Exports raise GDP by adding to the value of domestic output and income,
but they do not add to the value of domestic consumption. The standard
of living in a country depends on the level of consumption, not on the
level of income. In other words, income is not of much use except that it
provides the means for consumption.
If exports really were “good” and imports really were “bad,” then a fully
employed economy that managed to increase exports without a
corresponding increase in imports ought to be better off. Such a change,
however, would result in a reduction in current standards of living
because when more goods are sent abroad but no more are brought in
from abroad, the total goods available for domestic consumption must
fall.
The living standards of a country depend on the goods and services
consumed in that country. If we could have imports for “free,” meaning
without having to provide exports in return, our consumption and living
standards could be vastly increased. But no country will send us their
products for free. In reality, the importance of exports is that they provide
the resources required to purchase imports, either now or in the future.
Create Domestic Jobs
It is sometimes said that an economy with substantial unemployment,
such as Canada during and immediately after the 2009 recession,
provides an exception to the case for freer trade. Suppose tariffs or import
quotas reduce the imports of Japanese cars, Indian textiles, Chinese