Peter May — Modern Monetary Theory (MMT) and international trade

This discussion has foundered on the rocks of semantics. The assertion is that imports are a real benefit and exports are a real cost. This is means that real resources are being transferred from domestic use in the case of exports, which is a real cost domestically, and real resources are being received in the case of imports, which is a real benefit domestically.

Countries trade with each other either to obtain goods less expensively than they can be produced domestically, or to obtain goods for which the country lacks enough real resources to produce.

All economists agree with this assertion based on the meaning of terms. This is simply a case of understanding economic terminology.

In every monetary exchange for goods, one party receives a good, financial or real, and the other party receives the price of the good. In so doing, the buyer receives a good and the seller agrees to save in the currency in which the price is denominated, regardless of whether the parties are households or firms. In the case of international trade, these transactions are summarized in the balance of payments in terms of aggregates of imports and exports. The balance of payments of countries is of a different order than household and firm accounting statements. Confusing or conflating them is a category error.

Progressive Pulse
Modern Monetary Theory (MMT) and international trade

Peter May

The real benefit to international trade is the opportunity to obtain goods more cheaply than by producing them domestically. The proper way to view exports is as a cost: in an ideal world, foreigners would provide us with an infinite amount of imports for free.

One reason why the EU treaty is taking so long is that one implication – foreign competition in government procurement – is being treated as a cost, when of course the possibility that taxpayers might obtain more for less should be treated as a benefit.

The Globe and Mail — Economy Lab 

Imports are a benefit, exports are a cost. Is it clear now?
Stephen Gordon | Professor of Economics, Universite Laval Quebec, QC Canada

(Published March 31, 2011 and updated April 29, 2018)