Neglected negative consequences of using exports to earn foreign exchange

Abstract

The rapid growth of international trade has promoted equally rapid economic development and globalization. It has also brought some problems. To earn foreign exchange from other countries, some countries have adopted export tax rebate policies and other subsidies to enhance the international competitiveness of their products. However, earning foreign exchange from exports to other countries has also caused harms that have been neglected by many economists. To describe these harms, we studied the impact of transitioning from a completely export-oriented trade strategy to a strategy that mitigates trade’s negative impacts by considering the environmental damage associated with huge export profits. Behind the booming export earnings lies a continuous loss of real domestic wealth. Importing raw materials and exporting processed products also creates large amounts of pollution and wastes, and contributes to continuous degradation of the exporter country’s environment. It also widens the development gaps between and within countries. The core goal of socioeconomic development is to improve the livelihood of the people, not to hoard other countries' currencies. Balancing international trade therefore represents a necessary foundation for sustainable international trade, and this goal is jeopardized by excessive exports that unbalance a country’s international trade. Currency can become an invisible tax imposed on its users through depreciation caused by excessive issuance of the currency. The greater a country’s foreign exchange reserves, the greater the loss of real wealth. Therefore, to promote socioeconomic development and mitigate the problems caused by an excessive emphasis on exports, we should protect and enhance the vitality of markets (e.g., by eliminating export subsidies wherever possible) to balance exports and imports.