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.
