Quotation of the Day…

Tweet

… is from page 22 of Pierre Lemieux’s excellent 2018 book, What’s Wrong With Protectionism? [footnote deleted]:

[U.S.] exports are a cost because the United States uses its resources to produce goods and services for foreign countries; imports are a benefit because the United States uses the resources of foreign countries to obtain its own goods and services. So, contrary to what the mercantilists thought, the United States should import as much as it can and export as little as possible (assuming it were possible to maintain this regime for long). A reductio ad absurdum of the mercantilist argument is easy. Imagine that the United States ships its export by sea and that the returning ships bring back imported goods. If the returning ships sank, would the situation of exports without imports be a benefit for the United States. Obviously not.

DBx: So true.

Of course (as Pierre recognizes), mercantilists will say that what Americans should receive from foreigners in exchange for American exports is money. This obsession with money is what drives Trump’s mistaken beliefs about trade. But the mercantilists never bother to ask: What’s the use of the money? If the money paid to Americans is foreign currency, then that currency has value only because it can ultimately be used by Americans to purchase imports. If instead the money is dollars, then foreigners got those dollars only by earlier selling their exports to Americans. Either way, imports are the benefit of trade while exports are the price paid for imports.