Are Rising Imports a Boon or Bane to the Economy? | Daniel Griswold | Cato Institute: Commentary

Are Rising Imports a Boon or Bane to the Economy? | Daniel Griswold | Cato Institute: Commentary: "More than half of what we import consists of goods consumed by producers — capital machinery, raw materials, parts and other intermediate inputs. Those imports help us produce more, not less. This is one reason why, over the past year, imports of manufactured goods have been rising along with domestic manufacturing output.

In the long run, imports spur growth by forcing domestic producers to be more efficient and productive. Like competition generally, imports weed out the less-productive domestic producers, leaving the market to more-competitive U.S. companies."

"Obsession with the trade deficit also ignores the fact that the dollars we spend on imports quickly return to the United States. If they are not used to buy our goods and services, they are spent on assets, such as real estate, stocks and Treasury bonds. This inflow of capital also helps to fuel growth by keeping interest rates down and providing capital to build factories and expand output."

"Compared with a perfectly proportional correlation of 100 percent, the correlation between imports and GDP is a strongly positive 62 percent.

Politicians myopically focus on exports, but the correlation between rising exports and rising GDP is actually weaker, at 45 percent, than the connection between imports and GDP"