The Ultimate Trade Deficit

Bonaire

The crystal clear waters make for a fantastic snorkeling or diving experience. The best in the Caribbean islands.

Lately in the USA, trade deficits are in the headlines. It is impossible to read anything in the news without articles on tariffs and trade wars. It seems to be the consensus of the American people having a trade deficit with economic partners is a bad influence on the US economy. The focus of the USA deficit is on manufactured goods. Economists, including Chad Bown, disagree with those using this key matrix as a measurement of the USA’s overall economic health. Chad Bown is formerly a tenured Professor of Economics at Brandeis University and now co-hosts Trade Talks, a weekly podcast on the economics of international trade policy. I thought it would be nice of me to personally offer Chad a proof source he can quote on his podcast. What better way to prove his point than taking a look at the economy of Bonaire.

“For highly developed countries like the United States, a trade deficit doesn’t necessarily imply economic weakness. In fact, the smallest trade deficit in recent years was in 2008, 2009 during the Great Recession.” – Chad Bown 2017

I fear I am walking a political tightrope with this post. I will try to keep my opinions to myself. This is very hard for me. It goes against my nature. Those who know me know very well, I have no issue speaking my mind. I consistently make a conscious effort to keep our blog unbiased and non-political. So, the disclaimer here is, I have no opinion of any value. You should pay no attention to me whatsoever. I’m just trying to help out Chad. Here goes.

Bonaire imports everything. I mean everything. Nothing is grown here. It is too arid. No livestock is raised here. There isn’t enough farmland. There are lots of wild donkeys but I don’t think they eat them. Same is true for the flamingos. Other than salt, nothing is manufactured here. There are no factories. Bonaire’s trade deficit has to be 95% in the red. Bonaire has never in the history of the island experienced a trade surplus. So if trade deficits are an indication of a weakened economy then how come Bonaire is growing, people have jobs and residents receive excellent free healthcare?

Bonaire

A ship unloads at the Curoil docks

Bonaire

Importing, of all things, sand.

Bonaire’s only export is salt. The salt is made from ocean water.  Ocean water is one resource plentiful on Bonaire. And let’s face it; it is not like Bonaire has a monopoly on the world salt market. Ocean water covers about two thirds of the world’s surface so pretty much anyone wanting to make salt can do so. I don’t think the company making salt on Bonaire can demand premium price. Salt is salt.

It was a local lady who told us nothing sold on Bonaire is made here. She went on to say even the salt sold to tourists as a Bonaire souvenir isn’t really from here. I think I let out a little gasp when hearing this. Oh, the shame!  Is it really true salt sold to tourists as Bonaire salt is really imported from origins unknown? She went on to say, all of the salt made here is exported. It should come as no surprise this young lady asked to remain anonymous in fear she might be voted off the island for spilling the beans on this little factoid.

I later found out this is not quite true. There is a rum distillery on Bonaire. They make rum on the island. Every island we have visited in the Caribbean has had a rum distillery. The Bonaire rum is made from cacti. Cacti are another item in abundance on Bonaire. They make fences out of cacti. I love the priorities and resourcefulness of these people. We want rum. What do we have in abundance? We have salt, wind, sunshine, sand, flamingos, donkeys and cacti. Let’s figure out how to make rum from cacti. And, they did.

Bonaire

Mountains of salt await the arrival of a ship for export

Bonaire

No it isn’t snow. Dried salt is loaded from the flats and taken to the salt hills

It is impossible to visit Bonaire and not see salt pyramids. They can be about 50 feet high (15m) and since most of the southern part of the island is about three feet above sea-level, the salt pyramids are the southern landscape. Bonaire produces solar salt meaning the process of extracting salt from the ocean is done naturally by the sun and the wind. Wind is another thing Bonaire has as an abundant resource. The process of extracting salt from the Caribbean Sea can take up to one year. The results of solar dehydration are “sun gems”. These are large salt crystals unlike table salt or rock salt produced from underground salt deposits.  Ironically, one of the uses of the type of salt produced in Bonaire is to create saline swimming pools. So, the one year process of making the salt is completely reversed in 5 seconds when added to the pool.

The salt is produced by the Cargill Company who is a privately held Minnesota organization. So, even the profit from the one export Bonaire does have doesn’t stay on the island to enhance the local economy. There was an excellent article about the Bonaire salt production production published in the Huffington Post. You can read it by clicking here.

Bonaire

Gargill uses wind power to pump water. Along with saltwater, wind is in abundant supply because of the trade winds.

How is it with this massive trade deficit that Bonaire can survive? Bonaire’s economy is unequivocally tied to tourism. 300,000 people a year visit Bonaire. This is an astounding number of people when you consider only about 19,500 reside on Bonaire. The equivalent to this is like the entire population of the continent of Asia visiting the USA in one year. If this happened, everyone in the USA would have to focus on tending to the needs of the Asian tourist.  This is how life is on Bonaire. So yes, tourism is a key factor in the economy here. And by the way, tourism is not a matrix currently used in the USA trade deficit measurements. I wonder how many tourists visit the USA in a year. As I previously stated the focus is only on manufactured goods. The true definition of a trade surplus or deficit should be all moneys entering and exiting a country, not just manufactured goods. So there you go Chad. No charge for this one. You should come to Bonaire and see the salt production. Bring a couple of friends. They need the tourism.

Bonaire

Even the license plates tout tourism

 

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