During last week’s State of the Union address, President Obama discussed export-led trade as one of the ways in which he seeks to boost domestic employment. The President correctly implies that trade is an important factor which increases prosperity and fosters job growth. Unfortunately, his interpretation of how trade is leveraged to reap these benefits features strong elements of mercantilism.

His announcement of a National Export Initiative–which seeks to double exports, without any mention of the benefits of imports–shows strong signs of a mercantile world perspective.

In the President’s own words:



…we need to export more of our goods. Because the more products we make and sell to other countries, the more jobs we support right here in America. […] We will double our exports over the next five years…


Yet as Christopher Lingle explains, mercantilism is a shortsighted and outdated ideology. “The ideology behind export-led growth is contradicted by economic theory and reality. The notion that the advantages from trade come from exporting was the basis of mercantilism, a creed discredited several centuries ago. Adam Smith pointed out that the real advantages of trade come from allowing producers and consumers to buy from least-cost providers, regardless of their national origins. And so it is that increasing imports is a better way to boost growth since enhanced economic efficiency and increasing real purchasing power are what benefit people.” (The Freeman)

U.S. exporters benefit from imports because they lower their operating costs by accessing cheaper foreign inputs and intermediate goods. These imports enable U.S. exporters to be competitive in a global market economy.

Additionally, two-way trade benefits U.S. workers. Multinational companies operating in globally integrated supply chains are engaged in extensive import-export activities and provide jobs to workers in the U.S. and abroad. Goods are no longer made in individual countries, rather, production processes span across national borders, providing jobs to people across the globe. In his latest book Mad About Trade, Daniel Griswold points out that U.S. multinationals sell $6 billion worth of US-branded goods and services through their overseas affiliates each year for every 1 billion in goods they export from the U.S.

Lastly, imports benefit American consumers by reducing the prices they pay for everyday goods. Global competition in the production and delivery of such staple items as food, clothing, and shoes keeps the prices of these goods low; a benefit which especially helps those hurt most by the on-going economic difficulties: the poor.