Exports: The Other Side of the Coin

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.

An example:

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.

One thought on “Exports: The Other Side of the Coin

  1. When you export something, you are usually given little chits of paper from the foreign entity which represent a promise to give you something back in kind. In kind means different things in different parts of the world. Florida, may have lots of oranges but few bananas Equador might have lots of bananas and few oranges. Farmers in each country trying to sell their goods to locals might have great difficulty or will have to accept a low price, but if the export their respective goods they will get more value in the other’s commodity. The farmer in Florida will get relatively rare bananas the the equidorian otherwise could not give away in his own home, and visa versa for the oranges. So the exports didn’t have the effect of making a country poorer at all, it greatly increased the wealth for both.

    There are other cases where a country produces a lot of something and both exports and imports that product. In the US it happens because it is more costly to ship certain things domestically than it is to ship and receive from certain foreign entities. Oil is like that. We could export oil from the Gulf and then import on the east coast, because it is cheaper and easier to get Arab oil.

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