In a short pamphlet from the American Enterprise Institute titled "Three Simple Principles of Trade Policy
," Dartmouth economist Douglas A. Irwin writes this about his first simple principle, "A Tax on Imports is a Tax on Exports
"Any restraint on imports also acts, in effect, as a restraint on exports. If a government undertakes policies that systematically reduce the volume of imports, it also systematically reduces the volume of exports. The converse of this proposition is also true: when a government undertakes policies to expand the volume of exports, it cannot help but to expand the volume of imports as well.
The fundamental reason for this truth is that exports and imports are flip sides of the same coin. Exports are necessary to generate the earnings to pay for imports, or exports are the goods a country must give up in order to acquire imports. Exports and imports are inherently interdependent, and any policy that reduces one will also reduce the other."
MP: The chart above provides historical data on U.S. international trade (annual exports and imports in log form) from 1790 to 2011 that confirm the strong statistical correlation between exports and imports over the last 221 years - they are inextricably linked and interdependent. It follows from Irwin's First Simple Principle of Trade Policy that:
1. Trade policies that attempt to stimulate exports simultaneously stimulate imports. Although he probably doesn't understand or recognize this, Obama's plan to double exports over the next five years will simultaneously double imports over the next five years.
2. Attempts to tax (impose tariffs on) imports to protect domestic industries and increase jobs and exports in that industry will backfire because the tax on imports will simultaneously be a tax on U.S. exports, and there might actually be an overall decrease in employment.
The history of U.S. trade policy is based on the illusion that exports and imports are determined, or can be influenced, independently, since trade policy is almost always targeted at either decreasing imports or expanding exports, e.g. Obama's plan to double exports. But the reality is that exports and imports are dependent, determined simultaneously, and they rise and fall together.
3. This type of nitwitery will never work to create new U.S. jobs:
"World News with Diane Sawyer" is gearing up for a "Made in America Christmas" and we need your help.
The average American will spend $700 on holiday gifts and goodies this year, totaling more than $465 billion, the National Retail Federation estimates. If that money was spent entirely on U.S. made products it would create 4.6 million jobs. But it doesn't even have to be that big. If each of us spent just $64 on American made goods during our holiday shopping, the result would be 200,000 new jobs."
According to the First Simple Principle, reducing spending on imported Christmas gifts this year will simultaneously reduce spending on U.S. exports, and to the extent that any new jobs are created in some U.S. industries, they will be offset by job losses in other industries. No matter how successful the "Made in America Christmas" campaign is at increasing sales of American-made products, it won't create a single new American job, on net.