Not a Zero-Sum Game - Ludwig von Mises Institute

PART 11 COMMENTS ON TRADE BETWEEN "COUNTRIES"
Fluctuations in the rate of exchange serve to balance the
income from exports and ca ital inflows, with the expenses
from imports and capital ouPflows . . .
When demand for imports increases, causing a negative balance of trade,
the price of foreign currencies goes up, which then reduces imports.
Exports are now more profitable because exporters can sell their
foreign currency at a higher price in local currency.
As exporting becomes more profitable, people redirect their
resources from production for the domestic market to production
for the export market.
This will increase the supply of foreign currency, tending to lower
its price, thus increasing imports.
An inflow of capital will also lower the price of foreign currency,
which will increase imports.
Fluctuations in the rate of exchange bring about a continuous
tendency to balance payments.
Frequently people are alarmed when the balance of trade is neg-
ative and celebrate when it is positive. But an inflow of capital,
with its accompanying negative trade balance, is a sign that the
country's prosperity is attracting capital. Thus, hair-pulling over
a negative balance of trade is senseless.
Unsuspected losses for exporters. Somewhere we seem to
have lost sight of the fact that the sole purpose of exporting is to
be able to import, just like we sell our labor or goods in order to
have the wherewithal to purchase other goods or services. In both
cases, we sell in order to buy.