Chris
08-06-2016, 12:22 PM
This sort of muddies up the debated over the trade deficit, that fact that many imports are inputs to production.
Douglas A. Irwin, a trade economist at Dartmouth, writes in Free Trade Under Fire (http://press.princeton.edu/chapters/s7938.html):
...most of this trade in manufactured goods is not in final consumer goods, but rather in intermediate components and parts. The Department of Commerce provides a closer look at the imports when it attempts to classify them based on final actual use. Table 1.3 shows this end-use classification of U.S. imports for three categories: consumer goods, industrial supplies and materials, and capital goods. The most striking change is the rise of capital goods as a share of U.S. imports, especially since 1970. Capital goods include machinery, equipment, instruments, parts, and various other components to production. Over half of all imports are either intermediate components or raw materials. These imports are sold as inputs to domestic businesses rather than as goods consumed directly by households. As chapter 3 will explain, this fact has important implications for trade policy: protectionist policies will directly harm employment in other domestic industries by raising their production costs, in addition to forcing consumers to pay a higher price for the products they buy....
Don Boudreaux, economist at George Mason University, comments (http://cafehayek.com/2016/08/almost-all-imports-are-inputs.html):
...Recognition of this reality is important for at least three related reasons. First, it disabuses people of the false notion that increases in imports per-capita imply that we Americans are short-sightedly sacrificing our and our children’s futures in order to live irresponsibly high on the hog today. Second, it highlights a vital, positive connection between importing and domestic production. Third, it reveals that, while tariffs and other import restrictions are good for some domestic producers, they harm many other domestic producers even if those other domestic producers do not sell in export markets.
...In summary, with the exception of vacation travel abroad, almost no imports are purchased directly by final consumers. Almost all imports, even ones that are conventionally classified as “final consumer goods,” are inputs into the production processes of domestic producers. Almost all imports, even ones that are conventionally classified as “final consumer goods,” are in fact intermediate goods. And therefore, almost all tariffs, even ones on imports that are conventionally classified as “final consumer goods,” artificially increase the costs of producing domestically and of otherwise operating domestic businesses.
Douglas A. Irwin, a trade economist at Dartmouth, writes in Free Trade Under Fire (http://press.princeton.edu/chapters/s7938.html):
...most of this trade in manufactured goods is not in final consumer goods, but rather in intermediate components and parts. The Department of Commerce provides a closer look at the imports when it attempts to classify them based on final actual use. Table 1.3 shows this end-use classification of U.S. imports for three categories: consumer goods, industrial supplies and materials, and capital goods. The most striking change is the rise of capital goods as a share of U.S. imports, especially since 1970. Capital goods include machinery, equipment, instruments, parts, and various other components to production. Over half of all imports are either intermediate components or raw materials. These imports are sold as inputs to domestic businesses rather than as goods consumed directly by households. As chapter 3 will explain, this fact has important implications for trade policy: protectionist policies will directly harm employment in other domestic industries by raising their production costs, in addition to forcing consumers to pay a higher price for the products they buy....
Don Boudreaux, economist at George Mason University, comments (http://cafehayek.com/2016/08/almost-all-imports-are-inputs.html):
...Recognition of this reality is important for at least three related reasons. First, it disabuses people of the false notion that increases in imports per-capita imply that we Americans are short-sightedly sacrificing our and our children’s futures in order to live irresponsibly high on the hog today. Second, it highlights a vital, positive connection between importing and domestic production. Third, it reveals that, while tariffs and other import restrictions are good for some domestic producers, they harm many other domestic producers even if those other domestic producers do not sell in export markets.
...In summary, with the exception of vacation travel abroad, almost no imports are purchased directly by final consumers. Almost all imports, even ones that are conventionally classified as “final consumer goods,” are inputs into the production processes of domestic producers. Almost all imports, even ones that are conventionally classified as “final consumer goods,” are in fact intermediate goods. And therefore, almost all tariffs, even ones on imports that are conventionally classified as “final consumer goods,” artificially increase the costs of producing domestically and of otherwise operating domestic businesses.