Exporting Trade Fallacies

by Don Boudreaux on July 25, 2010

in Complexity & Emergence, Myths and Fallacies, Trade

Here’s a letter to the Wall Street Journal:

Undersecretary of Commerce for International Trade, Francisco Sanchez, boasts about the Obama administration’s efforts to boost U.S. exports (Letters, July 24).

Alas, there’s nothing special about exports – which is to say, there’s nothing special about the geographic locations in which products are sold.  Economic activity serves the public interest best when competition drives firms to produce those outputs whose sales yield the highest profits.  If some of those sales are to foreigners, that’s fine.  But it’s poor reasoning to conclude that because competition leads 100 American-made products to be profitably exported, then Americans would be even wealthier if government distorts competitive markets to ensure that 150 American-made products are exported.

Exports, as such, are no more or less fundamental to a country’s economic prosperity than are, say, products that are yellow.  Suppose that in competitive markets growers of lemons and sunflowers thrive, along with producers of yellow polka-dot bikinis.  Would it therefore be wise economic policy for government – impressed by the profits earned by these yellow-thing producers – to artificially encourage the production of greater numbers of yellow things?  Clearly not; such a conclusion is obviously unwarranted.  Yet a similar error in reasoning is applauded when the products are labeled “exports.”

Sincerely,
Donald J. Boudreaux

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