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Milton Friedman on Trade and tariffs

Another fallacy seldom contradicted is that exports are good, imports bad. The truth is very different. We cannot eat, wear, or enjoy the goods we send abroad. We eat bananas from Central America, wear Italian shoes, drive German automobiles, and enjoy programs we see on our Japanese TV sets. Our gain from foreign trade is what we import. Exports are the price we pay to get imports. As Adam Smith saw so clearly, the citizens of a nation benefit from getting as large a volume of imports as possible in return for its exports, or equivalently, from exporting as little as possible to pay for its imports.

Context. From Free to Choose (1980), written with Rose D. Friedman, in the chapter “The Tyranny of Controls”, on international trade.

Free to Choose
Book, 1980, Ch. 2 “The Tyranny of Controls”, p. 41
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Milton Friedman, “Free to Choose” (1980), Ch. 2 “The Tyranny of Controls”, p. 41. https://miltonfriedman.org/quotes/exports-price-we-pay-to-get-imports-1980

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He also said

  1. What we send abroad we can’t eat, we can’t wear, we can’t use for our houses. The goods and services we send abroad are goods and services not available to us. On the other hand, the goods and services we import, they provide us with TV sets we can watch, with automobiles we can drive, with all sorts of nice things for us to use. The gain from foreign trade is what we import. What we export is the cost of getting those imports, and the proper objective for a nation, as Adam Smith put it, is to arrange things so we get as large a volume of imports as possible for as small a volume of exports as possible.

    Context. From a lecture on free trade, just after he says that public talk of trade treats exports as good and imports as bad, which he calls “just upside down.”

    Milton Friedman Speaks: Free Trade: Producer vs. Consumer
    Lecture, 1978, Lecture 8, at 21:30
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  2. The key insight of Adam Smith's Wealth of Nations is misleadingly simple: if an exchange between two parties is voluntary, it will not take place unless both believe they will benefit from it. Most economic fallacies derive from the neglect of this simple insight, from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another.
    Free to Choose
    Book, 1980, Ch. 1 "The Power of the Market", p. 13
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  3. That is simply mercantilist confusion. Our benefits from international trade come from imports not exports and there is always a rate of exchange at which these will balance. If at that rate of exchange it is profitable to produce an SST for export, fine; if not, there is no case for subsidizing it.

    Context. From a statement he sent to Senator William Proxmire’s Joint Economic Committee in December 1972 for its hearings on the supersonic transport (SST). The Senate had voted in March 1971 to halt federal funding of an American SST, and the hearings considered whether to revive it. “That” is the claim that subsidizing the SST would help the U.S. balance of payments, which he has just called logically fallacious.

    Statement on the SST
    Letter, 1972, Letter to Senator William Proxmire, chairman of the Joint Economic Committee, dated December 11, 1972, submitting a statement for the record of the committee’s hearings on the supersonic transport; printed in full in the Congressional Record, Senate, January 11, 1973, p. 796, inserted by Senator Proxmire., Congressional Record, January 11, 1973, p. 796
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