Merchandise trade

Monday July 03, 2017 Konrad Hurren

Merchandise exports have been pretty flat for around two years, with a slight uptick near the end of the last period for which we have data.


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We can speculate on some things that can cause this uptick; it could be that either the quantity of merchandise exported has increased, or the price has. It is likely to be some combination of both.


Merchandise trade is a nebulous term, it’s a statistic that comprises all tangible stuff exported and imported. To shed light on some of what makes up this statistic two charts are reproduced: Forestry and Dairy. It is wise to keep in mind that international trade is just an extension; over political borders; of the division of labour, made possible by saving and capital accumulation, that drives increasing prosperity.


The receipts from both of these exported commodities have been driven by volume. Dairy prices are still below what they were in 2014, and forestry prices have been pretty much flat for some time.


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The discussion of merchandise trade could stop here. We could congratulate these sellers of wood and dairy products for their entrepreneurial nous in estimating and anticipating the needs of their customers. However, this is not a full treatment of merchandise trade.


All people wear two economic hats; that of a producer, when serving others; and consumer, when being served. At every moment people have unmet wants, and continually act to attain that which would satisfy these wants. Producers too consume other goods and services during stages of production, in pursuit of their own ends. And so they are, always and everywhere, also consumers. Therefore, to make any conclusions about trade, and avoid the fallacy of mercantilism, economists should consider the phenomenon from the point of view of consumers.


After earning many billions through the sale of logs and dairy products (among other things) producers in New Zealand have the means to change their situation from (subjectively) unfavourable to favourable – to act as consumers. By casting merchandise trade in these terms it is no stretch to assert that exports are a cost to the producer. Not in the sense that they are undesirable, far from it. But in the sense that they represent resources that are given up in order to attain commodities that remove more urgent sources of uneasiness. 


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Some commonly purchased merchandise includes coffee. Consumers in New Zealand have been importing an increasing quantity of this good over the 16 years for which data has been obtained.


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