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BALANCE OF TRADE: The difference between the value of goods and services exported out of
a country and the value of goods and services imported into the country. The balance of trade
is the official term for net exports that makes up the balance of payments. The balance of
trade can be a "favorable" surplus (exports exceed imports) or an "unfavorable" deficit
(imports exceed exports). The official balance of trade is separated into the balance of
merchandise trade for tangible goods and the balance of services....
A balance of trade surplus is most favorable to domestic producers responsible for the exports.
However, this is also likely to be unfavorable to domestic consumers of the exports who pay
higher prices.
Alternatively, a balance of trade deficit is most unfavorable to domestic producers in
competition with the imports, but it can also be favorable to domestic consumers of the
exports who pay lower prices....
Don Boudreaux on the Economics of "Buy Local". Podcast at EconTalk, April 16,
2007.
Proponents of buying local argue that it is better to buy from the local hardware store
owner and nearby farmer than from the Big Box chain store or the grocery store
headquartered out of town because the money from the purchase is more likely to
"stay in the local economy." Don Boudreaux of George Mason University talks with
EconTalk host Russ Roberts about the economics of this idea. Is it better to buy local
than from a seller based out of town? Is it better to buy American than to buy foreign
products? Does the money matter? In this conversation, Boudreaux and Roberts pierce
through the veil of money to expose what trade, whether local, national, or
international, really accomplishes.
Photos of the 100-Mile Suit. Buying local example. At Wired, March 31, 2007.
Last year, educator and costume designer Kelly Cobb asked her students at Drexel
University to trace the provenance of their clothes. When the task proved impossible,
she realized how far removed we are from what we wear.
It was then that Cobb came up with the idea of creating a suit of clothes made entirely
from materials prepared within a 100-mile radius of her home.
"You're just joking," the protectionists will say. "We couldn't possibly have been saying
anything so absurd." Indeed you have, and, what is more, you are acting upon these
absurd ideas and imposing them on your fellow citizens, at least as far as you can.
The truth is that we should reverse the principle of the balance of trade and calculate
the national profit from foreign trade in terms of the excess of imports over exports.
This excess, minus expenses, constitutes the real profit....
Why not just buy American? Foreign Trade, or The Wedding Gown, by Jane
Haldimand Marcet in John Hopkins's Notions on Political Economy. 1831.
One evening, when John returned from his work, he found his daughter Patty showing
off a new silk gown to her mother. It was a present which her lover had just given her,
for the approaching wedding day. Patty's eyes, which had seldom beheld any thing so
beautiful, shone with delight, as her mother admired it; and her father gave her a
hearty kiss, and said she would be as smart a bride as had ever been married in the
village. "Ay, and it is a French silk, too, mother," exclaimed Patty."Why, as for that,"
replied her mother, "I don't see the more merit in its being French; and I did not think,
Patty, you were such a silly girl as to have all that nonsense in your head. No, indeed,
it is bad enough for the great ladyfolks to make such a fuss about French finery, so
that they can't wear a bit of honest English riband. I don't like your gown a bit the
better for being French. No; and I should have thought that your husband, that is to
be, might have given you an English silk instead."...
Balance of Trade, in commerce, the term commonly used to express the difference between
the value of the exports from, and imports into a country: the balance used to be said to
be favorable when the value of the exports exceeded that of the imports,
and unfavorable when the value of the imports exceeded that of the exports. And in many
countries this was long believed to be the case, and to a late period they were annually
congratulated by their finance ministers on the excess of exports over the imports....
Mercantile System, from Lalor's Cyclopedia of Political Science
The theory of the balance of trade and the consequences which were drawn therefrom
constitute what is called the mercantile system, because the whole of this system tends to
consider foreign commerce as the most productive branch of a nation's labor. It is supposed
that a nation can sell more than it buys, in a way to ruin neighboring nations by absorbing
their precious metals by the greatest possible exportation and the least possible importation.
This false theory still prevails in the minds of the masses, and still serves as a rule for many
administrations and governments; it forms the basis of the economic ideas of all the writers of
the eighteenth century, who did not belong to the physiocratic school or to that of Adam
Smith; it is still appealed to in our days by statesmen, and by all those who, by conviction or
for financial considerations, defend prohibition, high tariffs and custom impediments....