Costs are Not Benefits

Here's a letter to the New York Times:

New York Farm Bureau president Dean Norton rightly seeks approval of free-trade pacts with countries such as South Korea (Letters, July 12).  But he wrongly justifies freer trade by emphasizing that "Without approval, the United States could lose nearly $2.3 billion a year in additional agriculture exports."

Protectionism does reduce U.S. exports.  The resulting loss to Americans, though, isn't the valuable goods and services that Americans don't ship to foreigners; instead, it's the valuable goods and services that foreigners don't ship to Americans.

Consider the U.S. exports that Mr. Norton mentions.  Directly or indirectly, South Koreans purchase these exports with South Korean won.  Of what use are won to Americans except as currency for purchasing goods and services from South Korea?  If South Koreans refuse to pay for exports received from America – or insist on paying for these exports only with Monopoly money – no one would regard Americans' failure to export to South Korea as a loss to America.

Americans' losses from protectionist policies are measured exclusively in the value of the imports that those policies prevent us from receiving.

Sincerely,
Donald J. Boudreaux