What is import and Export?
Imports are the products and services that a country’s consumers obtain from the rest of the world, rather than purchasing domestically manufactured things. Imports lead to an outflow of funds from the country since import transactions involve payments to sellers residing in another country. Whereas, exports are domestically manufactured products and services, but then sold to clients residing in other countries. Exports lead to an inflow of funds to the seller’s country since export transactions involve selling domestic goods and services to foreign buyers.
The value of a nation’s total export goods and services minus the value of all the goods and services it imports equal its net exports. A positive net exports figure indicates a trade surplus. A negative figure for net exports, on the other hand, suggests a trade deficit. Trade surplus or deficit represents the trade balance of a country which shows whether a country is net exporter or importer, and to what extent.
Reduce Import/ Raise Exports
The four most effective ways to increase exports services and reduce import services are taxes and quotas on imported goods, government subsidies, trade agreement and currency devaluation. Imposing taxes and quotas on imported good and service make the products more expensive than purchasing them domestically. Government subsidies to domestic businesses helps to reduce business cost and as a result the price of the products decrease which encourages customer to buy domestic products. Moreover, cheaper products also attract foreign buyers and increase exports. A trade agreement is a wide-ranging taxes, tariff and trade treaty that often includes investment guarantees. It exists when two or more countries agree on terms that help them trade with each other. Such agreements are aimed at stimulating trade and supporting economic growth for both countries involved. Currency devaluation is the process to devalue the currency in order to reduce the price of the domestic good and services to increase net export. Also, devaluing the currency makes it more expensive to buy foreign products, thus results in decreasing import.
Importance of Imports and Exports
The importance of import and export considerably varies with countries, and their overall balance of trade. For instance, China, the world’s largest exporting country, exports and a net positive balance of trade are critical to the success and growth of the country’s economy. Massive exports of commodities and raw materials to developed nations is the main fuel for the growth of their economy. For this reason, mining is commonly a key industry in such countries.