Does the purchase of input necessarily mean that we have to export?
On March 21, 2025, economist Don Boudreaux quotedAt Café Hayek, the next passage from a chapter written by Veronique de Rugy.
Here it is:
One of the largest errors about trade is that the final value of trade for a country is found in the export of that country, where the import is only valuable insofar as they enable the country to better export. But in reality the opposite is true: import is the end and export is the means. If we could acquire import without exporting anything, it would be the best of all worlds for us. Unfortunately, foreigners will not work for us for free. They want things in exchange for what they produce for us, and so we have to export.
It is clear from context that Don agrees with Vero.
I rarely disagree with Don or Vero about the trade. But I do here.
Start with the part I do not agree with, the first sentence:
One of the largest errors about trade is that the final value of trade for a country is found in the export of that country, where the import is only valuable insofar as they enable the country to better export.
That is perfect and well said.
It is the rest that I do not agree with. Let’s find it in sentence.
But in reality the opposite is true: import is the end and export is the means.
There are two ends: import and export. We want import: that is an end. But our exporters want to export: that is their end.
If we could acquire import without exporting anything, it would be the best of all worlds for us.
It is not clear that if we can get import without export, the best of all possible worlds would be. In particular, potential exporters would not like it because they would like to make money by exporting. What if the alternative to export is a huge foreign investment in our country? That can be good. More about that Anon.
Unfortunately, foreigners will not work for us for free.
I agree.
They want things in exchange for what they produce for us, and so we have to export.
It is true that they “want things in exchange for what they produce for us.” But it does not follow that we have to export. It is true that they get a way to buy money to buy things from us by importing us, and that they take a lot of money to sell it to us (which are exported from their point of view) and buy our exports.
But imagine that we spend a lot on import. Do we have to sell export? No. What if there are huge investment options in the United States, not only in buying American federal government bonds, but also invest in Apple, Microsoft, Meta, etc.? And what if, as is true, there is a world question to keep our dollars? Then exporters in other countries can take the money they have earned when exporting to us and investing in the United States or keeping it as dollars. So although there is a strong empirical connection between export and import, there is no necessary connection. Indeed, our large shortage in the current account and the large capital account surplus are proof of this.
The only case in which Vero would be right is if no one in any country has invested anything in any other country. But that is not the world in which we live.