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Imports are Good!

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As champions and opponents of the World Trade Organization (WTO) descended on Seattle, it would have been nice if they at least had their premises correct:

Imports are benefits. Exports are costs.

That is the opposite of what most people inside and outside the meeting hall believe. They insist on thinking that the purpose of free (or freer) trade is to export more.

But they’re wrong. The ultimate purpose of free trade is to import-and therefore to consume-more! Free trade enables us consumers to find better deals and to make our incomes go further.

There is no older fallacy than the principle that imports are bad (necessary evils, perhaps) and exports are blessings. But a falsehood doesn’t gain veracity with age. It is as true today as it was hundreds of years ago that imports are good and exports are what we give up to get them.

As Adam Smith so sensibly recognized in 1776, the purpose of production is consumption. This means more than simply that we work to eat rather than eat to work. It means that an activity is economically valuable only insofar as it serves consumers. One implication is that a job is not mere physical exertion. It is fulfillment of a demonstrated consumer demand. We could have 100 percent full employment by compelling everyone to dig holes endlessly and fill them up again. But that would not be productive work. It would be a waste of human energy.

Once we orient ourselves to consumer interests, we are sensitive to the pervasive scarcity we face. At any given time our demand for things exceeds the supply. That applies not only to consumer products, but to the things that create them: land, raw materials, machinery, and labor. Thus we have to make choices. If a quantity of land, raw materials, machinery, and labor goes to make widgets, it can’t be used to make gizmos, even though we want both widgets and gizmos. The market process-property rights, voluntary exchange-helps us make those choices; the price system communicates information about supply and demand, and profit-seeking entrepreneurs channel resources to where returns will be greatest. Anyone with even a casual acquaintance with history knows that the market has provided living standards that the kings of old would envy.

It is unfortunate that we must make choices. How nice it would be to have all the widgets and gizmos we want. But despair not. Creative people find technological ways to ease the limits we face. For instance, someone could invent a machine to produce more widgets with less labor. Conventional thinking would sob that some widget workers would become unemployed. But this is actually good news. Before the invention, there wasn’t enough labor to make widgets and gizmos. But now there is.

We consumers have an unlimited demand for goods and thus for the labor to produce them. We want things we don’t even know about yet-or we will want them as soon as someone offers them. Whenever labor is freed up through technological advance or the shifting of jobs to other countries, we should celebrate. We are richer than we were before. There is much work to be done.

Few people understand this. If a factory moves abroad, it is because people there have a comparative advantage in that particular industry. Even if Americans were better at producing all things, it would still make sense to concentrate on what we do best and trade with others for the rest. That’s how a society gets rich.

Opening our markets to imports is not a sacrifice. It’s the whole point of trade. Let the goods roll in. If foreigners don’t reciprocate, no matter. Sooner or later they’ll learn that their policy hurts only themselves. Unconditional free trade is the only policy consistent with individual liberty and maximum prosperity. Anything else less leaves room for government meddling.

As a bureaucracy, the WTO is risky, especially as it intervenes in labor and environmental matters. But let that not blind us to the benefits of genuine free trade.

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    Sheldon Richman is vice president of The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.