The other day, I talked a little bit on imports. Today, I want to talk about the other side of trade, exports.
Exports are a cost. Exports are domestically-produced goods and services a nation must give up in order to obtain imports (going back to our GDP identity, “exports” are a positive since they are domestically produced). But exports are a cost to the economy because it means there are now fewer goods/services the domestic population may consume.
Imagine a nation. This nation exports everything it has: every tree, every ounce of food, every scrap of metal, everything. Their exports would be relatively high, but where would their standard of living be? Unless the nation imports its food, resources, clothing, consumer good, etc, the people will have nothing because they’ve sent it all away.
Now, none of this is to say exports are bad. Exports are a cost, yes, but costs often provide benefits, too. Just as a new employee costs a company (in salary & compensation), it also provides a benefit (new labor). Exports can provide benefits in an economy: creation of jobs, trading a resource or good for a different kind of resource or good not available within the national borders, that sort of thing. But once should never let the idea that the exports themselves are the benefit cloud their judgement. When exports are subsidized (think of the Ex-Im Bank), the increase of costs is subsidized, not benefits.