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Here’s a letter to a frequent correspondent who is convinced that the case for free trade is “inherently illogical”:
Mr. McKinney:
Regarding my favorable linking [2] to David Henderson’s essay “NAFTA 0.0 [3],” you ask if I’ve “changed [my] mind” and now agree with David’s claim that “exports are good, because those who export make money on those exports.”
I’ve neither changed my mind nor disagree with David’s claim. Exports are indeed good for the reason that David notes.
In trying to determine just why you mistakenly suppose that I might disagree – or that I might once have disagreed – with the point that David makes in the above quotation, I can think of two related reasons.
First, I’m perhaps more obsessive than is David in making explicit the fact that earning money is never an end in itself. So I likely would have instead written “exports are good, because those who export increase their ability to acquire real goods and services.” But I don’t doubt that what I spell out here is implied in David’s more-succinct prose.
Second, David and I did have a minor disagreement [4] on the question of whether or not it’s proper to insist – as I do insist – that exports benefit a country only insofar as exports increase the ability of people in that country to import more. Consider, for example, the benefits that one enjoys from working at an income-earning job. The time and effort that people spend at their jobs are costs voluntarily incurred in order to receive benefits – namely, the goods and services that workers purchase with the incomes they earn. These goods and services might be purchased during the ‘current’ period or, alternatively, in the future (with income in the current period invested rather than spent).
The same is true for exports. While it’s good to have the opportunity to export, exports themselves are not benefits; they’re costs (although not losses [5]). The value of the opportunity to export lies exclusively in the fact that exporting enhances exporters’ access to real goods and services – either in the form of exporters themselves importing more, or by acquiring real goods and services from fellow citizens who wish to import more. And in both cases the increased imports can come during the ‘current’ period or, alternatively, in the future (with export earnings currently invested abroad rather than spent).
Again, none of these esoteric considerations imply that I disagree in any way with the passage that you quote from David’s excellent essay.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030