Gravity speaks

According to this report, Japan now trades more with China and Hong Kong than it does with the US.

No doubt, this will be the cue for lots of pompous prognostications about the decline of American economic influence.

But isn’t there a more mundane explanation? Isn’t this just what the gravity model of international trade predicts – that countries trade most with their neighbours?

After all, UK trade with the Irish Republic is almost twice that with China (£23.1bn versus £12bn in the last 12 months). This isn’t because Ireland is an economic superpower – it’s because it’s nearby.

Give me a simple model* over high-falutin’ geo-political mumbo-jumbo any day.

* No, I don’t mean Caprice, but since you mentioned it …