As a postscipt to my previous piece, there is futher comment using this title as a paragraph heading from Steve Keen who has pretty comprehensively rebutted the MMT (Modern Monetary Theory) view that exports are a cost and imports are a benefit – in so doing it shows again the dangers of viewing the overall economy as a household which was first highlighted in the same earlier post commenting on the way MMT thinks of balance of payment (trade) deficits.
When thinking about the economy of a currency issuing nation, we must never forget that they own a bank!
Steve Keen points out that unless you have completely full employment there will invariably be spare capacity – and potential for exports; that “goods are produced with a view, not to either consuming them or selling them if “the price is right”, but with a view to selling them, period”; and economies of scale, encourages exports where they allow better use of pretty much all (except mineral) resources and drive down the cost per unit.
Exports are a way of increasing capacity utilization over and above the limits imposed by aggregate demand in the home economy; and
Since the extra units exported will drive the firm closer to full capacity utilization, the costs will be lower and the potential profit margin higher.
Exports are therefore not a cost to the exporting firm, or its host country: they are a profitable way of increasing domestic aggregate demand.
None of this denies the basic ideas of MMT (which I have also seen recently referred to as Neo Chartalism) but it does mean that the balance of payments matters, particularly for a country such as the UK importing 40% of its food, and that imports are not simply a welcome benefit without meaningful consequence.