Should We Focus More on Reducing Imports or Increasing Exports?
We often hear of the need to increase U.S. exports, thus increasing GDP, employment and tax revenues and reducing foreign debt. Actually, the country needs to reduce its net export deficit. Due to the approximately 30% cost advantage of competing domestically instead of overseas, the relative volumes of our annual imports and exports, and a range of exogenous impacts on the U.S. economy, it is almost surely in the country’s interest to place more emphasis on substituting domestic production for imports (reshoring) than on increasing exports. Despite the clear advantage of reshoring, the U.S. government spends about 60X more on promoting exports than on encouraging reshoring.