse or their surplus fall. But who? Well, we now appear to have the answer, or a partial answer anyway. The answer lies with two island economies, on either side of the world, one of which seems to be rather close to home.

So the German trade surplus in November was 17.8 billion euros, one of the largest trade surpluses enjoyed by Germany since comparable records began in 1990. The US trade deficit in November was $34.3 billion, which seems rather high, but was in fact the lowest in four years. Meanwhile, other data revealed that exports from emerging markets increased 4.9 per cent year on year in November. The five countries that are now being referred to as the fragile five – Brazil, India, Indonesia, Turkey and South Africa – have seen their trade deficits fall, and their combined trade deficit is now almost 40 per cent down since June.

So how do we square the figures? As I am often saying, it is not possible for every team in the premiership to win all their games, neither is it possible for all countries to improve their current account. To coin a phrase, trade is a zero sum game.

Well, as far as the US is concerned, the big driver of its improving deficit has shale gas leading to falling imports of oil and gas. As it happens, in the global story, emerging markets that export commodities have not done so well, with exports from the Middle East and Africa down. So that goes some way to squaring the data on the US.

November also saw China’s exports rising 12.7 per cent year on year in November. Imports rose 5.3 per cent year on year.

What about Europe?

We don’t have all the data so far, but there is this feeling out there that much of the Eurozone will do well off the back of surging German exports, because many countries supply Germany exporters.

Alas, it seems that the UK has partly funded the improvement in German trade. Recent data show that in the three months to November, the UK trade deficit worsened, with exports down 2.5 per cent and imports falling by just 0.3 per cent. In November, UK imports from the EU were worth £19.2 billion, a record monthly high. The CEBR said UK imports were spurred on by a resurgence in car sales in the UK.

So this is the flip side of all that good news about surging car sales in the UK. Yes it is true that the UK car industry is more efficient these days, and UK car exports are rising, but it seems likely that car imports are rising even faster.

But then this morning data from Japan went some way to completing the equation. In November Japan experienced a record current account deficit, of 592 billion yen, that’s $5.73 billion.

Japan’s surging deficit must go some way to explaining the improvements in emerging markets. Capital Economics reckons this may be temporary, and that Japanese consumers may be buying in advance of the impending hike in consumption tax.

But we can say this. As far as November is concerned, it appears that one of Germany’s highest ever surpluses, and the lowest deficit in the US for four years, and the sharp falls in surpluses seen in emerging market countries with big deficits was at least partly funded by record imports to the UK from Europe, and Japan’s highest ever deficit.

In the zero sum game we call world trade, the US, China, Germany and emerging markets scored goals. Japan and the UK let them in. And the final score? Well, as ever, it was a draw.

 

These views and comments are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees


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