North Dakota & International Trade

Try as we might, JT and I did not get to a discussion of North Dakota and international trade these last few weeks. It will likely surprise nobody that an economist is generally in favor of free trade. However, it would be silly not to recognize circumstances and situations when there will be downsides and domestic losers from international trade. In general I rely on the data in these circumstances, so let’s investigate some of the data related to international trade and the state of North Dakota, paying special attention to NAFTA since it is under active discussion and likely negotiation.

North Dakota Trade Balances

It really is not surprising the central place Canada has in trade relationships with North Dakota. They are both the source country for the highest amount of ND imports, while also being the number one destination for North Dakota exports. According to Census Bureau data North Dakota has a trade surplus with Canada, just shy of $2 billion in 2016. In 2016 Canada accounted for 77.6% of exports from North Dakota, while Mexico accounted for 6.1%. Mexico is not number two, though they are number four. Second is China, with South Korea third. Canada accounted for 53.2% of imports, China 8.2%, South Korea 6.3%, and Mexico 4.6%. North Dakota has a trade surplus with Mexico as well, at well over $100 million in 2016. North Dakota does have a sizable trade deficit with China, of close to $200 million, though it bounced around greatly over the last four years. The NAFTA deal seems to be working out pretty well for the state of North Dakota though.

The various top goods exported include crude oil and other petroleum products as well as agricultural products and implements such as tractors, reinforcing the primacy of agriculture and energy (oil) as the top sectors in the North Dakota economy.

Manufacturing

Now one of the chief issues I hear raised about free trade deals is the loss of manufacturing jobs. Let’s see what’s happened in North Dakota.

Well it seems manufacturing employment in North Dakota really cannot point at NAFTA and suggest that it impacted the level of manufacturing jobs in North Dakota. Surely it is possible the composition of these jobs changed, that is some employers left and others moved in, but that is not really the complaint leveled about free trade. The complaint I hear consistently from callers on the radio is the loss of jobs, as in the level is going down (JT can verify the accuracy of this).

We can also look at the percentage change (year-over-year) in manufacturing employment, which is this graph:

Actually the most significant drop in the series does not come from free trade agreements. The whole series really exhibits a cyclical pattern, and then we hit the financial crisis, and a great drop in the year-over-year percentage change in North Dakota manufacturing employment.

Free trade is not absolute, and it is not a given that everyone always gains from free trade. However, there are gains to be had from trade, for individuals and at the societal level, that we cannot dismiss lightly.

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