Basically, Exports are goods and services that are produced in one country and sold to buyers in another and an import is a good or service bought in one country that was produced in another. Imports and exports are the components of international trade. Export refers to a product or service produced in one country but sold to a buyer abroad whereas an import is a product or service produced abroad and purchased in your home country.
Trade Surplus & Trade Deficit
A trade surplus takes place in a country when the exported goods and services value amounts to higher than its imports. It indicates that there is a greater inflow of the exporting company’s currency from the markets in a foreign country.
A trade deficit occurs in a country when the imports of that country exceed its exports costs. It can be considered as problematic to the extent that it can cause foreign exchange shortages within the country.
A high trade deficit of a country leads to the weakening of its currency. As imports consistently exceed exports, there is more outflow of U.S. dollars. Such outflow weakens the country’s currency. The weakening of currency further makes the imports expensive.
Advantages of Export and Import
- It is one of the simplest routes of entering into the global trade and import and export generate huge employment opportunities.
- Requires less investment in terms of time and money when contrasted with other
methods of entering into the global trade. - Is comparatively less risky when compared with different routes of entering in international business.
- As no nation can be 100% self-sufficient, import and export are very crucial for the functioning and growth of that nation.
- Can help Countries to access the best technologies available and best products and services in the world.
- It gives better control over the trade than setting up a market and the risk is considerably low.
Limitation of Export and Import
- It includes extra packaging, transportation and protection and insurance costs which build up the total cost of items.
- Exporting isn’t doable in the event that the foreign nation prohibits imports.
- Domestic organizations which are closer to the client could serve them better than firms outside their national borders.
- Merchandises are subject to quality standards any low-grade merchandise which is exported will result in Country reputation and remarks on countries.
- Obtaining licenses and documentation for foreign trade is a difficult and frustrating task.
- If you are not careful, you can lose grip on the domestic market and existing customers.
