What is an Export?

Exports are goods and services produced in the home country but sold to a foreign country. Like imports, exports also play a crucial role in international trade. If a country’s exports are larger than its imports, then the country is in a trade surplus. If the balance of imports is bigger than exports, then it is a trade deficit.

Export highlights include:

• An export is the goods and services produced in your native country but sold abroad.
• When a country cannot meet its domestic demand, it turns to exports.
• Free-trade agreements between countries make exports inexpensive.
• Corporations that export heavily are often exposed to a higher degree of financial risk.

Why do countries export?

Exports provide companies with the opportunity to find a new market for their products. It also helps those firms earn a profit when domestic demand for local produce is small. Governments across the world encourage international trade by allowing the free flow of goods and services.

According to statistics, China, the US, Germany, the Netherlands, and Japan are nations that export heavily as of 2019. China exported around $2.5 trillion worth of goods in that year, and those were mainly electronic equipment and machinery. The United States occupies the second position in exports. In 2019, the country exported mostly capital goods valued at $1.6 trillion. With an export value of $1.5 trillion, Germany comes third globally. Japan’s exports summed up to $705 billion, whereas Nederland exported $709 billion worth of goods that year.

What are the advantages of exports?

Firms export for many reasons. Exports provide a firm with the opportunity to find a new market or expand its existing one. Through exports, companies can expand their market share. Exports also permit firms to diversify their business risk by spreading it over multiple markets.

Exports increase sales, which in turn reduces the per-unit cost of production. Export-dependent companies can also gain access to new technologies, insights into a new market, and other global business practices.

How do trade barriers and other limitations hamper exports?

Countries sometimes enact laws, regulations, and other tariff and non-tariff barriers to limit imports within their borders. They do so to protect domestic industries. This hampers the ability of the exporting countries to enter into international trade with those nations. This presents a unique set of challenges for some companies. Export-oriented companies are forced to allocate sizeable resources to reach foreign markets. They often have to modify their goods and services to match the local demand.

The biggest limitation on exports is financial risk. The value of national currencies fluctuates, making the trade riskier. Besides, opening an account, issuing a letter of credit, making payments, and shipping all come with considerable difficulties.

A real-world example of exports:

As the sole economic superpower, the United States has many goods and services that it exports successfully. Bourbon is a kind of whiskey that is produced in the US. The US Congress has designated it as a product that is “unique” to the US. According to a resolution of the US Congress, this special type of liquor must be produced in the state of Kentucky. This liquor has made its way all over the world. But in 2019, during the US-China trade war, a 25% tariff was imposed on Kentucky Bourbon, which has significantly hurt its exports.