Many people believe U.S. companies should export as much as possible, and buy imports only when necessary. Adam Smith called this balance-of-trade obsession “mercantilism,”acidly noting in The Wealth of Nations that “in the mercantile system, the interest of the consumer is almost constantly sacrificed to that of the producer.”
Or, as Milton Friedman put it more recently, “imports are the goods and services we get to consume without having to produce; exports are the goods and services we produce, but don’t get to consume.”
Right now, the U.S. runs a current account deficit, popularly called the trade deficit, of $40.9 billion. That means Americans are importing more than they export. Trade balancers would instead prefer a current account surplus. A major part of the Export-Import Bank’s mission is to move the trade balance in that direction.
As it turns out, there is an easier way to shift America’s balance of trade towards exports that does not require an Export-Import Bank at all. First, fill a container ship with American-made goods. Then, send it out to sea. Once it leaves U.S. territorial waters, the goods count as exports in official statistics.
Before the ship reaches port overseas, have the crew sink the ship (and escape safely, of course). As far as U.S. trade balance statistics are concerned, the best place for all those goods is the ocean floor. That way they cannot be exchanged for imports.
The point is that exports are not automatically a good thing, and the Export-Import Bank’s mission in this regard is misguided.
Now suppose a foreign country adopts a similar balance-of-trade scheme for its own purposes. But instead of sinking their goods-laden ship, they allow it reach port in the U.S. They leave the goods on the dock, free for the taking, and return home empty-handed.
For balance of trade reasons, they don’t want to import anything back home and ruin their country’s statistics. The result for U.S. consumers is a bunch of free stuff that American workers now don’t have to make for themselves. Even if this disadvantages U.S. businesses that make similar goods, the American people are undeniably better off—they receive more goods for the same amount of money and work.
What these stories illustrate is that exports are the price we pay for imports. They are not a good thing in and of themselves. Exports are a good thing when the person or company doing the exporting gets something in exchange that it values more highly than what it gives up. As Friedman pointed out above, when a U.S. company exports its products, U.S. consumers lose the opportunity to consume those goods. The Export-Import Bank, by artificially increasing exports, isn’t necessarily making sure its beneficiaries are making worthwhile exchanges, or that U.S. consumers have access to all the goods they would like.
Other government policies, such as the OECD’s highest corporate tax rate and derivative rules from the 2010 Dodd-Frank financial regulation bill, make it artificially difficult for companies to export, and prevent many worthwhile exchanges from taking place. If increasing exports is one of the federal government’s policy goals, it should remove these barriers rather than try to offset them with further interventions such as Ex-Im. Supporting deregulation and opposing corporate welfare, it turns out, are two sides of the same coin.