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America and Russia don’t trade much with each other and that’s dangerous

PortandTerminal.com, March 10, 2019

Moscow, Russia – America does very little trade with Russia and that’s dangerous. Trading partners are less likely to fight. The early 19th-century economist Frédéric Bastiat put it best in his famous quote, “If goods don’t cross borders, soldiers will”.

If goods don’t cross borders, soldiers will.

Bastiat argued that trade between countries could reduce international conflict because trade forges connections between nations and gives each country an incentive to avoid war with its trading partners.

The European continent has been remarkably peaceful for almost 75 years after two devasting World Wars thanks to a large extent to the trade and interconnectivity fostered by the European Union. That fact that many are now questioning the role of the European Union (eg Brexit) must be a worrying sign for sensible politicians and historians alike. Even more alarming is the mounting evidence that Russia has been actively trying to undermine the European Union.

Russian and American trade

Russia and the United States do remarkably little trade with one another given their size and presence on the world stage. Russia ranked just No. 28 among the United States’ top trade partners.

The image below, while a few years old now, visualizes Russia’s trading relationship with the world. Look at the minuscule trade flows between Russia and the United States relative to those between the United States and China or the European Union. While China and the United States may have serious strategic issues with each other, they also have a deep trading relationship with one another and a vested interest in maintaining the status quo. Russia and the United States? Not so much.

What does Russia export that America actually wants?

Very little. Look around your home. How many products do you own that were made in Russia? Probably not many (any?). Russia as a nation doesn’t manufacture or export much in the way of consumer products. While Russia produces some very good consumer brands, few if any make it over to the United States. Which of the following “Made in Russia” big brands do you recognize?

Punching well below its weight in containerization

A good measure of a country’s trade in manufactured goods is the amount of containerized cargo handled at its ports. Manufactured products are generally shipped in containers. Russia though only ranks #32 in the world on that measure after much smaller countries such as Panama, Mexico and Canada.

Russia is ranked #32 in the world in containerized cargo traffic

What Russia has America doesn’t need

Russian state-owned Gazprom controls 35 percent
of the gas market in Europe, larger than any other supplier

What Russia does have a lot of America doesn’t need, or has better supply options to get elsewhere.

Russia is resource rich in gas, grain, metals and so on. It is the largest country in the world in terms of land mass and some sources estimate that Russia contains over 30 percent of the world’s natural resources.

America though doesn’t need Russian gas, wheat or much of anything else that it exports. Wheat? America is the largest exporter of wheat in the world (Russia is second). Natural Gas? America has the 5th largest natural gas reserves in the world (Russia is first) as well.

Natural resources are though what keeps the Russian economy afloat. Russia has the biggest natural gas reserves in the world (24 percent of global reserves) and the sixth largest oil reserves (6.1 percent of global reserves). Revenues from its sales of crude oil, petroleum products, and natural gas account for about half of Russia’s federal budget.

Most of Russia’s trade though is done with its European neighbors and not with the United States. Russia and the United States need to find ways to foster strong trade links with one another. Protectionism, obstruction and sabre rattling will not make the world a safer place.

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