Plastics resins and other U.S.-made raw materials have caught the attention of veteran economist Alan Tonelson, but not necessarily in a positive way.
In a Feb. 13 post on his RealityChek blog, Tonelson pointed out that six of the 10 largest trade surpluses seen by U.S. goods in 2017 were for commodity products. That number included plastic materials and resins, which came in at No. 4 with a surplus of $15.3 billion.
That status might be good for U.S. resin-makers, who are adding lots of capacity, especially of polyethylene, with expectations of exporting even more. But it isn't necessarily good for the U.S. economy, according to Tonelson.
“America's raw materials-heavy trade surplus is more typical of a third-world than a first-world pattern,” he wrote. “History teaches pretty clearly that relying heavily on exports of raw materials isn't a great formula for long-term national economic success.”
“That's one big reason that [2017 trade data] tells such a depressing story. Because that's exactly what the United States has been increasingly engaged in,” he wrote.
U.S. reliance on commodity surpluses appears to be growing, since the same top 10 list from 2007 included only three commodities. Plastic materials and resins was fourth on that list, too, with an almost identical surplus.
Tonelson, whose experience includes almost 20 years as a researcher with the U.S. Business and Industry Council, describes commodities as “low-value sectors” when compared to products made via manufacturing.
The U.S. manufacturing trade deficit, which he describes as “the flip side” of the surpluses, actually grew in terms of its share of the overall merchandise deficit between 2007 and 2017.
“There's a first time for everything, and maybe the U.S. will prove the exception to this rule about the value of manufactures vs. commodities trade,” he wrote. “As to the question of a comparative advantage in commodities providing a durable foundation for American prosperity — the burden of proof surely remains with the optimists.”