A zero-sum game?Feb 27th, 2018
As the global elite gathered in Davos last month, Piers Morgan was also there, to interview President Trump. He was told:
“We are going to make a deal with the UK that’ll be great. As you know, we are somewhat restricted because of Brexit, but when that restriction is up we’re going to be your great trading partner”.
A truly great deal would be one where both participants end up with a surplus, but that would be nonsensical and impossible.
Some countries import more than they export, and therefore have a trade deficit. Others export more than they import, and have a trade surplus. From a pure accounting perspective, the total of the surpluses minus the total of the deficits must add to zero.
Funnily enough, it doesn’t. Do the sums and the world has a trade surplus with itself of around £350 billion. Now that is a neat trick. Great, even.
In 2016, the UK reported a trade in services surplus with the US of around £23billion. In the same year, the USA reported a trade in services surplus with the UK of around £10 billion. The difference between them is therefore a not so small £33 billion. The ONS falls short of calling this ‘great’, preferring the drier but more accurate ‘trade asymmetry’.
The ONS has been doing some work to try and explain trade asymmetry, and is struggling to do so. So far, they have only identified causes for £4 billion of the £33 billion difference with the USA, which are attributed to ‘definitions’.
Closer to home, in 2016, the asymmetry on services between the UK and Ireland was £11.2 billion.
According to the ONS, trade asymmetries are greater in services than in goods. This might be simply because physical goods are easier to describe and measure than intangible services.
Looking forward to some great deals.