Monday, February 27, 2012

Why do we privilege exports of manufactures over services?

File:Boeing 787 Section 41 final assembly.jpg
A Boeing 787 in the midst of assembly. Source: Mark J. Handel/Wikimedia Commons

Writing in the Washington Post last week, Zachary Goldfarb took an insightful look at the present U.S. policy of supporting U.S. exports of manufactures through programs such export financing, and how it might undermine some U.S. exports of services. The particular example that he investigates is U.S. support for exports of Boeing jets. Goldfarb makes a compelling case that the government's export financing for foreign purchasers of these jets could put U.S. airlines at a competitive disadvantage.The article raises a number of interesting questions, such as:

1. What is the rationale for the government "picking winners" among industries, and why is it privileging manufacturing in particular? Is the rationale a sound one?

2. What is the balance of costs and benefits of programs such as export financing? Have all the costs been appropriately accounted for, such as unintended consequences to non-favored industries?

3. What are the opportunity costs of export-support programs? For example, might funds used to subsidize manufacturing exports be more wisely spent on R&D that supports a broader spectrum of industries?

Please weigh in with your thoughts. All perspectives are welcomed!

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