For today’s column we venture into the world of geopolitics and global trade.
I borrowed the idea for this column from Peter Zeihan, a geopolitical strategist from the US, who mentioned in an interview that the US recently joined a very exclusive club. He was speaking about countries that are net exporters of both food and energy. Let’s call these nations Double Net Exporters.
The US only became energy self-sufficient in 2019 due to advances in fracking technology. Environmentally, fracking has some issues but geopolitically it’s a blessing for the US. Now the US will interfere less in oil states and scale back its role as global security guarantor. How this is reshaping geopolitics is for another column. Today we focus on our exclusive club of Double Net Exporters.
Any analysis starts with an empty slate.
Understanding whether a nation is a net exporter or net importer of either food or energy is a bit tricky. Such datasets aren’t readily available, so compromises are required.
The basic concept is simple. A nation that exports more energy or food than it imports is a net exporter. Being self-sufficient is great, as you don’t rely on trade to keep the people fed and the lights on. What exactly to measure is tricky to work out. This isn’t a PhD thesis and I only have a day, rather than four years, to work on this. We will therefore need to work with readily available data. The result will be close enough to the truth to see meaningful global patterns.
To estimate global food trade, we pick trade in agricultural products. This isn’t ideal since this might well include non-food items like cotton but it’s close enough. Now we need to decide whether to measure trade-based on value or weight. Ideally, we would have this data broken down into calories but since that’s not available, weight appears to be closer linked to calories than value. The latest data is from 2021, when pandemic supply chain issues disrupted global trade. Therefore, we use 2019 data to see general trade patterns.
Energy data comes in a more comfortable format but is relatively old. I supplemented the data with manual research for 2022 for the largest 25 economies to make sure no major changes (such as the US becoming energy independent) were missed. The data refers to energy rather than only electricity as we want to measure oil and gas too.
To not clutter the map with minor economic players and microstates, only the top 50 per cent of nations, based on the latest GDP figures, are included. Imperfect but good enough.
Let’s start the analysis by looking for nations that are net importers of food and energy. The top ten list (ranked by GDP) of the Double Importer Club features big names. A total of 49 nations fall into this vulnerable category.
Double net importers depend on global trade
- South Korea
These nations are highly dependent on international trade. Think about the risks that these nations are exposed to.
They can only operate because they are deeply connected to regional and global trade networks. A thriving China outside of a deeply interconnected global trade network is unthinkable. The Belt and Road initiative builds out a largely non-Western trade network tasked with feeding and powering China.
When dealing with China, Australia needs to remember that technically speaking China needs us more than we need China. We only get money from China, while China needs food and energy to survive.
Japan tied itself much closer to Western trade networks as it doesn’t trust it’s Asian neighbours, and food from China won’t be forthcoming anyways.
The European nations on the list benefit from a few strong food exporters within Europe. It’s quite problematic from a food perspective that Ukraine, the largest European food exporter, was attacked by Russia (the second-largest food exporter).
This obviously drove up food prices. Europeans were hurt by this but nowhere near as much as poorer African states that are net food importers. The importance of France (the third-largest food exporter) in Europe was strengthened as a result of the war in Ukraine.
Now let’s look at the 13 members of the Double Exporter Club (ranked by GDP).
Double net exporters’ strength
- United States
- Russian Federation
- South Africa
Remarkable strategic power comes with the membership card of this club. We already discussed the US. Australia and Canada both have relatively small populations but control huge landmasses, making it easy to extract enough food and energy to become a Double Net Exporter.
It’s tempting for Double Net Exporters to simply rely on these relatively simple industries to create wealth. Russia and Kazakhstan for example have nothing else going for them, economically speaking, whereas the US, Canada, Australia, and even South Africa diversified their economies.
Tourism, international education, industrial production and, most importantly, the service sector, create widespread wealth. Establishing a strong democratic culture also protects double exporters from establishing a corrupt elite.
Without such structures Double Net Exporters might well fall victim to the Resource Curse. Selling easily exploitable resources creates enough wealth for a small but corrupt elite to maintain an obedient police force, crack down on alternative thought and suppress education, while living in splendour.
In fact, having a single abundant natural resource is enough for countries to fall into the hands of dictators. Countries that aren’t blessed with resources always had to trade (or fight) their way to success.
Without his double exporter status backing him up, Vladimir Putin would not have risked any European war adventures. As long as you have food and energy you can withstand awfully strong sanction packages.
Now imagine if such sanctions were extended to a double importer like China. We would see at least tens of millions of fatalities within a year (probably closer to 100 million deaths). This logic suggests that China will leave Taiwan alone until they secure food and energy inflow independent from the West. I guess that’s one angle to watch the tightening trade links between BRICS nations (Brazil, Russia, India, China, and South Africa).
Putting the Double Importer Club and the Double Exporter Club on the same map, we see the role that geography plays.
Geographical patterns emerge
The global Dust Belt stretches from the Sahara Desert to the Gobi Desert. This region is mostly suboptimal for growing food.
The small geographical spread of European nations means that few can produce enough food and energy to sustain relatively dense populations. Structurally speaking, importing wheat and gas from the larger eastern European nations (Russia, Ukraine) made sense.
Unfortunately, Angela Merkel’s strategy of appeasing Putin by tightening German trade links with Russia failed. Unfortunately for Putin, Russia was demoted to deliver heavily discounted food and energy to China (and other BRICS partners). I see no hope for the average Russian to be better off in the next few decades than they were in 2019.
When we look at the Double Net Exporter club, we see yet again Australia’s privileged position. Our national business model (selling stuff we dig out of the ground and that we grow on the ground) will continue to be successful.
Someone will need to feed the rapidly growing Asian middle-class.
The structural challenge for Australia, as for any Double Net Exporter, will be to find ways to fairly distribute the wealth that our resources create among the wider population. Stupendously expensive housing, for example, suggests we have been moving in the wrong direction for quite some time.
Demographer Simon Kuestenmacher is a co-founder of The Demographics Group. His columns, media commentary and public speaking focus on current socio-demographic trends and how these impact Australia. Follow Simon on Twitter, Facebook, LinkedIn for daily data insights in short format.