Exporting Fables

by Don Boudreaux on November 16, 2010

in Myths and Fallacies, Trade

Here’s a letter to a mysterious e-mailer known to me only as “Exporter”:

Dear “Exporter”:

You object to my recent letter in which I argue that there is nothing special about American producers selling to foreigners as compared to selling to other Americans.  “Foreign buyers,” you say, “pay us with money earned there [presumably, in foreign countries] and not here.”

Not quite.  Money spent by foreigners on U.S. exports can be dollars originally earned in the U.S.  For example, Sony might buy legal advice from a New York law firm using dollars that Sony earned by selling consumer electronics in the U.S.

More importantly, though, foreigners buy American exports ultimately with goods and services they produce and then exchange for the dollars demanded by American sellers.  In this way, foreigners are identical to non-foreigners: they earn the income they need to buy U.S. output only by producing valuable output of their own.

For this reason, it makes no more sense to applaud (or to lament) a greater volume of sales made to foreigners than it does to applaud (or to lament) a greater volume of sales made, say, to people with blue eyes or to people who drive red cars.  In all cases, these people will buy more U.S. output only if they themselves produce more output in exchange.  And the American producers who make these additional sales are no better off if these sales are made to the British or to the Koreans rather than to the Blue-Eyedish or to the Red-Careans.

Peace & Free Trade,

Don Boudreaux

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