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Are Americans buying imports with exports?
Yes. Trade is a two-way process. To be a demander of trade offerings on the market, Americans must, in turn, be a supplier of something that people in other countries will take in exchange for what we want. In the language of international trade, the means of payment for the imports we buy from other countries are the exports we send abroad.
Sometimes this becomes blurred, because in a modern, complex economy we do not barter goods directly for goods. Instead, we first sell on the market whatever good or service we produce for money, and then turn around and use the money income we have earned to buy what our neighbors or potential trading partners in other parts of the world are offering for sale. The exchange process through the intermediation of money is a two-step rather than a one-step process. But regardless of this, ultimately, it still remains the fact that goods trade for goods. There is always work for ourselves in producing what we hope others would like to purchase from us if we are to have the means to buy what we would like to obtain from them.
This is not the end of the story; however. The foreign supplier is interested in selling to Americans because he, in turn, is interested in earning money. To do what? To purchase things he would like to buy. He may, himself, like to buy some American goods with the dollars he has earned. Or he may want a product made in his own country; but in this latter case he will then sell the dollars he has earned on the foreign exchange market for some of his own country's currency. Who will have bought those dollars from him? Someone who wanted dollars, either to buy American goods or to invest in American industry.
If it is American goods that are wanted, this will increase the demand for American exports. The export sectors of the American economy will begin to expand to meet this greater demand for what they have to sell. Job opportunities, as a result, will be opened up in the export industries in the U.S. economy. Some of those who had been let go by domestic producers will now find alternative employment helping to manufacture or market goods or services for sale abroad.
Another additional benefit is the economized dollar. As Americans purchase less costly goods, consumers increase their demand for more of different American goods. And once more, this creates business and, hence, alternative jobs to satisfy these new demands. Even if some of these economized dollars are spent on buying more imports, those imports will have to be paid for through an expansion of our export industries.
International trade is merely the global extension of the advantages from a division of labor and mutually beneficial exchange that we all common-sensically appreciate when it involves our local community, our state or our own nation. Just like when practiced around our own neighborhood, a global division of labor through international trade offers all of us better and less expensive products for a higher standard of living. And as individuals we each pay for those benefits by adjusting to the changing opportunities of the market by finding and shifting into those niches of the economy where we have the greatest comparative advantage in making and marketing those products that others would like to buy from us.
The Mackinac Center for Public Policy is a nonprofit research and educational institute that advances the principles of free markets and limited government. Through our research and education programs, we challenge government overreach and advocate for a free-market approach to public policy that frees people to realize their potential and dreams.
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